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Running head: CARLILL V CARBOLIC SMOKE BALL COMPANY 1

Carlill v Carbolic Smoke Ball Company

Name

Institutional Affiliation

CARLILL V CARBOLIC SMOKE BALL COMPANY 2

Carlill v Carbolic Smoke Ball Company

Introduction

A contract is a legally binding set of promises. In the context of contract law, one’s

undertaking to do or refrain from doing something if another party makes a promise in return or

also refrains or does something a promise. A legally binding agreement, in this case, is reached

when a promise meets certain criteria. In Australia, the criteria include the fact that there has to be

a consideration, an agreement made up of an offer and an acceptance, compliance with legal

formalities regardless of type, intention to make legal relation and lastly the parties involved in the

contract should have the legal capacity to it.

Carlill v Carbolic Smoke Ball Co. Ltd [1892] 2 QB 484 is the Court of Appeal’s contract

law decision and it is most talked about due to the way the law was developed in an inventive way

by two judges, Bowen LJ and Lindley LJ. In the case, a medical firm created an advertisement for

its recent product which could cure influenza which then was a major cause of death. The

advertisement stated that if the “smoke ball”, as it was called, would cure flu but if it could not

cure, the user of the wonder drug would get a reward of 100 pounds. After Carlill v Carbolic Smoke

Ball Co. Ltd was sued, it made an argument that the advertisement had not to be considered as an

offer which was legally binding. The company went further to term the advertisement as a gimmick

and a small invitation to threat. The Court of Appeal, however, held a to it that it would be seen

by any reasonable human being that Carlill v Carbolic Smoke Ball Co. Ltd had made a serious

offer. Consideration comes in where users had given consideration for it by fully trusting and using

the faulty product.

Louisa Carlill v Carbolic Smoke Ball Company case was heard by the Court of Appeal and

it was decided on 8th December 1892 by Bowen LJ and Lindley LJ and AL Smith LJ. Its citations

CARLILL V CARBOLIC SMOKE BALL COMPANY 3

are [1893] 1 QB 256, [1892] EWCA Civil 1. In this case, the defendant is Carbolic Smoke Ball

Company while the plaintiff is Louisa Carlill. The defendant made a product known as the smoke

ball and therefore the company made a claim that the product could cure influenza. According to

McKendrick (2014), the smoke ball was made of a rubber with an attached tube used to insert into

the nose so that carbolic acid vapor could be released into a user’s nose. When this was done, the

nose would run and therefore help in flushing out the viral infections from the body.

Carbolic Smoke Ball Co. Ltd published the advertisement in the Pall Mall Gazette on

November 13, 1891 and it is here that a claim was made that the company would pay 100 pounds,

a considerable amount at that time to anyone who still contracted influenza after using the smoke

ball based on the instructions which were written in the advertisement. According to Bender and

Do (2014), the advertisement read, “£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."

In this case, Mrs. Louisa Elizabeth Carlill, the plaintiff read the advertisement in the

newspaper and made a purchase of a packet of the smoke ball and used it as per the instructions

from the middle of November. However, on January 17, 1892, she contracted influenza (Butler,

CARLILL V CARBOLIC SMOKE BALL COMPANY 4

Christensen, Willmort & Dixon, 2013). It was at this point that her husband who was also a

solicitor wrote to the Carbolic Smoke Ball Company who is the defendant and in the written letter,

he explained what had transpired and asked for the 100 pounds as per the promise of the

advertisement. The defendant, however, refused to make the payment stating that there was no

presence of a contract to pay. It was at this point that Mr. Carlill, the husband of Mrs. Louisa

Elizabeth Carlill brought the case to the court of appeal where the arguments from the two sides

were heard by the judges and a verdict was given in favor of Mrs. Louisa Elizabeth Carlill. The

defendant, however, made an appeal.

Significance of Carlill v Carbolic Smoke Ball Co. Ltd in Australian Courts.

In the case, there are significant and relevant legal principles which are still utilized in

Australian courts today. According to Jones (2016), a contract is a promise or a set of promises

which will be enforced by the law. The agreement binding the parties to the contract has a major

role to play while taking into consideration every word stated in the contract. According to Miller

(2015), a contract law is a set of rules governing the content, relationship, valid agreement between

two or more individuals in regards to the exchange of ownership or interest, provision of services

or the sale of goods.

