The case of Carlill V Carbolic smoke ball Co. Ltd.

Carlill v Carbolic Smoke Ball Company [1892][1] is an English contract law decision by the Court of Appeal. It is notable for its curious subject matter and how the influential judges developed the law in inventive ways. Carlill is frequently discussed as an introductory contract case, and may often be the first legal case a law student studies.The case concerned a flu remedy called the “carbolic smoke ball”. The manufacturer advertised that buyers who found it did not work would be rewarded £100, a considerable amount of money at the time. The company was found to have been bound by its advertisement, which it construed as creating a contract. The Court of Appeal held the essential elements of a contract were all present, including offer and acceptance, consideration and an intention to create legal relations.

The Carbolic Smoke Ball Company 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 (phenol). The tube was then inserted into the user’s nose. It was squeezed at the bottom to release the vapours into the nose of the user. This would cause the nose to run, and hopefully flush out the viral infection.

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 set out in the advertisement.

“£100[2] reward will be paid by the Carbolic Smoke Ball Company to any person who contracts the increasing epidemic influenza colds, or any disease caused by taking cold, after having used the ball three times daily for two weeks, according to the printed directions supplied with each ball. £1000 is deposited with the Alliance Bank, Regent Street, showing our sincerity in the matter. During the last epidemic of influenza many thousand carbolic smoke balls were sold as preventives against this disease, and in no ascertained case was the disease contracted by those using the carbolic smoke ball.

Mrs Louisa Elizabeth Carlill saw the advertisement, bought one of the balls and used three times daily for nearly two months until she contracted the flu on January 17, 1892. She claimed £100 from the Carbolic Smoke Ball Company. They ignored two letters from her husband, who had trained as a solicitor. On a third request for her reward, they replied with an anonymous letter that if it is used properly the company had complete confidence in the smoke ball’s efficacy, but “to protect themselves against all fraudulent claims” they would need her to come to their office to use the ball each day and be checked by the secretary. Mrs Carlill brought a claim to court. The barristers representing her argued that the advertisement and her reliance on it was a contract between her and the company, and so they ought to pay. The company argued it was not a serious contract.

The Carbolic Smoke Ball Company, despite being represented by HH Asquith, lost its argument at the Queen’s Bench. It appealed straight away. The Court of Appeal unanimously rejected the company’s arguments and held that there was a fully binding contract for £100 with Mrs Carlill. Among the reasons given by the three judges were (1) that the advert was a unilateral offer to all the world (2) that satisfying conditions for using the smoke ball constituted acceptance of the offer (3) that purchasing or merely using the smoke ball constituted good consideration, because it was a distinct detriment incurred at the behest of the company and, furthermore, more people buying smoke balls by relying on the advert was a clear benefit to Carbolic (4) that the company’s claim that £1000 was deposited at the Alliance Bank showed the serious intention to be legally bound.

After the action, Mr Roe formed a new company with limited liability, and started up advertising again. Many people conclude after reading the case that the Carbolic Smoke Ball Company would have been brought down by thousands of claims. The company did not have limited liability, which could have meant personal ruin for Mr Roe. In his submissions to the Court of Appeal, Finlay QC had used that as an argument against liability. He said that 10,000 people might now be sniffing at Smokeballs hoping for their £100, and it would be a travesty to inflict insolvency on this one unfortunate company. But this did not happen at all. In a new advert on February 25, 1893 in the Illustrated London News, Mr Roe cunningly turned the whole lost case to his advantage. He described the culpable advert, and then said,

“Many thousand Carbolic Smoke Balls were sold on these advertisements, but only three people claimed the reward of £100, thus proving conclusively that this invaluable remedy will prevent and cure the above mentioned diseases. The CARBOLIC SMOKE BALL COMPANY LTD[3]. now offer £200 REWARD to the person who purchases a Carbolic Smoke Ball and afterwards contracts any of the following diseases…

“In the advertisement’s small print were some restrictive conditions, with a period of 3 months to use the ball and claim, showing that legal advice had been adhered to. Mr Roe left the management of the new company to other new subscribers and directors, who did not pursue such an aggressive advertising policy. By 1895 the company had fallen on harder times, and it had to be wound up in 1896. Simpson suggests that the new management “had failed to grasp the fact that vigorous advertising was essential to success in the field of quack medicine.” Mr Roe himself died at the age of 57 on June 3, 1899 of tuberculosis and valvular heart disease. Mrs Louisa Carlill, however, lived to the ripe old age of 96. She died on March 10, 1942, according to her doctor, Mr Joseph M. Yarman, principally of old age[4]. There was one cause noted: influenza[5].