Private Law – Contract II

1. Private Law – Contract II Unit 7

2. Bowen LJ begins his judgmentbystatingthedefendants’ arguments. How do youthinkthejudgmentwillcontinue? It seems to me thatinorder to arrive at a rightconclusionwe must readthisadvertismentinitsplainmeaning, as thepublicwouldunderstand it. It wasintended to beissuedtothepublicandtobereadbythepublic. Howwouldanordinarypersonreadingthisdocumentconstrue it?

3. HowwillBownL.J. continue? Will he construethewordsoftheadvertismentnow? It wasintendedunquestionably to have some effect, and I thinktheeffectwhich it wasintended to have, wastomakepeople use thesmokeball, becausethesuggestionsandallegationswhich it contains are directedimmediately to the use ofthesmakeball as distinctfromthepurchaseof it. It didnotfolowthatthesmokeballwas to bepurchasedfromthedefendantsdirectly, or evenfromagentsoftheirsdirectly. Theintentionwasthatthecirculationofthesmokeballshouldbepromoted, andthatthe use of it shouldbeincreased. Theadvertisementbeginsbysayingthat a rewardwillbepaidbytheCarbolicSmoke Ball Co. to anyperson who contractstheincreasingepidemicafterusingtheball.

4. Will he construethewordsoftheadvertismentnow? No, he describestheeffecttheadvertisementwasintended to have.

5. Will he (a) examinethispointindetail? or 2) continue to describetherestoftheadvertisment? It hasbeensaidthatthewords do notapplyonly to persons who contracttheepidemicafterthepublicationoftheadvertisement, but includepersons who had previouslycontractedtheinfluenza. I cannotsoreadtheadvertisement. It is writtenincolloquialand popular language, and I thinkthat it is equivalent to this:

6. Will he 1) examinethispointindetail? Or 2) continue to describetherestoftheadvertisment Answer: 1

7. Will he explainthemeaningofthewordsintheadvertisement? “100£. willbepaid to anyperson who shallcontracttheincreasingepidemicafterhavingusedthecarbolicsmokeballthreetimesdaily for twoweeks.” And it seems to me thatthewayinwhichthepublicwouldread it wouldbethis: thatifanybody, aftertheadvertisementwaspublished, usedthreetimesdaily for twoweeksthecarbolicsmokeball, andthencaught cold, he wouldbeentitled to thereward. Thenagain it wassaid: “Howlong is thisprotection to endure? Is it to go on for ever, or for what limit of time?”

8. Will he explainthemeaningofthewordsintheadvertisement? Yes

9. Whatwill he do next? I thinkthatthere are twoconstructionsofthisdocument, eachofwhich is goodsense, andeachofwhichseems to me to satisfytheexigenciesofthepresentaction. It maymeanthattheprotection is warranted to lastduringtheepidemic, and it wasduringtheepidemicthattheplaintiffcontractedthedisease.

10. Whatwill he do next? He answersthequestionaboutthe time limit, sayingthatthere are twopossibleconstructions.

11. Howwillthetextcontinue? I think, more probably, it meansthatthesmokeballwillbe a protectionwhile it is in use. Thatseems to me thewayinwhichanordinarypersonwouldunderstandanadvertisementabout medicine, andabout a specificagainstinfluenza. It couldnotbesupposedthatafteryouhaveleftoffusingityou are still to beprotected for ever, as iftherewas to be a stamp set uponyourforeheadthatyouwerenever to catchinfluenzabecauseyou had onceusedthecarbolicsmokeball. I thinktheimmunity is to lastduringthe use oftheball. That is thewayinwhich I shouldnaturallyread it, anditseems to me thatthesubsequentlanguageoftheadvertisementsupportsthatconstruction. (…) Was it intendedthatthe 100£ should, iftheconditionswerefulfilled, bepaid?

12. Howwillthetextcontinue? He examinesthesecondpossibleconstructionofthedocumentregardingthe time limit.

13. Whatmethodwill he use to answerthequestion? Theadvertismentsaysthat 1000£ is lodged at the bank for thepurpose. Therefore, it cannotbesaidthatthestatementthat 100£ wouldbepaidwasintended to be a merepuff. I think it wasintended to beunderstoodbythepublic as anofferwhichwas to beactedupon. But it wassaidtherewas no check on thepartofthepersons who issuedtheadvertisement, andthat it wouldbeaninsensatething to promise 100£ to a person who usedthesmokeballunlessyoucouldcheck or superintend his mannerofusing it.

