Analysis of Carlill v Carbolic Smoke Ball Company in Business Law

This report provides an analysis of the landmark case of Carlill v. Carbolic Smoke Ball Company, a pivotal judgment in contract law. The case involves an advertisement by a pharmaceutical firm and is used to illustrate the essential elements of a contract. The report defines a contract and outlines its key components: offer, invitation to offer, acceptance, communication of acceptance, consideration, and intention. It explores the specific facts of the Carlill case, including the court's ruling on the advertisement as a unilateral offer and the establishment of acceptance and consideration. The report also examines the importance of intention and certainty within a contract, providing a comprehensive overview of contract law principles through the lens of this significant legal precedent. The research aims to study various elements of the contract and their binding upon the parties.

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Executive Summary
The Carlill v Carbolic Smoke Ball Company case is stated as a milestone judgment
given by the Court of Appeal in order to understand the function of the contracts. As per the
facts of the case, it was related to an advertisement by the pharmaceutical firm. This case is
considered as the backbone of the contracts as it provides a structure to the contract law by
stating the elements for the contracts and the bindings upon the parties to enter into the
Contract. The research studies about the case of Carlill and Carbolic Smoke Ball Co in order
to understand the elements of the contract law. Further, an outline of the Contract and its
elements are stated in this research. Thus the aim is to study the various elements of the
Contract and their binding upon the parties through the case mentioned.

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Table of Contents
Executive Summary...................................................................................................................1
Introduction................................................................................................................................3
Definition of Contract................................................................................................................4
Elements of Contract..................................................................................................................4
Offer...........................................................................................................................................4
Invitation to Offer......................................................................................................................5
Acceptance.................................................................................................................................6
Communication of acceptance...................................................................................................6
Consideration.............................................................................................................................7
Factors necessary for Consideration..........................................................................................7
Intention.....................................................................................................................................8
Domestic....................................................................................................................................8
Commercial................................................................................................................................8
Certainty.....................................................................................................................................8
Conclusion..................................................................................................................................9
Reference..................................................................................................................................10

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Introduction
The case of Carlill v Carbolic Smoke Ball Company is considered as a landmark
judgment given by the Court of Appeal. This is the first case of contract law that is to be kept
in mind to understand the elements of a contract. As per the facts of the case, it was related to
an advertisement by the pharmaceutical firm. The central fact included was that the firm
introduced a new kind of drug that is like a smoke ball that claimed to cure the people’s flu.
Furthermore, in the scenario where it could not cure the people’s flu, the buyers would
receive a refund of £100. In the time where the company was sued for not paying the amount
as per stated in the advertisement carbolic argued that the advertisement was just an invitation
to offer and should not be treated as a legal binding as it was just a promotion scheme or a
gimmick. However, the court of appeal alleged that the offer made by Carbolic would appear
as serious offer to a reasonable man. People had taken the ad seriously and not as a gimmick,
so it was the liability upon the Carbolic for the faulty product.
The primary issue that was noted in the following case includes the fact that whether
the language that was used in the Defendant’s advertisement, regarding the reward of £100
can be stated as an expressed promise to the buyers or just, be treated as a promotion scheme
that does not have any legal binding upon the failure of the product (Riches, Allen, and
Keenan 2009). The Court of Appeal rejected Carbolic’s claim and stated that the contract was
binding, and upon the judgment, these four issues were considered bu the jury
 That the advertisement was a unilateral offer
 The situations for using the smoke ball established acceptance of the offer.
 That obtaining or merely using the smoke ball constituted reasonable Consideration
 That the company’s claim will be a legal binding

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Definition of Contract
A Contract is referred to as an agreement between two or more parties that is binding
upon the parties and further defines the duties and the liabilities of both the parties involved
in the Contract. Such liabilities and duties are enforceable or recognized by law. Contracts
rise from a duty or obligation of a party, upon the promises made to the other party. To be
lawfully binding few elements of the Contract must be met, for example, a promise upon a
consideration. The elements of a contract to be legally binding upon the parties include the
following:
 Offer
 Acceptance
 Consideration
 Intention
 Certainty
Elements of Contract
Offer
It is stated as the willingness of a party to be bound by the terms of the Contract.
Terms established by the offeror here – and only those included at this stage form part of the
Contract. It is the set of terms that are binding on both the parties. An offer may be dismissed
by the actions of the offeror or upon the expiry of the terms and conditions as per stated in the
Contract. The following points are to be considered upon the terms of the Contract:
 If the time limit of the acceptance for such offer is exceeded, then the offer can be
terminated between the parties, and it would not constitute any legal binding between
the parties.

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 The offer expires after the expiry of a given period. For example, in the case of
Ramsgate Victoria Hotel v Montefi ore, the Contract expired after the expiry of the
period.
 The offer expires with the death of the offeror. An offer that has not been accepted
and in cases where the offerer dies, the offer dies with the offerer. An in cases where
offerer dies after the acceptance, then the Contract remains valid to be performed as
seen in a case of Bradbury v Morgan.
 In cases where there is a counteroffer. It involves negotiations of the offers and
counteroffers. As a result, the original offer dies as seen in the case Hyde v Wrench.
 In cases where there is a revocation of the offer, the person offering may revoke the
offer at any phase before its acceptance even after keeping the promise to keep such
offers for a specific period. Such element appeared in the case of Dickinson v Dodds
where the offer was revoked before its acceptance.
For example, in Carlill v Carbolic Smoke Ball co the company could not communicate the
revocation procedure to every person, but the renovation should have been communicated by
advertisement in the same newspaper stating about revoking the offer.
Invitation to Offer
An invitation to offer is stated as the willingness to enter into the procedure of
negotiation with the person making the offer. It can also be termed as an invitation to treat
that means to negotiate. Invitation to offer is a valuable part in understanding the elements of
the Contract as it provides equal powers to offer and counteroffer upon reaching the terms
and the conditions of a contract. Some examples can be seen where dealers vend goods
through advertisements and negotiations. For example, in the case of Fisher v Bell, the items
displayed on the shop with the price tag were considered as an invitation to offer. In another

