Contract; formation: consideration; offer and acceptance.
Facts: During an influenza epidemic in England in 1891 the Carbolic Smoke Ball Company produced patented 'smoke balls' made from certain chemicals. The company marketed these smoke balls as an effective means of preventing influenza. In particular, the company published an advertisement in a newspaper, offering to pay a reward of £100 to anyone who purchased the smoke balls, used them according to the instructions provided, but who nevertheless caught influenza. To demonstrate the seriousness of their offer, the company deposited £1000 in a bank account from which to pay the rewards. Elizabeth Carlill saw the advertisement. She bought and used a smoke ball as directed. When she nevertheless caught influenza she claimed the £100 reward promised by the company. The company refused to pay her, denying that an enforceable contract with Carlill had been created in these circumstances.
Issue 1: Intention to be legally bound. Could it be inferred from the circumstances that the promise to pay the advertised reward was intended to be legally binding?
Decision: There were sufficient circumstances to infer that the promise was intended to be contractually binding.
Reason: The advertisement was unlike other advertisements. The fact that it stated that £1000 had been deposited in a bank by the company expressly for the purposes of making the promised payments demonstrated that the promise was intended to be legally binding.