Private Law – Contract II

Unit 7
Bowen LJ begins his judgment by stating the
defendants’ arguments. How do you think
the judgment will continue?
 It seems to me that in order to arrive at a
right conclusion we must read this
advertisment in its plain meaning, as the
public would understand it. It was intended
to be issued to the public and to be read
by the public. How would an ordinary
person reading this document construe it?
 How will Bown L.J. continue? Will he
construe the words of the advertisment
now?
 It was intended unquestionably to have some effect, and
I think the effect which it was intended to have, was to
make people use the smoke ball, because the
suggestions and allegations which it contains are
directed immediately to the use of the smake ball as
distinct from the purchase of it. It did not folow that the
smoke ball was to be purchased from the defendants
directly, or even from agents of theirs directly. The
intention was that the circulation of the smoke ball
should be promoted, and that the use of it should be
increased. The advertisement begins by saying that a
reward will be paid by the Carbolic Smoke Ball Co. to
any person who contracts the increasing epidemic after
using the ball.
 Will he construe the words of the
advertisment now?
 No, he describes the effect the
advertisement was intended to have.
Will he (a) examine this point in detail? or 2)
continue to describe the rest of the
advertisment?
 It has been said that the words do not
apply only to persons who contract the
epidemic after the publication of the
advertisement, but include persons who
had previously contracted the influenza. I
cannot so read the advertisement. It is
written in colloquial and popular language,
and I think that it is equivalent to this:
Will he 1) examine this point in detail? Or 2)
continue to describe the rest of the
advertisment
 Answer: 1
 Will he explain the meaning of
the words in the advertisement?
 “100£. will be paid to any person who shall contract the
increasing epidemic after having used the carbolic
smoke ball three times daily for two weeks.” And it
seems to me that the way in which the public would read
it would be this: that if anybody, after the advertisement
was published, used three times daily for two weeks the
carbolic smoke ball, and then caught cold, he would be
entitled to the reward. Then again it was said: “How long
is this protection to endure? Is it to go on for ever, or for
what limit of time?”
 Will he explain the meaning of
the words in the advertisement?
 Yes
 What will he do next?
 I think that there are two constructions of
this document, each of which is good
sense, and each of which seems to me to
satisfy the exigencies of the present
action. It may mean that the protection is
warranted to last during the epidemic, and
it was during the epidemic that the plaintiff
contracted the disease.
 What will he do next?
 He answers the question about the time
limit, saying that there are two possible
constructions.
 How will the text continue?
 I think, more probably, it means that the smoke ball will be a
protection while it is in use. That seems to me the way in which an
ordinary person would understand an advertisement about
medicine, and about a specific against influenza. It could not be
supposed that after you have left off using it you are still to be
protected for ever, as if there was to be a stamp set upon your
forehead that you were never to catch influenza because you had
once used the carbolic smoke ball. I think the immunity is to last
during the use of the ball. That is the way in which I should naturally
read it, and it seems to me that the subsequent language of the
advertisement supports that construction. (…)
 Was it intended that the 100£ should, if the conditions were fulfilled,
be paid?
 How will the text continue?
 He examines the second possible
construction of the document regarding
the time limit.
 What method will he use to
answer the question?
 The advertisment 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. I think it was intended to be understood by the
public as an offer which was to be acted upon.
 But it was said there was no check on the part of the
persons who issued the advertisement, and that it would
be an insensate thing to promise 100£ to a person who
used the smoke ball unless you could check or
superintend his manner of using it.
 What method will he use to
answer the question?
 He examines the words of the
advertisement to answer the question. He
thinks it was intended to be a serious offer.
 How will the text continue?
 The answer to that argument seems to me to be that if a
person chooses to make extravagant promises of this
kind he probably does so because it pays him to make
them, and, if he has made them, the extravagance of the
promises is no reason in law why he should not be
bound by them.
 It was also said that the contract is made with all the
world – that is, with everybody; and that you cannot
contract with everybody. It is not a contract made with all
the world. There is the fallacy of the argument.
 How will the text continue?
 He answers the defendants’ argument,
then goes on to a new point.
 Will he explain why it is not a
contract made with all the world?
 It is an offer made to all the world; and why should not an offer be
made to all the world which is to ripen into a contract with anybody
who comes forward and performs the condition? It is an offer to
become liable to anyone who, before it is retracted, performs the
condition, and although the offer is made to the world, the contract is
made with that limited portion of the public who come forward and
perform the condition on the faith of the advertisement.
 (…) Then as to the alleged want of consideration. The definition of
‘consideration’ given in Selwyn’s Nisi Prius, 8the ed. p. 47, which is
cited and adopted by Tindal, C. J., in the case of Laythoarp v.
Bryant, is this:
 Will he explain why it is not a contract
made with all the world?
 Yes
 How will the text continue?
 “Any act of the plaintiff from which the
defendant derives a benefit or advantage,
or any labour, detriment, or inconvenience
sustained by the plaintiff, provided such
act is performed or such inconvenience
suffered by the plaintiff, with the consent,
either express or implied, of the
defendant.”
 How will the text continue?
 He gives the definition of consideration
from the work of authority cited.
Will he apply these principles to
the present case?
 Can it be said here that if the person who reads this advertisement
applied thrice daily, for such time as may seem to him tolerable, the
carbolic smoke ball to his nostrils for a whole fortnight, he is doing
nothing at all - that it is a mere act which is not to count towards
consideration to support a promise (for the law does not require us
to measure the adequacy of the consideration). Inconvenience
sustained by one party at the request of the other is enough to
create a consideration. I think, therefore, that it is consideration
ejnough that the defendants received a benefit from this user, for the
use of the smoke ball was contemplated by the defendants as being
indirectly a benefit to them, because the use of the smoke balls
would promote their sale.
 A.L. Smith, L-.J. delivered judgment to the same effect.
Will he apply these principles to
the present case?
 Yes
 True or false?
 1. In this section, Bowen LJ answers the
defendants’ arguments
 2. He agrees with most of the defendants’
arguments
 3. He construes the words of the
advertisement in detail one section at a
time.
 4. He does not give the words of the
advertisement any special legal meaning.
 True or false?
 5. The words of the advertisement are
intended to make people buy the smoke
ball.
 6. It refers to anyone who catches flu
before or after the advertisement was
published.
 7. The smoke ball should be used
regularly for three weeks
 True or false?
 8. In Bowen LJ’s opinion the smoke ball
should give protection during the period of
use
 9. The offer of a reward was valid because
the company deposited £1000 at the bank
to prove their sincerity.
 What is the meaning of the
following words:
 Warranted (line 29)
 Fulfilled (42)
 Insensate (49)
 Extravagant (53)
 Liable (61)
 Key
 Warrant = guarantee
 Fulfill= carry out, meet (conditions)
 Insensate = silly
 Extravagant = wild
 Liable = binding
 Complete this phrase with information from lines
48-51, substituting a phrase with if for unless:

 It would be an insensate thing to promise

100£ to a person who used the smoke ball
if…’
 What is the meaning of the
following words?
 It pays him (lines 53-4)
 Fallacy (58)
 To ripen into (60)
 Retracted (62)
 Benefit (68, 81, 82)
 Detriment (69)
 Nostrils (75)
 Meaning
 Fallacy= fault in an argument, wrong
argument
 Ripen into = become, change into
 Retracted = taken back
 Benefit = something that helps a person, a
good thing
 Detriment = harm, damage, loss
 Nostrils= the two passages of the nose
 Complete the sentences below by choosing
the following: fallacy, fulfilled. retracted,
benefit, detriment, warranted
 She offered to pay $300 for the painting,
but___her offer when she learnt that it was
not an original.
 The vendor___the high quality of the
material
 The idea that the law is always just is a
___. Even a good law may sometimes
cause injustice in individual cases.
 Complete the sentences below by choosing
the following: fallacy, fulfilled, retracted,
benefit, detriment, warranted
 In her will the testator created a trust for
the ___of the poor.
 A contract comes to an end when both
parties have____all their obligations.
 Bad working conditions at Smith’s Ltd
were a serious____to the
employers’health. In fact, in 1979 a group
of workers who fell ill sued their employers
for damages.
 Answer these questions:
 1. Can an extravagant or ridiculous
promise be legally binding?
 Why did the company make this
extravagant promise?
 A contract cannot be made with the whole
world. Why does this not apply in this
case?
 When can an offer to the world become a
contract?
 Answer these questions:
 Who does an offer to the world create legal
relations with?
 To create a contract, must the offeree always
state that s/he accepts the offer?
 What happens if the condition is fulfilled after the
offeror has retracted the offer?
 What is consideration?
 What was the ‘double consideration’ in this
case?
 Was the decision in Carlill unanimous?
 Exercise
 Go back to Section One, Exercise D3 on
p. 122 and complete the table showing the
arguments for the defence and the
decision by filling in each point in your
notebook
 Arguments for the defence
Bowen LJ’s ruling?
 1. Only an offer, not a contract
 2. Not definite, no time limit
 3. Vague regarding persons involved
 4. Vague – offer to the world in general
 5. Not definite – no way of checking the
experiment
 6. Not a serious promise
 7. No contract intended because advertisement
too vague
 Bowen LJ’s ruling
 1. It is only an offer, which becomes a
contract on acceptance
 2. The smoke ball gives protection while in
use
 3. It applies to persons who used the
smoke ball after the advertisement was
published
 Bowen LJ’s ruling?
 4. It is possible to make an offer to the
world in general, which becomes a
contract with individuals who accept the
offer by performig the condition specified.
 5. The promise may be extravagant, but
this is no reason in law why it should not
be binding
 Bowen LJ’s ruling
 6. The fact that 1000 £ was deposited at
the bank shows that it was a serious offer.
 7. Bowen LJ construes the advertisement
as ordinary people would read it and
according to what is reasonable. He uses
the words of the advertisement to decide
what the defendants intended, so that the
terms of the offer become clear.
 Conclusion
 Refer to Part B of your completed table on
p. 122. Which rulings apply only to the
specific facts of Carlill v. Carbolic Smoke
Ball Co., and which rulings contain general
legal pirnciples?
 Specific facts of Carlill
 1. It is only an offer, which becomes a contract
on acceptance
 2. The smoke ball gives protection while in use
 3. It applies to persons who used the smoke ball
after the advertisement was published
 6. The fact that 1000 £ was deposited at the
bank shows that it was a serious offer.
General legal prionciples: Ratio
decidendi
 1. It is possible to make an offer to the
world in general which becomes a contract
with individuals who accept the offer
 2. It is possible to accept an offer by the
act of performing the conditions specified
in it if the offer is in the form of a promise
in return for an act
 Obiter dicta?
 If a person chooses to make extravagant
promises, the extravagance of the
promises is no reason in law why he
should not be bound by them
 The law does not require us to measure
the adequacy of consideration
 Inconvenience sustained by one party at
request of the other is enough to create a
consideration
 Which courts are bound by the
decision in Carlill?
 The Court of Appeal
 High Court
 All courts of first instance
 How can the binding principles of
Carlill be changed?
 The principle can be overruled only by the
Supreme Court or changed by an Act of
Parliament
Which sources of law does Bowen
LJ use to reach his decision?
 case law (Laythoarp v. Bryant)
 A work of authority cited in that case
(Selwyn’s Nisi Prius)
 Complete the following extract by choosing:
contracts,contracting, obligation, party