14. Whatmethodwill he use to answerthequestion? He examinesthewordsoftheadvertisement to answerthequestion. He thinks it wasintended to be a seriousoffer.

15. Howwillthetextcontinue? Theanswer to that argument seems to me to bethatif a personchooses to makeextravagantpromisesofthiskind he probablydoessobecause it payshim to makethem, and, if he hasmadethem, theextravaganceofthepromises is no reasoninlawwhy he shouldnotbeboundbythem. It wasalsosaidthatthecontract is madewith all the world – that is, witheverybody; andthatyoucannotcontractwitheverybody. It is not a contractmadewith all the world. There is thefallacyofthe argument.

16. Howwillthetextcontinue? He answersthedefendants’ argument, thengoes on to a new point.

17. Will he explainwhy it is not a contractmadewith all the world? It is anoffermade to all the world; andwhyshouldnotanofferbemade to all the world which is to ripeninto a contractwithanybody who comesforwardandperformsthecondition? It is anoffer to becomeliabletoanyone who, before it is retracted, performsthecondition, andalthoughtheofferismade to the world, thecontract is madewiththatlimitedportionofthepublic who comeforwardandperformthecondition on thefaithoftheadvertisement. (…) Then as to theallegedwantofconsideration. Thedefinitionof ‘consideration’ giveninSelwyn’s Nisi Prius, 8the ed. p. 47, which is citedandadoptedbyTindal, C. J., inthecaseofLaythoarp v. Bryant, is this:

18. Will he explainwhy it is not a contractmadewith all the world? Yes

19. Howwillthetextcontinue? “Anyactoftheplaintifffromwhichthedefendantderives a benefit or advantage, oranylabour, detriment, orinconveniencesustainedbytheplaintiff, providedsuchact is performed or suchinconveniencesufferedbytheplaintiff, withtheconsent, either express or implied, ofthedefendant.”

20. Howwillthetextcontinue? He givesthedefinitionofconsiderationfromthe work ofauthoritycited.

21. Will he applytheseprinciples to thepresentcase? Can it besaidherethatiftheperson who readsthisadvertisement applied thricedaily, for such time as mayseem to himtolerable, thecarbolicsmokeballto his nostrils for a wholefortnight, he is doingnothing at all - that it is a mereactwhich is not to counttowardsconsiderationtosupport a promise (for thelawdoesnotrequire us to measuretheadequacyoftheconsideration). Inconveniencesustainedby one party at therequestoftheother is enough to create a consideration. I think, therefore, that it is considerationejnoughthatthedefendantsreceived a benefitfromthisuser, for the use ofthesmokeballwascontemplatedbythedefendants as beingindirectly a benefit to them, becausethe use ofthesmokeballswouldpromotetheir sale. A.L. Smith, L-.J. deliveredjudgment to the same effect.

22. Will he applytheseprinciples to thepresentcase? Yes

23. 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.

24. 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

25. 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.

26. What is the meaning of the following words: • Warranted (line 29) • Fulfilled (42) • Insensate (49) • Extravagant (53) • Liable (61)

27. Key • Warrant = guarantee • Fulfill= carry out, meet (conditions) • Insensate = silly • Extravagant = wild • Liable = binding

28. Complete this phrase with information from lines 48-51, substituting a phrase with if for unless: • It wouldbeaninsensatething to promise 100£ to a person who usedthesmokeballif…’

29. 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)

30. 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

31. 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.

32. 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.

33. 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?

34. 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?

35. 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

36. Arguments for the defenceBowen 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

37. 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

38. 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

39. 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

40. 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

41. Which courts are bound by the decision in Carlill? • The Court of Appeal • High Court • All courts of first instance

42. 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

43. 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)

44. 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.

45. 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____.

46. Complete the following extract by choosing: binding, intentionnon-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____.

47. 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.

48. 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

49. 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______.

50. A moot For eachcase, appointthreepeople to act as counsel for theplaintiffandtwopeople as counsel for thedefendant. Theothermemersoftheclasswillact as judges. Prepareyourrolescarefully. Revise some oftheexpressionsyoulearntinSection One, Exercise E2 ifyou are acting as counselandinSection One, Exercise D 4 ifyou are thejudge.