Principles of Contract Law

In Australia, contract law is defined with four essential aspects which include an offer,

acceptance, intention to legal relations and lastly consideration (Latimer. 2012). According to

Monaghan (2015), an offer is willingness’ expression to a given contract on certain terms and

conditions which are created with an intention that it will be binding when it is agreed upon by the

party to whom it is addressed. Acceptance of an offer means the agreement which is unconditional

CARLILL V CARBOLIC SMOKE BALL COMPANY 5

for all terms of that specific offer. The contract cannot be formed without consideration which is

a very important element and it is made up of an obligation to perform a given act which is desired

or refrain from engaging in an act which one is legally entitled to perform.

For Carlill v Carbolic Smoke Ball Company’s case, an offer is seen in the promise made

by the Carbolic Smoke Ball Company to pay 100 pounds to any person who proves that the

functionality of the smoke ball is improper (Butler, Christensen, Willmort & Dixon, 2013). When

the case was filed, the company claimed that it was not an offer but a mere puff and a statement.

However, the judges disregarded this claim because the company had made a deposit of 1,000

pounds in the Alliance Bank located in Regent Street and this showed that the company was indeed

ready to pay 100 pounds to any person who contracted influenza after using the smoke ball as per

the guidelines in the advertisement (O’Gorman, 2013). Acceptance, in this case, can be seen where

the defense counsel of the Court of Appeal brought the fact that there is no presence of notified

acceptance with Mrs. Louisa Elizabeth Carlill. The judges, on the other hand, claimed that a

notified acceptance was not necessary to the offer because of the company’s publication of the

advertisement and therefore, there was no need for a notified acceptance in the contract.

Consideration as a principle is also touched upon in the case of Carlill v Carbolic Smoke

Ball Co. Ltd. The Court of Appeal held to it that the advertisement is regarded as an offer when it

makes a specific quantity of parties eligible to accept the terms (McKendrick, 2014). If such an

advertisement needs performance, the party offering the claim is not required to provide a notice

of his performance. Even though there was an argument that the advertisement lacked

consideration, the judges refused it.

Rationale

CARLILL V CARBOLIC SMOKE BALL COMPANY 6

The Court of Appeal made an anonymous rejection of the company’s argument and held

to it that based on the advertisement in the newspaper, when it came to the plaintiff, there was a

legally binding contract for 100 pounds. Among the reasons placed on the table by the three-judge

bench include the fact that the newspaper advertisement by Carbolic Smoke Ball Co. Ltd was a

unilateral offer to any person who read the newspaper, by using the smoke ball one satisfied the

conditions which constituted the acceptance of the offer, by just purchasing or using the smoke

ball, a party constitutes a good consideration and lastly, the company’s claim that it made a deposit

of 1,000 pounds to the Alliance Bank showed the seriousness of the legally bound agreement.

The judgments of the courts was made by three notable judges Lindley .L.J, Bowen .L.J and A.L.

Smith, L.J (Cheong, 2016). Lindley .L.J dismissed the appeal, giving his decisions first and reasons

later, he made an explanation of his judgements by making an answer to the defense counsel’s

allegations and upholding the decision by the lower courts.

According to Vermeesch and Lindgren (1990), Lindley .L.J said, “I will begin by referring

to two points which were raised in the Court below. I refer to them simply for the purpose of

dismissing them. First, it is said no action will lie upon this contract because it is a policy. You

have only to look at the advertisement to dismiss that suggestion. Then it was said that it is a bet.

Hawkins, J., came to the conclusion that nobody ever dreamt of a bet, and that the transaction had

nothing whatever in common with a bet. I so entirely agree with him that I pass over this contention

also as not worth serious attention.” According to Jones (2016) he went further to say that, “The

first observation I will make is that we are not dealing with any inference of fact. We are dealing

with an express promise to pay 100£ in certain events. Read the advertisement how you will, and

twist it about as you will, here is a distinct promise expressed in language which is perfectly

unmistakable…100£ the reward will be paid by the Carbolic Smoke Ball Company to any person

CARLILL V CARBOLIC SMOKE BALL COMPANY 7

who contracts influenza after having used the ball three times daily for two weeks according to the

printed directions supplied with each ball."

