Carlill v Carbolic Smoke Ball Co  1 QB 256
Full case judgment: The reported judgment, cited as  1 QB 256, is available from the ICLR. Alternatively, you can view the full judgment for this case, cited as  EWCA Civ 1, on the open access BAILII website, http://www.bailii.org/ew/cases/EWCA/Civ/1892/1.html
Other perspectives: Use the Law Trove search tools to read other authors’ accounts and commentaries on this case.
The defendant company placed an advertisement promoting their product, the carbolic smoke ball. The company declared that it would pay £100 to anyone who caught influenza after buying and using the smoke ball three times a day for two weeks, in accordance with directions. In the advert the company declared that it had deposited £1,000 with its bank, just to show that it was being sincere. The claimant, Mrs Carlill, purchased a carbolic smoke ball, used it in accordance with the instructions, and caught influenza. She claimed the £100. The company refused to make the payment, arguing that it was not under a contractual obligation to do so.
The Court of Appeal held that the advertisement constituted an offer. This had been accepted by Mrs Carlill, as she had performed the conditions stated in the offer. The contract was supported by consideration. Accordingly, the company was bound to make the payment. The company argued that the advert lacked the certainty required to constitute a binding offer. It was a mere ‘advertising puff’. The Court of Appeal unanimously rejected this argument. The advert contained a clear express promise to pay £100 to anyone who bought a smoke ball and used it in accordance with instructions, and who then caught influenza within a reasonable time (or: whilst using it (Bowen LJ)). The advert also demonstrated a serious contractual intent by the depositing of £1,000: per Lindley LJ relying on Williams v Carwardine (1833) 5 C & P 566, 172 ER 1101.
The company also argued that Mrs Carlill had not sufficiently notified them of her acceptance. As you will see from other cases (Entores Ltd v Miles Far East Corp  2 QB 327; Adams v Lindsell (1818) 1 B & Ald 681, 106 ER 250 (KB); Holwell Securities Ltd v Hughes  1 WLR 155), it is a fundamental principle of Contract Law that acceptance must be notified to the offeror. The Court of Appeal held that Mrs Carlill had sufficiently notified her acceptance by fulfilling the conditions set out in the advert. In the circumstances it was not necessary for her to communicate her acceptance by any further action than this: Per Lindley LJ, relying on Brogden v Metropolitan Railway Co. (1877) LR 2 App Cas 666 (HL), at p.691. It might also be said that the company had waived its right to be notified. The company could not have expected everyone who would potentially claim the reward to notify them of the fact: per Bowen LJ.
Another argument that the company raised was that the advert purported to be a contract with the whole world, and as such, was void on the grounds that ‘you cannot contract with everybody’: per Bowen LJ. This was rejected. The offer might have been made to the whole world, but the contract was made only with the individual who came forward and fulfilled the conditions of the offer: Bowen LJ.
A remarkable feature of Carlill is how deeply it embodies the fundamental principles of contract formation: Lord Neuberger of Abbotsbury, ‘Reflections on the ICLR top fifteen cases’ (2016) Construction Law Journal 149.
Firstly, whether an advert is construed as an offer or an invitation to treat very much depends on the context of the advert and its construction against surrounding circumstances. In this case, Bowen LJ showed that an advertisement promising to pay money in return for providing particular information could be construed as an offer. On the other hand, adverts which offered goods for sale or houses to let are prima facie invitations to treat, e.g. Partridge v Crittenden  1 WLR 1204. With advertisements for goods, there is a limited supply of goods. It would not make commercial sense for the advertiser to become contractually bound by a high number of possible acceptances over which he had no control. In Carlill, the Court of Appeal were unimpressed by the suggestion that the company’s advert would, if construed as an offer, lead to an unworkably high level of acceptances. Perhaps this could be seen as an early form of consumer protection: ‘if a person chooses to make extravagant promises of this kind he probably does so because it pays him to make them’: per Bowen LJ.
Secondly, it had been argued that even if there was an offer and an acceptance, it was unsupported by consideration. However, the Court of Appeal found that Mrs Carlill had provided consideration for the £100 reward. To critically evaluate the case, it is necessary to ask: Was this consistent with fundamental principles of Contract Law or was the Court of Appeal simply avoiding an injustice to Mrs Carlill? The idea of requiring consideration before a contract can be enforced reflects the idea that a contract is a ‘bargain’: P.S. Atiyah, An Introduction to the Law of Contract (5th edition, Oxford University Press, 2000), p.118. Atiyah here observes that a promise should only become binding if there is some benefit promised or given in return, or the promisee acts to their detriment in reliance on the promise. Note the element of reciprocity. What is given in return for the £100 must have been requested by the company as the price of their promise to pay that reward. The Court of Appeal identified a benefit in the fact that Mrs Carlill used the smoke ball and in the fact that the conditions laid down in the advert would promote sales of the ball. By complying with the conditions in the advert as to the use of the smoke ball, Mrs Carlill suffered inconvenience over and above its purchase. Thus, although this would have no direct economic value, it would certainly confer a benefit. This is consistent with cases on consideration, such as Chappell & Co Ltd v Nestle Co Ltd  AC 87 (HL). Both this benefit and detriment had been requested by the company, as conditions of the £100 reward, and had sufficient transactional certainty.
How accurate do you think it would be to state that this situation would arise today, given the modern regulation of such extravagant claims?
Carlill is remarkable in that it is an enduring example of the fundamental principles of contract formation: Lord Neuberger of Abbotsbury, ‘Reflections on the ICLR top fifteen cases’ (2016) Construction Law Journal 149. However, do you think it could be said that the notions of offer, acceptance, and consideration were stretched in order to protect Mrs Carlill’s reliance on the promises made by the company’s advertisement? Throughout its history, there are many examples of the way in which the law protects one person’s reliance on the promise of another. To further develop this idea, see P.S. Atiyah, The Rise and Fall of Freedom of Contract (Oxford University Press 1979, 2000).