Every day we enter into contracts, some explicit, some not so much, for instance when we board a bus or taxi to get to work, we enter into a contract with the transport provider. The key ingredients in a contract are: Agreement (offer of terms and unequivocal, unconditional acceptance of those terms, because if the acceptance is unequivocal and unconditional, it is no longer an acceptance but a counter-offer); consideration (a gratuitous promise will not count... both parties offer something of value); and intention to create legal relations (normally, contracts with minors and family members will not be valid).
Sometimes contracts are written, other times they are not and a contract is implied by the conduct of the parties involved.
The most quoted case in contract law is Carlill v. The Carbolic Smoke Ball Company. Anyone who has studied contract law remembers this case and admittedly it is a memorable case from 1893. The Carbolic Smoke Ball Company advertised a smoke ball (a patent devise that introduced carbolic smoke into the nostrils, which was to make the user's nose run and flush out disease-causing viruses) and promised that anyone who bought the smoke ball and used it correctly, presumably according to directions that came with the smoke ball, would be immune from a range of diseases including the flu.
The company went further to say that anyone who used the smoke ball as directed (three times daily for two weeks) and still got the flu would receive £100. To show their seriousness and 'sincerity in the matter', the advertisement also stated that £1000 had been deposited in a bank for any claims that ever came up. Mrs Carlill bought her smoke ball, used it as directed for two months and got the flu while she was still using the smoke ball.
She then wrote, through good 'ole Mr. Carlill who was a solicitor, to the Company to claim her £100 (imagine what £100 was in 1893 - cha ching!). The company ignored the letters and after the third letter, sent an anonymous letter to the Carlills stating that Mrs. Carlill had to come into their office and use the smoke ball under supervision. The Carlills had enough and headed to court. Sometimes it pays to marry a lawyer; someone in the frontlines for you, gratis!
Normally, an advertisement is not an offer for purposes of forming a contract, but an invitation to treat, which acts to persuade the interested buyer to go to a store and offer to purchase the advertised product. When the product is taken to the check-out counter, the check-out clerk accepts the offer, receives the cash, and, voila, contract formed.
In court, the Company argued that their advertisement could not form a contract as there was no offer to a specific person and their claims on the efficacy of their smoke ball was a mere puff. The courts disagreed.
The courts said that the Company had made an offer to the whole world (as is the case with reward adverts, a.k.a. unilateral contracts), and Mrs Carlill accepted the offer by buying and using the smoke ball as directed. Normally, in a contract, acceptance of the offer must be communicated to the offeror, but the courts said that in a case such as this, where an offer was made to the whole world, and no specific mention was made as to the communication of acceptance as one of the steps to follow in the advertisement, Mrs Carlill's purchase and use of the carbolic smoke ball was acceptance enough.
So, if a party puts out a unilateral offer to the world, it must be clear what limitations come with that offer, and they cannot put out an offer and turn around and say that they did not intend to contract when another party has 'accepted' the offer and started to perform on the contract. In this case, at no time did the Company announce or advertise that their offer was being revoked, and even though the courts had some difficulty defining the issue of time in relation to using the smoke ball and how long after a user got the flu, they agreed that although the advertisement was not clear on that issue, it was not so vague as to negative the main issue - use our smoke ball as directed, if you get the flu, we give you £100.
On the Company's claim that there was no consideration, the courts disagreed saying that the Company derived a benefit from the increase in sales that their advert would have generated, and Mrs Carlill was not getting the smoke ball for free, she purchased it.
On whether the advertisement was a mere puff, the courts noted the fact that the Company had paid £1,000 into an account to show their 'sincerity' in the matter. That act showed their intention to be legally bound; they had taken an extra step to persuade the public to act on their offer.
While doing cartwheels to defend their clients, the barristers representing the Carbolic Smoke Ball Company, raised every defence possible and the judges addressed every point they raised. The case covers all the ingredients of a contract - agreement, consideration, intention to create legal relations - which is probably why this is one of the first cases that every Contract Law student in Common Law jurisdictions, like Nigeria, studies. http://odili.net/news/source/2016/jan/24/822.html |
To further clarify, agreement consists of offer and acceptance. And an additional characteristic of a valid contract is Legal capacity i.e. both parties have to be of legal age to come to an agreement, and for consideration to take place.
A unilateral contract is one in which all legal responsibility falls on the offeror. For instance, if you fail to pay your monthly DSTV subscription fee, DSTV could simply cancel your subscription; but the company cannot sue you for failing to pay the monthly fee. In this instance, you the consumer, is the offeree.
Another facet of contract law is the mail-box rule: It states that acceptance is effective upon dispatch, while an offer is effective upon receipt.
I also read the interesting Carbolic case in my first year of contract law. |
Breach of contract can be defined as a failure to fulfill any term of a contract without a justifiable, lawful excuse.
- Contracts of adhesion: are contracts in which one party has no ability to negotiate, so unequal bargaining position. Examples include home/auto insurance policies, cable tv subscription, some football contracts etc. |
