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Acknowledgement

It is my privilege to record my deep sense to perform gratitude to those who

helped me in completion of this project.

In making of this project many people helped me immensely directly or

indirectly. Firstly I would like to present my gratitude to Mr. Drivedi who gave

me an idea and encouragement for making this project. I would like also to

thank my friends for being cordial in order to make conducive environment in

the college.

Anshumaan Bahadur

ROLL : 318

2 nd semester.

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RESEARCH METHODOLOGY

Research Methodology is a systematized investigation to gain new knowledge

about the phenomena or problems. Legal phenomena require their own research

methodology. The research methodology applied here is doctrine method of

research. The systematic investigation of problems and of matters concerned

with the topic “Carlill Vs Carbolic smoke ball Company” has been done. The

research has been done through web sites available on the internet and the

books available in the library have been used to study about the topic. The main

goal of this research is to understand the case and its relevance in the Indian

Judiciary. As this was the land mark case in the History Of the Chapter of

Acceptance so the research has been done in accordance with the English Laws

And in Accordance with the Indian Law.

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Index

1) Introduction....................................................................................................................5

2) Proposal Or Offer...........................................................................................................7

3) Facts of the case.............................................................................................................9

4) Judgement of the case...................................................................................................11

(i) Lord Justice Lindley.........................................................................................13

(ii) Lord Justice Bowen..........................................................................................16

(iii) Lord Justice A.L.

Smith...................................................................................22

5) Legacy and modern perspectives.................................................................................25

6) Conclusion: Indian Perspective....................................................................................28

7) Bibliography................................................................................................................33

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Cases Refered

(i) Carlill v Carbolic Smoke Ball Company............................... (1893) 1 Q.B. 256.

(ii) Lalman Shukla vs. Gauri Dutt............................................ (1913) 11 All LJ 489

(iii) Dimmoch v Hallett ......................................................................(1866) 2 Ch.

App. 21

(iv) Brogden v Metropolitan Ry Co............................................. (1877) 2 App Cas 666 HL

(v) Gerhard v Bates................................................................................... 2 E. & B. 476

(vi) Spencer v Harding........................................................................... (1870) 5 CP 561

(vii) Fisher v Pyne ................................................................................(1960) 3 All ER 731

(viii) Denton v Great Northern Ry. Co............................................. (1865) 5 E&B 860

(ix) Williams v Carwardine................................................................ (1833) 2 LJKB 101

(x) State of Bihar vs Bengal C&P Works…………………………………. AIR 1954 Pat 14.

(xi)Union of India v. Rameshwarlal Bhagchand................................... AIR 1973 Gauhati 111

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Introduction

Carlill v Carbolic Smoke Ball Company1 is a English contract law decision by the Court of

Appeal. It is notable for its curious subject matter and how the influential judges (particularly

Lindley LJ and Bowen LJ) 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

studies2.

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 relations3.

In order to understand the arguments and the issues involved in this case one must have an

idea of what are the basic requisites of a contract.

What is a CONTRACT?

Anson4 has defined the word ‘contract’ in the following words:

“A contract consists in an actionable promise or promises. Every such

promise involves two parties, a promisor and promisee, and an expression of a common

intention and of explanation and of expectation as to the act or forbearance promised”.

The term contract is defined in Section 2(h) of the Indian Contract Act, 1872 which says “an

agreement enforceable by law is a contract”. Thus for the formation of a contract there has to

be two essentials:

1. An agreement;

2. The agreement should be enforceable by law5.

1 (1893) 1 Q.B. 256.

2 http://en.wikipedia.org/wiki/Carlill_v_Carbolic_Smoke_Ball_Company

3 http://en.wikipedia.org/wiki/Offer_and_acceptance

4 Anson’s Law Of Contract 23rd Edition, Edited by A.G.Guest (1971) p. 23.

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The word agreement is defined as “every promise and every set of promises forming a

consideration for each other”6. And a promise is defined as an accepted proposal. The

process of definitions comes down to this: A contract is an agreement, an agreement is a

promise and a promise is an accepted proposal.

The case of Carlill v Carbolic Smoke Ball Company7 is based on the “acceptance of a

proposal”. Therefore the task is to understand the proposal, its types and acceptance of a

proposal.

