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Offer and Consideration: Carlill v. Carbolic Smokeball

Learn about one of the most entertaining Contract Law cases: Carlill v. Carbolic Smokeball. Although this case dates back to the 1890s in Britain, it showcases how offer and consideration are determined under the Objective Theory of Contracts. Professor Mark Movsesian explains why Mrs. Carlill was successfully able to sue Carbolic Smokeball Company, even though the company claimed their advertisement was not meant to be an actual offer. https://youtube.com/watch?v=b6qOTdY0c0E

Transcript

You could teach a lot of the first part of the contracts course just using the Carbolic Smokeball case. which is a British case from the 1890s. Carbolic Smokeball is about consideration and about the Objective Theory of Contracts and so it's really important for students to kind of focus on the case and get the lesson. It's also a fun case. The facts are sort of fun. So in this case, the plaintiff, Mrs. Carlill, reads a London newspaper one day and she sees an advertisement for a medical device called the “Carbolic Smokeball.” And the advertisement which most casebooks reprint is really quite a lot of fun because it turns out the Carbolic Smokeball can cure everything you might have, including, including influenza, which of course in the 1890s was a very serious disease. And the advertisement says, we will give a hundred pounds to anyone who purchases a Carbolic Smokeball and uses it as directed, and nonetheless and nonetheless catches the flu. So, Mrs. Carlill does this, she purchases a Carbolic Smokeball, she uses it as directed, and she gets the flu, and so she sues them. And her theory is, well, we had a contract, we had a deal. You promised a hundred pounds if this happened, and it happened. And the Smokeball company says, no, no, no, this wasn't really an offer, this was just an advertisement. And the general rule is in American contract law, English contract law too, that advertisements to the public aren't offers. They are just solicitations of offers. So it gets before the court, and the court has very little trouble saying, Carbolic Smokeball Company loses. This was a genuine offer, which Mrs. Carlill accepted, and the condition to the offer was fulfilled, and so she should get paid. Let's break this down. Why was this an offer? Well, here's the Objective Theory of Contracts part. Under the Objective Theory of Contracts, we look at a statement in light of what a reasonable person in the circumstances would understand. Specifically, when it comes to an offer, we say, would a reasonable person in the circumstances understand that the speaker has committed himself or herself to a deal with the listener or the reader in this case? And in this case, the court said, a reasonable person in the position of Mrs. Carlill will understand that this was a genuine offer, not a “mere puff,” ho ho, a mere puff that meant nothing. Why? Well, because the advertisement was very specific, very detailed, and even said, that the company was placing a thousand pounds in a bank as a deposit to pay out anyone who got sick. And so the court said a reasonable person reading this would think this was a genuine offer. And Mrs. Carlill did what the offer required. She purchased the Smokeball. She used the Smokeball as directed. That constituted legal detriment on her part. She had no obligation to do any of those things. Legal detriment is defined as the promisee does something that she had no obligation to do, or refrained from something that she had a right to do. Well, Mrs. Carlill had no obligation to purchase the Smokeball and use it, so she incurred legal detriment in exchange for a promise. This was a contract. Carbolic Smokeball is interesting too because conditions are important in Carbolic Smokeball. So, sometimes students think that Mrs. Carlill accepted the offer by getting the flu. That isn't true. She accepted the offer. Her consideration was using the Smokeball. Her getting the flu was a condition to the company's promise to pay her. And a condition is defined as an event that may not occur, but must occur before the promise, the performance of the promise becomes due. So, Carbolic Smokeball is also a good way to introduce students to the distinction between a promise and a condition. And, as I say, the facts are really fun. And one note about this case is that I always tell students Mrs. Carlill eventually died in the 1940s, in her 90s. And the cause of death on the death certificate was influenza. So, it took a while to catch up with her, but it finally did.

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