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Case Summary

Carlill v. Carbolic Smoke Ball Co. (1891-94) All ER Rep.127

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This Case Summary is written by Ishanvi Jain, a student of Galgotias University, Noida

Introduction

The Plaintiff, believing Defendant’s advertisement that its product would prevent influenza, bought a Carbolic Smoke Ball and used it as directed from November 20, 1891 until January 17, 1892, when she caught the flu.  Plaintiff brought suit to recover the 100£, which the Court found her entitled to recover.  Defendant appealed.Carlil vs carbolic is notable for its curious subject matter and how the influential judges (particularly Lindley LJ and Bowen LJ) developed the law in inventive ways. Carlil vs carbolic is a contract case that is frequently discussed. In this casea medical firm advertised that its new wonder drug, a smoke ball, would cure people’s flu, and if it did not, buyers would receive £100. When sued, Carbolic argued the ad was not to be taken as a serious, legally binding offer. It was merely an invitation to treat, and a gimmick. But the court of appeal held that it would appear to a reasonable man that Carbolic had made a serious offer. People had given good “consideration” for it by going to the “distinct inconvenience” of using a faulty product. The Defendant, the Carbolic Smoke Ball Company of London (Defendant), placed an advertisement in several newspapers on November 13, 1891, stating that its product, “The Carbolic Smoke Ball”, when used three times daily, for two weeks, would prevent colds and influenza.  The makers of the smoke ball additionally offered a 100£ reward to anyone who caught influenza using their product, guaranteeing this reward by stating in their advertisement that they had deposited 1000£ in the bank as a show of their sincerity.  The Plaintiff, Lilli Carlill (Plaintiff), bought a smoke ball and used it as directed.  Several weeks after she began using the smoke ball, Plaintiff caught the flu.

Facts 

  1. The Company published advertisements in the Pall Mall Gazette and other newspapersclaiming that it would pay £100 to anyone who got sick with influenza after using its product according to the instructions.
  2. £100 reward will be paid by the Carbolic Smoke Ball Company to any person who will get caught by the cold or other diseases related to cold after having used the ball three times daily for two weeks, according to the printed directions supplied with each ball.
  3. The plaintiff (Louisa Carlill) believing in the accuracy of the statement made in the advertisement , purchased one packet and used it thrice every day from mid-November, 1891 until 17th Jan, 1892, after that  date she had an attack of influenza. 
  4. After that her husband wrote a letter for her to the defendants, stating what had happened, and asking for £100 as promised in the advertisement.

Issues raised

  1. Was the ad a “mere puff”?
  2. Does performance of the condition advertised in newspaper constitute acceptance of an offer?
  3. Was there any consideration made?

Judgement

The court said that there is no time limit fixed for catching influenza, and it cannot seriously be meant to promise to pay money to a person who catches influenza at any time after the inhaling of the smoke ball. There is also great vagueness in the limitation of the persons with whom the contract was intended to be made. But this document was intended to be issued to the public and to be read by public and the effect of this advertisement was to attract people and make them use it, which would amount to more sales, thus more profit. Based on this intention to promote the distribution of the smoke balls and to increase its usage, the advertisement was accepted as a contract addressing public at large but limited to those people who are using it either for prevention or treatment of influenza and other mentioned diseases.

Defendant’s Appeal was dismissed, Plaintiff was entitled to recover 100£.
The Court acknowledges that in the case of vague advertisements, language regarding payment of a reward is generally a puff, which carries no enforceability.  In this case, however, Defendant noted the deposit of £1000 in their advertisement, as a show of their sincerity.  Because Defendant did this, the Court found their offer to reward to be a promise, backed by their own sincerity. The Court of Appeal unanimously rejected the company’s arguments and held that there was a fully binding contract for £100 with Mrs. Carlill.

Conclusion

The ad was an express promise to pay 100 pounds to anyone who contracts flu after using the ball three times daily, 2 weeks. The ad was not a mere puff because of this statement “1000 is deposited with the Alliance Bank, showing our sincerity in the matter” proof of sincerity to pay. Promise is binding even though not made to anyone in particular. A unilateral offer  i.e. “offers to anybody who performs the conditions named in the advertisement, and anybody who does perform the condition accepts the offer”. The ad is not so vague that it cannot be construed as a promise the words can be reasonably construed. For example, that if you use the remedy for two weeks, you will not contract the flu within a reasonable time after that.

Suggestion 

The advertisement was an offer to the world. It was contended that it is not binding. It was said that it was not made with anybody in particular. In point of law the advertisement was an offer to pay £100 to anybody who will perform these conditions, and the performance of the conditions is the acceptance of the offer. Communication of acceptance is not necessary for a contract when people’s conduct manifests an intention to contract. Unquestionably, as a general proposition, when an offer is made, it is necessary in order to make a binding contract, not only that it should be accepted, but that the acceptance should be communicated but in cases of this kind, it is apprehended that they are an exception to the rule that the communication of the acceptance need not precede the performance. This offer is a continuing offer. It was never revoked, and if notice of acceptance is required, then the person who makes the offer gets the notice of acceptance contemporaneously with his notice of the performance of the condition before his offer is revoked.