5 Contract Act and Specific Relief Act, Avtar Singh, 10th Edition, Eastern Book Company, p. 3.

6 See Section 2(e) of Indian Contract Act, Bare Act.

7 (1893) 1 Q.B. 256.

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Proposal or Offer

The first step in the formation of a contract is the making of a proposal. Generally speaking

there must be at least two persons to make a contract- A person to make the proposal and the

other person accept it. The word ‘proposal’ has been defined in Section 2(a) 8 of the Indian

Contract Act, 1872. It provides as follows:

“when one person signifies to another his willingness to do or to

abstain from doing anything, with a view to obtaining the assent of that other to such act or

abstinence, he is said to make a proposal”9.

According to this definition there are three main essentials of a valid proposal-

(i) The person who makes the proposal should communicate it to the person to whom it

is made.

(ii) The proposal should be made in the view to obtain the other person’s assent.

(iii) The offeror should make the proposal signifying his willingness to do or

abstain from doing10.

A proposal to be valid must contain the following elements:

(i) Every proposal must be communicated.

(ii) It must be made with a view to create legal relations.

(iii) It must be certain and definite.

There are two main types of offer:

(i) General offer

(ii) Specific offer.

An offer need not always be made to ascertained person but it is necessary that an ascertained

person should accept it. For example a person offers a reward to anyone who finds his lost

diamond ring, the finder can successfully claim the reward. In Lalman Shukla vs. Gauri

8 See Indian Contract Act, 1872, Bare Act.

9 See Section 2(a) of Indian Contract Act.

10 Contract-I, 11th Edition, S.K.Kapoor, Central Law Agency, p.18.

8

Dutt11, it was held that the servant is not entitled to claim the reward because it came to his

knowledge after he had discovered the boy which he was obliged to do as a servant.

Where the offer is made to the whole world, acceptance of the offer and performance

of the contention will be sufficient for making it an enforceable contract. A well known

illustrative English case is the case of Carlill v Carbolic Smoke Ball Company12.

11 (1913) 11 All LJ 489

12 (1893) 1 Q.B. 256.

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Facts of the case

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 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.

One carbolic smoke ball will last a family several months, making it the cheapest remedy in

the world at the price, 10s. post free. The ball can be refilled at a cost of 5s. Address:

“Carbolic Smoke Ball Company, “27, Princes Street, Hanover Square, London.”

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 checked by the secretary. Mrs

Carlill brought a claim to court. The barristers representing her argued that the advertisement

10

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.

11

Judgement of the case

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 smokeball

constituted acceptance of the offer (3) that purchasing or merely using the smokeball

constituted good consideration, because it was a distinct detriment incurred at the behest of

the company and, furthermore, more people buying smokeballs 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. The judgments of the court

were as follows13.

Lord Justice Lindley

Lindley LJ gave the first judgment, after running through the facts again. He makes short

shrift of the insurance and wagering contract arguments that were dealt with in the Queen's

Bench.

“I will begin by referring to two points which were raised in the Court below. I refer to

them simply for the purpose of dismissing them. First, it is said no action will lie upon

this contract because it is a policy. You have only to look at the advertisement to

dismiss that suggestion. Then it was said that it is a bet. Hawkins, J., came to the

conclusion that nobody ever dreamt of a bet, and that the transaction had nothing

whatever in common with a bet. I so entirely agree with him that I pass over this

contention also as not worth serious attention.14”

Then, what is left? The first observation I will make is that we are not dealing with any

inference of fact. We are dealing with an express promise to pay 100ℓ. in certain

events. Read the advertisement how you will, and twist it about as you will, here is a

distinct promise expressed in language which is perfectly unmistakable —

13 [1893] 1 Q.B. 256, 262-275

14 Contract Act and Specific Relief Act, Avtar Singh, 10th Edition, Eastern Book Company, p. 18.

12

“100ℓ. reward will be paid by the Carbolic Smoke Ball Company to any person who

contracts the influenza after having used the ball three times daily for two weeks

according to the printed directions supplied with each ball.”

