Law 200 Basic Business Law Assessment Answers

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Carlill v Carbolic Smoke Ball Company [1892] EWCA Civ 1, is a case where the court of appeal rejected the decision made by the lower court. The case is related to the formation of a valid contract discussing the elements of a valid contract specifically intention and unilateral offer and acceptance.

The defendant made an advertisement in the news paper. According to the advertisement the defendant (Carbolic Smoke Ball Company) promised to pay 100 to whoever suffers influenza if that person has used according to the instruction the product of the company as printed on the products. The advertisement further stated that the company ensures its sincerity in relation to the matter by depositing the amount with Alliance bank.  The plaintiff purchased the smoke balls and used them as instructed by the company. However the plaintiff was still diagnosed with influenza even after using the products as instructed by the defendant. The plaintiff made a claim for the rewards which had been promised by the defendant however the claim had been rejected by the defendant stating that it did not have intention to establish a contractual relationship. The court held that there was objective intention of the defendant and as the plaintiff has already done the consideration the contract is binding. 

Arguments of the plaintiff

1. There is a contract between the plaintiff and the defendant which provides that if the plaintiff suffers influenza after the use of the smoke balls which he did he is entitled to the reward promised by the defendant.
2. As the plaintiff had committed the act according to the advertisement of the defendant the plaintiff is entitled to be the loss which has been suffered by her due to the advertisement.
3. The reliance on the advertisement by the plaintiff constituted a valid contract between the parties.

Arguments of the defendant

1. It was argued by the defendant that the advertisement was merely a sales puff and the company had no intention to make an offer with respect to the product.
2. It was also argued by the company that it is not possible to make an offer to the whole world.
3. The plaintiff did not notify the defendant any form of acceptance.
4. The wording of the advertisement was very ambiguous so it cannot be constituted as an offer as no time had been stated in relation to the diagnosis of the disease.
5. No consideration existed in relation to the contract as it had not been specified that any person has to purchase the product. 

Ratio Decidendi

It was held by the court that an offer could result from an advertisement in case specific words have been used. It was also held by the court that an offer is eligible to be presented to the whole world. The court also held that the acceptance of a person can come to existence because of his actions in form of a unilateral contract. The consideration in this case according to the court was the disease suffered by the plaintiff and the benefit enjoyed by the company due to the increased sales. The decision of the court was to prevent the plaintiff from suffering undue hardship and ensuring that companies do not get away by making such advertisements. 

Comments on the decision

The decision provided by the court is one of the best decisions of the court which acts as a guideline for various situations in relation to contract law. The court established that a person can make an offer to another person, a group or to the whole world and such determination is based on the wording of the offer.  It had been decided in the case of partridge v Critenden (1968) 2 ALL ER 425 that an advertisement is not a complete offer and merely an invitation. However in this case the court this case it had been provided that an advertisement would result in an offer if the wordings of the advertisement induces a person to perform an action according to it. The principle was also discussed in the case of Chapelton v Barry Urban District Council [1940] 1 KB 532 where it had been provided by the court that the intention of a person is derived through an objective test. According to the test if a reasonable person would be induced by the wordings of a statement to get into a contract intention is deemed to be present. Consideration does not have to be fair in order to form a contract; an adequate consideration is enough to form a contract. In this case even through it was not mentioned in the advertisement that person has to purchase the smoke balls in order to be eligible for the reward as thus no consideration existed the court held that the suffering which was endured by the plaintiff was adequate consideration along with the benefit of the company. According to the principles of equity if a person makes gains by unreasonable expose of the other to detriment he is liable to compensate the other person for the loss suffered (Hunter, 2017). Thus the decision of the court in relation to the consideration of the contract was appropriate. It had been provided by the case of Smith v Huges 1871 that an acceptance has to be notified to the person is some form to constitute a contract, however in this Carhill case the court held that even though acceptance was not communicated the doing of the consideration resulted in acceptance. The decision of the court has also been supported by which provided that in case of unilateral contract the offeree need not notify the offeror about the acceptance. There have been various exception provided where a advertisement results in an offer instead of an invitation to treat (Poole, 2016). In this case such exceptions were observed by the court to provide an appropriate decision. According to McKendrick (2014), implied contract are also formed between parties through which it is deemed that there has been an agreement between the parties for instance a contract is created when a penitent visits the doctor for examination (Knapp, Crystal & Prince, 2016). Thus in this case the contract was created when the plaintiff completed the terms of the valid offer on his part. 

References

Carlill v Carbolic Smoke Ball Company [1892] EWCA Civ 1

Chapelton v Barry Urban District Council [1940] 1 KB 532

Hunter, H., 2017. Modern Law of Contracts.

Knapp, C. L., Crystal, N. M., & Prince, H. G. (2016). Problems in Contract Law: cases and materials. Wolters Kluwer Law & Business.

McKendrick, E. (2014). Contract law: text, cases, and materials. Oxford University Press (UK).

partridge v Critenden (1968) 2 ALL ER 425

Poole, J. (2016). Textbook on contract law. Oxford University Press.