INTRODUCTION

A ‘contract’ is a bilateral transaction between two or more than two persons.

Anson1 has defined the word ‘contract’ in the following words:

“A contract consists in an actionable promise or promises. Every such promise involves two

parties, a promisor and promise, and an expression of a common intention and of expectation as

to the act or forbearance promised.”

Section 2(h) of the Indian Contract Act 2 defines contract as “An agreement enforceable by law

is a contract.”

Therefore, a contract means an agreement which is enforceable by law. An agreement consists of

reciprocal promises between the two parties.

Each party is legally bound by the promise made by him.

An agreement arises by an “offer” (used in English Law) or “proposal” (used in Indian Contract

Act) by one of the parties and the “acceptance”of such offer by the other.

“When one person signifies to another his willingness to do or to abstain from doing

anything, with a view to obtaining the assent of that other to such act or abstinence, he is

said to make a proposal.”

An offer need not always be made to an ascertained person but it is necessary that an ascertained

person should accept it.

1
Anson’s Law of Contract 23rd Edition, Edited by A.G. Guest (1971) p. 23
2
Indian Contract Act, 1872.
The case “Louisa Carlill v. Carbolic Smoke Ball Company3 ” took place in the year 1983 in

the court of Appeal in UK which is considered as one of the landmark judgements in English law

of contracts. It deals with an advertisement in the newspaper and with general offer. The judges

in this case were Justice Lindley, Justice Bowen, and  Justice Smith.

3
Louisa Carlill v. Carbolic Smoke Ball Company [1892] EWCA Civ 1 / (1893) 1 Q.B. 256.
BACKGROUND

The defendants, i.e. Carbolic Smoke Ball Company were proprietors and vendors of a medical

preparation called “The Carbolic Smoke Ball” to cure influenza. They inserted in the Pall Mall

Gazette of November 13, 1891, and in other newspapers, the following advertisement:

“£100 reward will be paid by the Carbolic Smoke Ball Company to any person who contracts the

increasing epidemic influenza, colds, or any disease caused by taking cold, after having used the

ball three times daily for two weeks according to the printed directions supplied with each ball.

£1000 is deposited with the Alliance Bank, Regent Street, showing our sincerity in the matter.”

“During the last epidemic of influenza many thousand carbolic smoke balls were sold as

preventives against this disease and in no ascertained case was the disease contracted by those

using the carbolic smoke ball.”

“One carbolic smoke ball will last a family several months, making it the cheapest remedy in the

world at the price, 10s., post free. The ball can be refilled at a cost of 5s. Address, Carbolic

Smoke Ball Company, 27, princes Street, Hanover Square, London.”

These advertisements were in the context of flu pandemic 1889-1890.

The plaintiff, Mrs. Louisa Elizabeth Carlill, on the faith of this advertisement, bought one of the

smoke balls at a chemist’s, used it as directed, three times a day, from November 20, 1891, to

January 17, 1892, yet she was attacked by influenza.

which was initially ignored by the company and then the company sent letters stating it

wouldn’t be a problem unless the Smoke Ball has been used in the prescribed manner.

She brought an action to claim the reward in UK’s House of Lords as the Company didn’t give

her the compensation despite the Company knowing she contacted influenza.
The Defendants Argued:

1. That there was no binding contract between the parties because notification of acceptance

had not been communicated, i.e. no communication of acceptance was done by her(the

offeree) to the company (the offeror).

2. That – the present case is similar to Harris v. Nickerson4 (law Rep. 8 Q.B. 286 Vol. I.

1893). The advertisement is too vague to be the basis of a contract; there is no limit as

to time, and no means of checking the use of the ball. Anyone who had influenza might

come forward and depose that he had used the ball for a fortnight, and it would be

impossible to disprove it.

3. It was further argued by the company that the offer of the reward of £100 was a casual

offer, a mere advertisement and it was thought that no reasonable man took any serious

note of it.