 We have seen that most contracts are

agreements. It should now be noted that it is by
no means true to say that all agreements
are___. Many agreements fall outside the scope
of the law of contract, either because they
concern matters of moral, rather than of legal,
____or because the ____parties agree that they
are not to be treated as enforceable contracts,
or they are not intended to be such.
Complete the following extract by choosing: case, courts,
jurisdiction,

 A familiar example is the___of a person

who drives a friend somewhere in return
for payment of the petrol. The___have,
moreover, repeatedly declined jurisdiction
over agreements which are expressed in a
way which shows an intention to exclude
their____.
 Complete the following extract by choosing: binding,
intention non-contractual,

 On the other hand, what appears on the

face of it to be a business transaction will
not lighlty be treated as a merely moral
obligation, and it should be noted that
expressed____may sometimes have the
efect of turning into a___contract – an
agreement which might otherwise have
been regarded as____.
 Complete the following extract by choosing: defendants,
reward, influenza,

 A famous example of the latter situation

was provided by Carlill v. Carbolic Smoke
Ball Co.The___manufactured “carbolic
smoke balls” which they advertised as
miraculous cures for___. The
advertisement stated that L100___would
be paid to anyone who contracted
influenza after having used the ball as
prescribed.
 Complete the following extract by choosing: Company’s,
plaintiff, sued

 It was further stated that L1,000 was

deposited with a bank to show the
sincerity of the ____intention. The___, Mrs
Carlill, used one of these balls, but
nevertheless contracted influenza;
she___for the promised reward
 Complete the following extract by choosing: accepted, It
was held, legal relations, offer, plaintiff, recover