Bowen, L.J judgment correlated with that of Lindley, L.J but he went further to put forward

some points with regards to the contract’s time period together with its vagueness. His perspective

was better structured in style and up to now, it is being cited by scholars and researchers. He

dismissed the claim by the Defense’s counsel that the contract was vague and therefore its

enforcement was not possible. Bowen, L.J, had reliance on his construction of the document and

he said that there was lack of time limit which was stipulated when it came to contracting influenza

and that the company could not make a promise of paying 100 pounds to any person who contracts

influenza after using the smoke ball (Miller, 2015).

Vagueness was also visible in the limitation of the parties involved in the contract but

essentially the advertisement as a document was issued to the public so that it could be read by the

public because the channel used was print media in the form of a newspaper. Bowen, L.J further

made a claim that a commoner would most likely interpret the advertisement in different ways. He

also went ahead to touch on the main reason for the advertisement which was to reach as many

people as possible so that they would try out the new product and most likely bring about returns

as profits.

According to Bowen, L.J, the major reason for the advertisement was to promote the

product’s distribution and therefore its view as a contract is highly acceptable especially to those

using the product as a treatment or preventive measure against influenza and other diseases. The

judge, therefore, came to a conclusion that the warranted protection by the contract lasted for as

long as influenza threatened the lives of people and therefore based on the time limit, the contract

held (Smits, 2017).

CARLILL V CARBOLIC SMOKE BALL COMPANY 8

The Effects

The aftermath of the appeal is that it was anonymously dismissed by the judges and the

plaintiff ultimately got the reward of 100 pounds and she lived until she was 96 years old and in

1942, she died of old age and influenza (Cheong, 2014). On the other hand, Carbolic Smoke Ball

Co. Ltd continued advertising and even increased the compensation to 200 pounds after losing the

case to Mrs. Carlill. The judgment made by the Court of Appeal has set a precedent in contract

law which has continued to be seen in Australia. What this judgment has established is an offer

that a contract can have the ability to be unilateral and made for all parties. It has also established

the fact that acceptance of similar offers have no need of a notification in that once a party meets

certain conditions or purchases an item, the contract is activated. It also goes further to establish

that such a purchase is also an example of consideration and it moves a step higher to make the

contract legitimate. The Carlill v Carbolic Smoke Ball Company’s case is very important in

protecting consumer rights and laying out the responsibilities of companies and even today, it is

cited in disputes at the consumer ad contractual disputes.

Contract Laws in the nineteenth century and the twenty-first century

Contract laws have undergone changes over the years and in this context from the

nineteenth century to the twenty-first century. This change has been observed in the factors which

determine the enforceable promises. The ideas which demonstrate reciprocity have changed over

the years and they include bargain, exchange, and reliance. In the past, consideration was based

on reliance and indicated a benefit or act to compensate for a promise.

CARLILL V CARBOLIC SMOKE BALL COMPANY 9

Reference

Bender, M., & Do, C. (2014). How to Pass Business Law. CCH Australia Limited.

Butler, D., Christensen, S., Willmott, L., & Dixon, B. (2013). Contract Law Case Book.

Cheong, T. (2014). A Promising Idea: Reconceptualizing the Formation of Unilateral Contracts.

Oxford U. Undergraduate LJ, 1.

Jones, E. (2016). Richard Stone and James Devenney, Texts, Cases and Materials on Contract

Law. The Law Teacher, 50(3), 393-396.

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

materials. Wolters Kluwer Law & Business.

Latimer, P. (2012). Australian Business Law 2012. CCH Australia Limited.

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

Miller, R. L. (2015). Business Law Today, Standard: Text & Summarized Cases. Nelson

Education.

Monaghan, C. (2015). Beginning Business Law. Routledge.

O'Gorman, D. P. (2013). Redefining Offer in Contract Law. Miss. LJ, 82, 1049.

Smits, J. M. (Ed.). (2017). Contract law: a comparative introduction. Edward Elgar Publishing.

Vermeesch, R. B., & Lindgren, K. E. (1990). Business law of Australia. Butterworths.

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