Already, it is apparent which way that Lindley LJ will decide. Judges often differ in their

style, and in 19th century cases it was more usual to be short and direct, giving the decision

first and then the reasons. Since the later 20th century, judges have made their opinions ever

longer and wordier, often dealing with all sides and points of argument before reaching

conclusions. He follows on with essentially five points. First, the advert was not "mere puff"

as had been alleged by the company, because the deposit of £1000 in the bank evidenced

seriousness15. Second, the advertisement was an offer to the world. Third, communication of

acceptance is not necessary for a contract when people's conduct manifests an intention to

contract. Fourth, that the vagueness of the advert's terms was no insurmountable obstacle.

And fifth, the nature of Mrs Carlill's consideration (what she gave in return for the offer) was

good, because there is both an advantage in additional sales in reaction to the advertisement

and a "distinct inconvenience" that people go to use a smokeball.

We must first consider whether this was intended to be a promise at all, or whether it was a

mere puff which meant nothing. Was it a mere puff? My answer to that question is No, and I

base my answer upon this passage: “1000ℓ. is deposited with the Alliance Bank, shewing our

sincerity in the matter.” Now, for what was that money deposited or that statement made

except to negative the suggestion that this was a mere puff and meant nothing at all? The

deposit is called in aid by the advertiser as proof of his sincerity in the matter - that is, the

sincerity of his promise to pay this 100ℓ. in the event which he has specified. I say this for the

purpose of giving point to the observation that we are not inferring a promise; there is the

promise, as plain as words can make it.

Then it is contended that it is not binding. In the first place, it is said that it is not made with

anybody in particular. Now that point is common to the words of this advertisement and to

the words of all other advertisements offering rewards. They are offers to anybody who

performs the conditions named in the advertisement, and anybody who does perform the

15 The leading case of the time, which said that mere advertising "puff" did not create actionable warranties is

Dimmoch v Hallett (1866) 2 Ch. App. 21. It follows the Latin maxim simplex commendatio non obligat, that

"simple commendations do not create obligations

13

condition accepts the offer. In point of law this advertisement is an offer to pay 100ℓ. to

anybody who will perform these conditions, and the performance of the conditions is the

acceptance of the offer. That rests upon a string of authorities, the earliest of which is

Williams v Carwardine, which has been followed by many other decisions upon

advertisements offering rewards.

But then it is said,

“Supposing that the performance of the conditions is an acceptance of the offer, that

acceptance ought to have been notified.”

Unquestionably, as a general proposition, when an offer is made, it is necessary in order to

make a binding contract, not only that it should be accepted, but that the acceptance should be

notified. But is that so in cases of this kind? I apprehend that they are an exception to that

rule, or, if not an exception, they are open to the observation that the notification of the

acceptance need not precede the performance. This offer is a continuing offer. It was never

revoked, and if notice of acceptance is required - which I doubt very much, for I rather think

the true view is that which was expressed and explained by Lord Blackburn in the case of

Brogden v Metropolitan Ry Co16 - if notice of acceptance is required, the person who makes

the offer gets the notice of acceptance contemporaneously with his notice of the performance

of the condition. If he gets notice of the acceptance before his offer is revoked, that in

principle is all you want. I, however, think that the true view, in a case of this kind, is that the

person who makes the offer shews by his language and from the nature of the transaction that

he does not expect and does not require notice of the acceptance apart from notice of the

performance17.

We, therefore, find here all the elements which are necessary to form a binding contract

enforceable in point of law, subject to two observations. First of all it is said that this

advertisement is so vague that you cannot really construe it as a promise - that the vagueness

of the language shows that a legal promise was never intended or contemplated. The

language is vague and uncertain in some respects, and particularly in this, that the 100ℓ. is to

be paid to any person who contracts the increasing epidemic after having used the balls three

times daily for two weeks. It is said, When are they to be used? According to the language of

16 (1877) 2 App Cas 666 HL

17 Contract and Specific Relief, 10th Edition, Avatar Singh, Eastern Book Company, p.25

14

the advertisement no time is fixed, and, construing the offer most strongly against the person

who has made it, one might infer that any time was meant. I do not think that was meant, and

to hold the contrary would be pushing too far the doctrine of taking language most strongly

against the person using it. I do not think that business people or reasonable people would

understand the words as meaning that if you took a smoke ball and used it three times daily

for two weeks you were to be guaranteed against influenza for the rest of your life, and I

think it would be pushing the language of the advertisement too far to construe it as meaning

that. But if it does not mean that, what does it mean? It is for the defendants to shew what it

does mean; and it strikes me that there are two, and possibly three, reasonable constructions

to be put on this advertisement, any one of which will answer the purpose of the plaintiff.

