Q.
It is known that for a contract to be established, there are three basic elements:
- Offer & acceptance
- Intention to be binding
- Consideration
Explain using case law how these elements are found in a contract.
A.
See post on 'Four Elements of a Legal Contract".
The case law for the discussion here is Carlill v Carbolic Smoke Ball Company 1892.
This case put to test the three fundamental requirement for a contract. In summary, a remedy of 'flu' called Carbolic Smoke Ball was supposed to treat and prevent 'flu' and the company went many steps further in providing guarantee or claim in an advertisement to the public, that if a user were to use it according to what it supposed to be, the company would pay a handsome sum for those who caught 'flu' in spite of the use of Smoke Ball. The company even deposited a big sum of money in a bank to prove its genuine intention.
Mrs Carlill bought the Smoke Ball and used it like was prescribed, but however so, still fell sick with 'flu'. She claimed for the payment but denied. She sued the company for breach of contract. The company tried to avoid the claim by stating it (the advertisement) as 'not a serious contract'. The case was appealed to Court of Appeal.
Judgment was set that the elements of a contract were all fulfilled, thus the Carbolic Smoke Ball Company had breached the contract by not paying Mrs Carlill the advertised sum.
Among the reasons given by the three judges were
(1) that the advertisement was not a unilateral offer to all the world but an offer restricted to those who acted upon the terms contained in the advertisement
(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 advertisement 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.
Hence, this case showed the three basic elements of a contract being found acting together in a binding contract.
Ref:
Carlill v Carbolic Smoke Ball Company 1892. Available from:
http://en.m.wikipedia.org/wiki/Carlill_v_Carbolic_Smoke_Ball_Company