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Case Summary

Felthouse V. Bindley (1862) 11 CB 869

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This Case Summary is written by Shivanshi Aggarwal, a student at Maharaja Agrasen Institute of Management Studies, GGSIPU

Introduction

To make a contract valid and legally bound, offer, acceptance of that offer and consideration are considered to be essential elements. The Indian Contract Act, 1872 defines offer and acceptance as “When one person signifies to another his willingness to do a particular act is said to be maid offer” and “when the other person to whom the offer is made signifies his assent is said to accept that offer”. A contract is made to be complete when an offer is made and that offer is accepted. But to make a certain offer and to accept that offer certain conditions are required. These conditions generally lead to misunderstandings and later disputes. In this case as well there was misunderstanding between the appellant and the party whose property was being subjected regarding whether the offer made was accepted or not. This case provided a slight clear vision towards the correct form of acceptance and how a mere communication does not amount to contract of sale. 

Facts

Paul Felthouse, a builder residing in London was the complainant. He had communication with his nephew John Felthouse, showing the interest to buy his horse. They both had two letters exchanged as there was some misunderstanding regarding the prices of the horse. Paul sent the final letter to his nephew saying, “If I hear no more about him, I consider the horse to be mine at 30 pounds and 15 cents”. He was ready to pay more to cover up for the misunderstanding. John being busy with his farm’s auction replied nothing but instructed auctioneer Mr. Bindley that the horse should not be auctioned and should be reserved. But the auctioneer forgot this communication and sold the horse to some other party gaining more profit. When John got to know about this he sent a letter to his uncle apologizing for the same. Finally Paul sued Bindley in the tort of conversion which is using someone else’s property inconsistently with their rights.

Some of the issues raised in front of the court were-

  1. Whether silence or no reply amount to acceptance
  2. Whether failure to reject amount to acceptance
  3. Does principle of acceptance put burden on the offeree to communicate the acceptance or the refusal

Arguments Raised

Defendant Side

Paul argued that since no letter was received from his nephew’s side the horse will considered being his and then Bindley had no right to sell or to take any advantage from the sale of the horse. He walked beyond his rights by selling the property which did not belonged to him. 

Accused Side

Bindley put up his point saying that since John never communicated his acceptance, there was no actual contract of sale or any bounding contract between them. He never officially communicated the horse to be his and thus Paul had no right over the horse. 

Judgement

This judgement was given by three judge bench consisting of Willes J, Byles J and Keating J unanimously. Willes J gave the leading judgement stating that there was no formal bargain for that horse and hence there was no space for contract of sale. Being silent or giving no response will not amount to acceptance. Though John showed his interest in selling the horse to Paul and also instructed Bindley not to sell the horse in auction but still showing interest will not legally bound him or Bindley to sell the horse to Paul. The date of sale of horse was 25th of February and by that date no letter of acceptance was being sent. The apology letter was sent on 27th of February which will be considered as the first official letter by the nephew to his uncle but that was after the sale of the horse. Thus at the time of the sale there was no legal contract between any party and Paul did not have the ownership of the horse. Since he had no legal right over the horse he cannot claim anything from Bindley and actions for conversion cannot be taken. The other two judges were of the same opinion and did not consider silence or failure to reject as an acceptance. They further signified that one cannot impose an obligation on another to reject one’s offer. 

Conclusion

Offer and acceptance being the major component of binding contract cannot be left as any loophole. There must be clear communication regarding making the offer and simultaneously accepting the offer made. In this case offer has been clearly made by Paul but John did not communicate any clear acceptance. Thus principles of acceptance of offer have been cleared here which clearly shows that silence cannot be considered as an acceptance. The court also considered the case of Dobell v. Hutchinson which tells that acceptance need not to be in written it can be oral as well. But regardless in this case acceptance was not made in any form and only the intention of selling the horse was shown which does not give ownership rights to any person concerned. This case was considered landmark as an important judgement was delivered regarding principles of acceptance. 

Suggestions

There is a concept of acceptance by conduct which means that doing ac act in accordance with what was required which shows the approval or acceptance. Since Paul put the letter stating, “If I do not hear”, and got no response there was a chance of acceptance by conduct. John might do not replied because he agreed to the conditions and prices. This case was also later reconsidered delivering that fact that there were chances of acceptance by conduct. Though the judges were right in saying that clear communication should be made for a contract of sale to become valid and legally bound but in my opinion this case should have been come under acceptance by conduct. The conduct of John, not replying or not giving any response will create a picture in someone’s mind that he accepted the offer and now horse belongs to him. Also the auctioneer was also instructed not to sell the horse and he also failed to work in accordance to what was required by his client. His negligence harmed Paul and Paul should be given the ownership of the horse. As can be seen in the case of Rust v. Abbey Life Asurance Co. Ltd., failure to reject was considered as acceptance. 

