For today’s post we will take a look at the first key element of a contract which is Offer and Acceptance.
Offer and Acceptance
An offer is a proposal made by one party to another, indicating that they are willing to enter into a contract under certain terms. The acceptance is the other party’s agreement to those terms. For a contract to be valid, there must be an offer and acceptance.
Carlill v. Carbolic Smoke Ball Co.: In this case, the Carbolic Smoke Ball Co. made an offer to the public that they would pay a reward of £100 to anyone who used their smoke ball product and still caught the flu. Mrs. Carlill used the smoke ball and caught the flu. When she claimed the reward, the company refused to pay.
What is interesting about this case is that the offer in question was an advertisement from the Carbolic Smoke Ball Company of London, which placed an ad 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.
Mrs. Carlill bought one of the Carbolic Smoke Balls and used it from November 20, 1891 until January 17, 1892, at which point she came down with the flu. This case established a clear line between an advertisement’s guarantee as “puffery” and when an advertisement can be considered a contract with the public.
Lord Justice Lindley made a number of points as to why the advertisement became a binding contract with Mrs. Carlill:
- the advertisement was not “mere puff” as had been alleged by the company, because the deposit of £1000 in the bank evidenced seriousness.
- the advertisement was an offer made specifically to anyone who performed the conditions in the advertisement rather than a statement “not made with anybody in particular.”
- communication of acceptance is not necessary for a contract when people’s conduct manifests an intention to contract.
- the vagueness of the advertisement’s terms was no insurmountable obstacle.
- the nature of Carlill’s consideration was good, because there is both an advantage in additional sales from the response to the advertisement and a “distinct inconvenience” that people go to when using a smoke ball.
When it comes to a bilateral or mutually executed contract the offer and acceptance are for the most part both spelled out in detail within the contract. However, a unilateral offer, even one disguised as an advertisement, usually is not a contract until the acceptance party actually fulfills the conditions of the offer and then contacts the person or entity that made the offer to collect on the offer.