 . ___that she was entitled to___: normally

such advertisements are mere “puffs”
which are not intended to create___, but in
this instance taking into account, amongst
other circumstances, the reference to
the____at the bank, the court___that the
Company had intentionally made a
binding__which the plaintiff had______.
 Later comments of the case
 "The amusing circumstances of the case should not
obscure the surprising extent to which the court was
prepared to conceive social relations in terms of
contracts. The parties to the alleged contract had never
met or communicated with each other directly. Nor had
they exchanged goods, money or services between
themselves. The law of contract is used by the court as
an instrument for discouraging misleading and
extravagant claims in advertising and for deterring the
marketing of unproven, and perhaps dangerous
pharmaceuticals...
 Later comments
 The judges run through a shopping-list of
questions: Was there a promise? Was the
promise serious and intended to be acted
upon? Was the promise sufficiently
definite and certain? Was the promise
accepted by the plaintiff? Did the plaintiff
perform some action in exchange for the
promise?...
 Later comments
 The generality and abstraction of the rules permit both
the extensive utilization of [contract law] and its
application to the case, without any discussion of such
matters as the moral claims of the parties, the nature of
the market for pharmaceuticals and the problems
generated by misleading advertising... Its doctrinal
integrity helps to achieve legitimacy, because the law
can be presented as objective and neutral, not a matter
of politics or preference, but a settled body of rules and
principles, legitimated by tradition and routine
observance, and applied impartially and fairly to all
citizens (Prof. Hugh Collins, LSE)
 A moot
 For each case, appoint three people to act
as counsel for the plaintiff and two people
as counsel for the defendant. The other
memers of the class will act as judges.
 Prepare your roles carefully. Revise some
of the expressions you learnt in Section
One, Exercise E2 if you are acting as
counsel and in Section One, Exercise D 4
if you are the judge.
 A moot
 Counsel for the plaintiff/defendant: (‘In my
submission… In my respectful
submission…It is submitted that…’)
 Judge: ‘The defendants contend that…It
was urged also…
 A moot
 Hold the moot, at which first the plaintiff,
then the defendant are represented in turn
in court. Deliver judgment, and decide who
has won the case.
 Issue a short written judgment beginning
like this:
 ‘It was held that the plaintiff was/was not
entitled to recover on the grounds that…
 A moot
 X advertises in the local paper that she will
pay a £100 reward to anyone who finds
and returns her lost Persian cat, Miaow. Y
finds Miaow two months later and takes
her back to X, asking for the reward- ;
meanwhile, X has bought another cat to
replace Miaow. She agrees to take her
back, but refuses to pay the reward. Y
sues her for the £100 reward.
 A moot
 The Superhair Company produces an expensive new
product ‘guaranteed to make your hair grow in only 3
weks or your money back’. The advertisement specifies
that users must follow the instructions on the packet
carefully. Z, who is completely bald (he has no hair at all)
sees the advertisement and buys the product. He uses it
as instructed on the packet, but his hair does not begin
to grow again. When Superhair refuse to give Z his
money back, he sues them.
 Case A
 For the plaintiff: The advertisement was a
definite offer. It was an offer to the public in
general which the plaintiff accepted by fulfilling
the conditions specified (Carlill v. Carbolic
Smoke Ball Co.) – finding and returning the
defendant’s cat. In consideration for the promise
of L100 the plaintiff suffered the inconvenience
of finding and returning Miaow. The offer was
not revoked and remained valid for a reasonable
period of time.
 Case A
 For the defendant: The advertisement was
not a contract. It was an offer to the world
in general, not to a particular person. It
was not a definite offer, it was vague
regarding the time limit. There was no
consideration for the promise to pay L100.
In any case, Y did not accept the offer.
 Case A
 Judgment: for the plaintiff (adopting the
arguments for the plaintiff). It was held that
the plaintiff was entitled to recover the
L100 reward on the grounds that by her
act of finding and returning the defendant’s
cat she had performed the conditions
specified in the offer, thus accepting the
offer and creating a legally binding
contract with the defendant.
 Case B
 For the plaintiff: The defendant company intended the advertisement
to be read as a serious offer, which would encourage people to use
the new product, so promoting their sales. People reading the offer
would understand that it was serious because the product was
expensive and the advertisement specified that users must follow
the instructions on the packet carefully. The plaintiff bought the
product on the basis of the advertisement. By his act of buying and
using the product as instructed he fulfilled the conditions specified in
the offer, thus creating a contract with the defendant company
(Carlill v. Carbolic Smoke Ball Co.). There was double consideration
since there was a benefit to the offeror in the promotion of their
sales and a detriment to the offeree in the inconvenience of using
the product.
 Case B
 For the defendant: The advertisement was only an extravagant
promise, it was not a serious offer intended to form the basis of a
legally binding contract and memberrs of the public who read it
would not construe it that way. The case must be distinguished from
Carlill since in Carlill the defendant comjpany stated that they had
deposited money with the bank for the purpose of paying the reward
and it was this fact which showed the sincerity of their intention to
contract. It was vague – there was no way of checking the
experiment. It was an offer to the world in general, not to a particular
person. There was no consideration for the promise.
 Case B
 Judgment: for the defendants. It was held that the plaintiff was not
entitled to recover the cost of the product on the grounds that the
advertisement was not a serious offer intended to form the basis of a
legally binding agreement. The case must be distinguished from
Carlill on the grounds submitted by counsel for the defendants.
Normally advertisements of this kind are not intended to create legal
relations and there is nothing in the facts of the present case to
show that the offer was so intended.