Case#4 Carbolic smoke ball Case Study

Case Discussion on Famous Carbolic Smoke Ball

1. Case Study#4 Carbolic smoke ball Student Coordinators: Ashutosh Sahu Shubham Sharma MBA 2 nd Sem

2. Case summary The Carbolic Smoke Ball Co. made a product called the "smoke ball". It claimed to be a cure for influenza and a number of other diseases. The smoke ball was a rubber ball with a tube attached. It was filled with carbolic acid (or phenol). The tube would be inserted into a user's nose and squeezed at the bottom to release the vapours. The nose would run, ostensibly flushing out viral infections.

3. Continued.... The Company published advertisements in the Pall Mall Gazette and other newspapers on November 13, 1891, claiming that it would pay £100 to anyone who got sick with influenza after using its product according to the instructions provided with it. Fig 1: Carbolic Smoke Ball

4. £100 REWARD WILL BE PAID BY THE CARBOLIC SMOKE BALL CO. to any Person who contracts the Increasing Epidemic, INFLUENZA, Cold, or any Diseases caused by taking Cold, after having used the CARBOLIC SMOKE BALL according to the printed directions supplied with each Ball. £1000 IS DEPOSITED with the ALLIANCE BANK, Regent Street, showing our sincerity in the matter.

5. Continued... Mrs Louisa Elizabeth Carlill saw the advertisement, bought one of the balls and used it three times daily for nearly two months until she contracted the flu on 17 January 1892. She claimed £100 from the Carbolic Smoke Ball Company. Fig 2: Ms Lousia Elizabeth Carlill

6. Continued... The defendant raised the following arguments to demonstrate the advertisement was a mere invitation to treat rather than an offer:  The advert was a sales puff and lacked intent to be an offer. It is not possible to make an offer to the world. There was no notification of acceptance. The wording was too vague to constitute an offer since there was no stated time limit as to catching the flu. There was no consideration provided since the 'offer' did not specify that the user of the balls must have purchased them. 

7. Issues / problems Was the advertisement an offer? To whom had the offer been made? If Ms. Carlill had accepted the offer, what had been the consideration? Let’s have discussion on the given problems......

8. Court Decision The Court of Appeal held that Mrs Carlill was entitled to the reward as the advert constituted an offer of a unilateral contract which she had accepted by performing the conditions stated in the offer. The court rejected all the arguments put forward by the defendants for the following reasons: The statement referring to the deposit of £1,000 demonstrated intent to demonstrate the company’s sincerity in paying the reward. and therefore it was not a mere sales puff. ( Intention to create legal relation ) It is quite possible to make an offer to the world. In unilateral contracts there is no requirement that the offeree communicates an intention to accept, since acceptance is through full performance.

9. Continued... There was consideration in this case for two reasons: Carbolic received a benefit i.e. In the sales directly beneficial to them by advertising the Carbolic Smoke Ball. The direct inconvenience to the person who uses the smoke ball 3 times a day x 2 weeks according to the directions at the request of Carbolic. In other words, performance of the specified conditions constitutes consideration for the promise. Fig 3: Lord Justice Lindly Fig 4: Lord Justice A.L. Smith

10. Conclusion / Solution Yes, the advertisement was an offer, more specifically General Offer General offer - When offer is given to entire world at a large. The offer had been made to the whole world – and will ripen into a contract with anybody who comes forward and performs the condition mentioned in the advertisement. The nature of Mrs Carlill's consideration (what she gave in return for the offer) was good, because there is both an advantage in additional sales in reaction to the advertisement and a "distinct inconvenience" that people go to when using a smoke ball.

11. Crux of the case

12. Hope you all have enjoyed the case!!!