Case Summary

Lalman Shukla v. Gauri Dutt (1913) XL ALJR 489 (AII.)

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This Case Summary is written by Shivanshi Aggarwal, a student at Maharaja Agrasen Institute of Management Studies, GGSIPU

Introduction

For a valid and binding contract, there must be an offer and acceptance of that offer. If any one of the element is missing then it will not be considered as the valid contract. Further offer can be classified in various other ways one such is general offer. General offer can be defined as an offer which is made to general public or an offer which is made at large. Then whoever sees that offer and act in accordance with its policies is said to be accepted that offer, in this case there is no need to present acceptance to particular party concerned. In the case mentioned there was misunderstanding regarding whether the offer made by defendant was a general offer or a specific offer and whether plaintiff accepted that offer or his conduct was acceptance to that offer. 

Facts

Gauri Dutt, the defendant sent her several servants to different places to find out her missing nephew who was absconded from the house. Lalman Shukla, the plaintiff was the munim in the firm. He was sent to Haridwar to trace the boy. He was given the expenses of the train fare and was paid for other expenses as well. He found the nephew in Rishikesh and brought him back to Kanpur. When he was gone for the search, the defendant issued handbills saying that whoever will bring back the nephew will be rewarded with 501 rupees. Plaintiff was unaware of this announcement. When he returned he was awarded 20 rupees and two sovereigns. He accepted that and continued to work. After six months when he was being fired from the job due to some dispute he got to know about the offer. Later he filed the case in Kanpur court to claim rest of the reward money. Kanpur courts dismissed his appeal, then he filed the reconsideration appeal in high court. 

Issues Raised

Some of the issues raised in front of the court were:

  1. Whether the offer was accepted
  2. Whether the lower court was correct in dismissing his appeal
  3. Whether he was entitled to receive the remaining reward money
  4. Whether the offer made was specific offer or general offer
  5. Whether the principles of offer made were fulfilled 

Arguments Raised

Plaintiff Side

The plaintiff argued that the conditions of the offer were to find the missing boy and to bring him back home. He fulfilled those and thus as per Section 8 of Indian Contract Act, 1872 which says “performance of the conditions of the proposal is an acceptance of the proposal”, he should be given the remaining amount. He further presented the case of Gibbons v. Proctor which shows that if persons performs the conditions of the offer even if completely unaware of the reward is entitled to receive the amount of the reward also in the case of Williams v. Carwadine it was shown that the valid contract exists if the acceptance is done by performing the essential conditions of the contract. 

Defendant Side

Defendant claimed that since plaintiff was unaware of the offer made and never accepted that offer, should not be entitled to receive any reward as per Section 2(b), and Section 2(h) of Indian Contract Act, 1872 which says that “when the person to whom the offer is made signifies his assent thereto, the proposal is said to be accepted” and “an agreement enforceable by law is a contract”, respectively. She further presented the case of Fitch v. Snedker which shows that failure to accept the offer made the contract void and hence no claim can be pleaded. 

Judgement

On filing the reconsideration appeal, in Allahabad High Court, Justice Banerji also dismissed the plaintiff’s appeal stating that since at the time of declaration of reward defendant was not present and did not had the knowledge of the handbills, it cannot be considered as the acceptance of any offer made. Also the acceptance of general offer can be done when any person after knowing the offer, then act in accordance with the offer made with the motive to receive the reward but since here he did not had any previous knowledge he cannot claim any compensation. He was just performing his duties in accordance with his obligations as the servant and not in accordance with any contract or offer made. Thus the contract is not enforceable by law and cannot be treated as any agreement and leading no option with plaintiff to receive any sum of money from defendant as the conduct of finding the missing boy. 

Conclusion

This case was considered very important as a landmark judgement regarding essentials of contract, how contract turns into agreement and elements of general offer were justified here. This case shows how general offer and specific offer is differentiated. Also this case shows the presence of knowledge at the time of conduct or acceptance is very necessary. This case also clarifies how the given facts are different from any other lost and found or missing advertisements of the market and thus why in this case the plaintiff will not receive any remuneration which people usually receive in general times. Also various provisions of Indian Contract Act, 1872 were being highlighted and discussed which extensively tells how to rely upon certain circumstances and how certain facts change the entire concept of general offer. As per this judgement the contract needed acceptance to turn into valid agreement but the absence of that made it void and unenforceable. Lalman Shukla, no doubt performed his duties what was mentioned by Gauri Dutt in the handbills issued but it was not in accordance or not with the motive to fulfill that offer. It was his mere sincerity towards his job. He simply did not have any motive to claim the reward when he left to find the boy from Kanpur to Haridwar. Thus the absence of both knowledge and motive made this case to be dismissed.