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case of Partridge v Crittenden, it was also an example of an invitation to treat and not an
offer.
Acceptance
The acceptance is the point in the Contract that is unconditional, and the discretion of
the other party with regards to the offer made to him. There are circumstances where the
court needs to set the guidelines as to how the acceptance may be established. The critical
aspect of acceptance is that it must be communicated.
Communication of acceptance
 The acceptance should be made through the conduct. For example, in the case of
Alexander Brogden v Metropolitan Railway Co, a contractual deed was drafted by
the members of the and used the method of negotiation.
 The offeree can deviate in the manner of acceptance if the other method is as fast or
quicker than what has been mentioned in the offer as per laid in the case of Yates
Building Co Ltd v R J Pulleyn & Sons Ltd.
 Silence is not an effective way for the acceptance of any offer. The case of Felthouse
v Bindley silence was stated as not an effective way in order to negotiate or continue
further with the Contract.
The Postal rule of the acceptance states that acceptance could be made valid as per the
posting of the acceptance nor as a mere letter as in case of The Household Fire and Carriage
Accident Insurance Company v Grant. In another case of Holwell Securities v Hughes, the
postal rule would not be used as it subjected to inconvenience and absurdity.

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Consideration
Consideration is an essential factor in all the contracts. Consideration is stated as a
value regarding something that is provided along with the offer and acts as a benefit to the
buyer. The Consideration is stated simply as a price in return of the promise as per the case of
Currie v Misa. In simple words, Consideration is what is paid in return for the product or the
services upon which the Contract is made. For example if Mr K enters into a contract with Mr
T then Mr T will have to pay a consideration to Mr K for availing his services according to
the clause of the Contract. Consideration may be two kinds of executed Consideration or
executory contracts. Executed Consideration involves one party making the promise to the
other party in return for an act or services. Whereas executory considerations are performed
in cases after the offer has been made upon the act that is to happen in the future.
Factors necessary for Consideration
 Consideration must be made in the present and not in the past. In cases where the
Consideration is provided after the completion of an act, the act is not considered to
be sufficient in order to enforce the promise.
 Consideration needs to be sufficient and not adequate. In simple terms, the
Consideration must have some material or legal value attached to it. For example, in
the case of Bolton v Madden the Consideration depends upon the adequacy for the
parties in order to consider to agree and not for the court.
 Consideration needs to be material and real in terms where the promiser receives what
he is entitled to get. This rule seeks to look upon the factor and can be applied to
conduct a renegotiation procedure to set better terms of the promise. For example, in
the case of Stilk v Myrick, the commander of a vessel during a voyage promised the
present team an equal share in the wages of the employees those have deserted.
However, the wages were not delivered, and action is instituted to receive such share.

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The court held that there was no consideration delivered in care of the promise. In
another instance in the case of Hartley v Ponsonby, the sailors were promised
additional money on the completion of the voyage when the ship’s crew has
abandoned the vessel. The court stated they are allowed to the extra pay due to the
reason that they exceeded their existing duties due to the significant rise in the risk in
order to continue the voyage even with insufficient crew members.
Intention
The legal relationship between the parties meant the parties to look upon the
agreements as a legally enforceable contract and remedy can be sought upon the breach of
such contracts. The existence of legal relations can be examined in terms of relations based
on domestic or commercial spheres.
Domestic
For example, in an instance, the parties do not intend to create legal relations. In the
case of Balfour v Balfour, an agreement was created between a husband and wife regarding
the wife’s maintenance that was deliberated not to be legally binding upon both the parties.
Commercial
For example in the case between commercial parties, the intention to build legal
relations is alleged except the parties to introduce an agreement to the differing as per in the
case of Rose and Frank Company v J R Crompton.
Certainty
The terms and the conditions stated in the Contract must be assured if they are to be
deliberated amply detailed to be enforced by a court. It follows the facts that the courts will
not rewrite any contract if they are drafted incorrectly or negligently.

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Conclusion
In conclusion, it is stated that as per the facts and the circumstances of the case of
Carlill v Carbolic Smoke Ball Co it was an example of the invitation to offer and although the
company revoked the offer before the acceptance as the offer was made to a public at large
the revocation of such contracts should also have been made to the public by an article in the
same newspaper. The fact that it was the liability of the company as a to a reasonable man
such offers seem to be accurate and a person can claim in case of a breach. This case is an
example to understand the aspects of the contract law as it is considered particularly to the
unilateral contracts. Studying this case provides a fundamental understanding of the elements
of the Contract, and hence this case is also known as the foundation case law in order to
understand the contracts.

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Reference
Alexander Brogden v Metropolitan Railway Co [1877]
Balfour v Balfour [1919]
Bolton v Madden 1873
Bradbury v Morgan [1862]
Carlill v Carbolic co [1893]
Currie v Misa (1874–75)
Dickinson v Dodds (1875–76)
Felthouse v Bindley [1862]
Fisher v Bell( 1960)
Hartley v Ponsonby [1857]
Holwell Securities v Hughes [1974]
Hyde v Wrench [1840]
Partridge v Crittenden [1968] 1 WLR 1204
Ramsgate Victoria Hotel v Montefi ore (1865–66)
Riches, S., Allen, V. and Keenan, D. (2009). Keenan and Riches' Business law. Harlow:
Pearson Longman.
Rose and Frank Company v J R Crompton [1925]
Stilk v Myrick 1809

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The Household Fire and Carriage Accident Insurance Company v Grant (1879)