4. That their offer didn’t have a binding effect on them to form a legal contract. They

reasoned that the word used in the advertisement didn’t amount to promise because the

advertisement was not clear in terms to form a contract.

Thus, it is clear that the advertisement was just a marketing strategy and the company has no

intention of creating any kind of contract while offering a worldwide offer.

The Plaintiff Argued:

4
Harris v. Nickerson (1873) LR 8 QB 286
 1. That the promise was not vague and also the formulation of the offer was such that it was

clear that in case the product doesn’t work and wasn’t effective the company would reward

a certain amount. And also to imply the same, the Company had deposited in their Alliance

bank account. Thus, their act of depositing the amount is proof of their intention to

make a contract.

2. That there was a consideration in form of money paid to buy the Carbolic smoke ball.

Thus, the Company has to fulfil its part of the bargain.

 What is the test of determining as to whether the parties intended to create legal

relations while giving the proposal. (“intention to create legal relations is an essential in

creating valid agreement or proposal)

 Whether the advertisement made by the company a valid general offer or not?

 Was any sort of communication of acceptance done by mrs. Carlill to the company or

not? Or whether mrs. Carlill was required to communicate her acceptance of the

offer to the company?

 Whether a consideration was made or not.

 Is there a binding effect of the agreement between the parties?

 Does the performance of the conditions advertised constitute as “acceptance of offer”?

COURT’S OPINION

The court of appeal unanimously rejected the company’s argument and held that there was a

fully binding contract for £100 with Mrs. Carlill and finally Mrs. Carlill received compensation

of £100.

The court further held that:

(i) This advertisement was a unilateral offer to the entire world.

person who makes the offer, he may dispense with notice to himself if he thinks it

desirable to do so......... In the advertisement cases it seems to follow as an inference to

be drawn from the transaction itself that a person is not to notify his acceptance of the

offer before he performs the conditions.

It is well settled that an offer may be accepted by conduct. But conduct would only amount to

acceptance if it is clear that the offeree did the act with the intention (actual or apparent) of

accepting the offer.

(iii) This is one of those cases in which a performance of the condition by using these

smoke balls for two weeks three times a day is an acceptance of offer.

(iv) A person becomes a persona designata and able to sue, when he performs the

conditions mentioned in the advertisement.

(v) There were 2 considerations, i.e. consideration of the inconvenience of having to use

this carbolic smoke ball for two weeks three times a day; and the other more important

consideration is the money gain likely to accrue to the defendants by the enhanced sale

of the smoke balls, by reason of the plaintiff’s user of them. There is ample

consideration to support this promise.

(vi) In the words of Bowen L.J. “The advertisement says that £1000 is lodged at the bank

for the purpose therefore it cannot be said that the statement that £100 would be paid

was intended to be a mere puff.”

those who suffer from influenza even after using the smoke ball according to the printed

directions for a certain period (i.e. three times everyday for two weeks) clearly shows company’s

“sincerity in the matter”.

ANALYSIS

It was mentioned by The Company that thousands of carbolic smoke balls were sold as

preventives against these diseases and in no such case, the disease was contracted by those using

it.

The interpretation/assumption of this information if it were considered to be true:

1. If there were so many people taking this ball and still none claimed compensation from

The Company, or so as we know; that means that there are chances that Mrs. Carlill

didn’t take these balls in the prescribed manner.

The Company wouldn’t know it unless there was a test determining whether she took the

carbolic smoke balls or not as the ratio of people consuming them and not contracting influenza

is very high as compared to the one person who took it & still contracted influenza.

An advertisement containing certain terms to get a reward constituted a binding unilateral offer

that could be accepted by anyone who performed its terms.

This benchmark judgment of Carlill v. Carbolic Smoke Ball Company was given in 1892 and

still remains an important case for law students. It established several key principles in Contract

Law:

- It clarified that advertisements can be considered offers that can be accepted by

performance.

- It demonstrated how the principle of offer and acceptance works in practice.

- It confirmed the importance of consideration in contract formation and showed how

reliance on an offer can be sufficient consideration.