Possibly it may be limited to persons catching the “increasing epidemic” (that is, the then

prevailing epidemic), or any colds or diseases caused by taking cold, during the prevalence of

the increasing epidemic. That is one suggestion; but it does not commend itself to me.

Another suggested meaning is that you are warranted free from catching this epidemic, or

colds or other diseases caused by taking cold, whilst you are using this remedy after using it

for two weeks. If that is the meaning, the plaintiff is right, for she used the remedy for two

weeks and went on using it till she got the epidemic. Another meaning, and the one which I

rather prefer, is that the reward is offered to any person who contracts the epidemic or other

disease within a reasonable time after having used the smoke ball. Then it is asked, What is a

reasonable time18? It has been suggested that there is no standard of reasonableness; that it

depends upon the reasonable time for a germ to develop! I do not feel pressed by that. It

strikes me that a reasonable time may be ascertained in a business sense and in a sense

satisfactory to a lawyer, in this way; find out from a chemist what the ingredients are; find out

from a skilled physician how long the effect of such ingredients on the system could be

reasonably expected to endure so as to protect a person from an epidemic or cold, and in that

way you will get a standard to be laid before a jury, or a judge without a jury, by which they

might exercise their judgment as to what a reasonable time would be. It strikes me, I confess,

that the true construction of this advertisement is that 100ℓ. will be paid to anybody who uses

this smoke ball three times daily for two weeks according to the printed directions, and who

gets the influenza or cold or other diseases caused by taking cold within a reasonable time

after so using it; and if that is the true construction, it is enough for the plaintiff.

18 (1877) 2 App Cas 666 HL

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I come now to the last point which I think requires attention - that is, the consideration. It has

been argued that this is nudum pactum - that there is no consideration. We must apply to that

argument the usual legal tests. Let us see whether there is no advantage to the defendants. It

is said that the use of the ball is no advantage to them, and that what benefits them is the sale;

and the case is put that a lot of these balls might be stolen, and that it would be no advantage

to the defendants if the thief or other people used them. The answer to that, I think, is as

follows. It is quite obvious that in the view of the advertisers a use by the public of their

remedy, if they can only get the public to have confidence enough to use it, will react and

produce a sale which is directly beneficial to them. Therefore, the advertisers get out of the

use an advantage which is enough to constitute a consideration.

But there is another view. Does not the person who acts upon this advertisement and accepts

the offer put himself to some inconvenience at the request of the defendants? Is it nothing to

use this ball three times daily for two weeks according to the directions at the request of the

advertiser? Is that to go for nothing? It appears to me that there is a distinct inconvenience,

not to say a detriment, to any person who so uses the smoke ball. I am of opinion, therefore,

that there is ample consideration for the promise.

We were pressed upon this point with the case of Gerhard v Bates19, which was the case of a

promoter of companies who had promised the bearers of share warrants that they should have

dividends for so many years, and the promise as alleged was held not to shew any

consideration. Lord Campbell's judgment when you come to examine it is open to the

explanation, that the real point in that case was that the promise, if any, was to the original

bearer and not to the plaintiff, and that as the plaintiff was not suing in the name of the

original bearer there was no contract with him. Then Lord Campbell goes on to enforce that

view by shewing that there was no consideration shewn for the promise to him. I cannot help

thinking that Lord Campbell's observations would have been very different if the plaintiff in

that action had been an original bearer, or if the declaration had gone on to shew what a

société anonyme was, and had alleged the promise to have been, not only to the first bearer,

but to anybody who should become the bearer. There was no such allegation, and the Court

said, in the absence of such allegation, they did not know (judicially, of course) what a

société anonyme was, and, therefore, there was no consideration. But in the present case, for

19 2 E. & B. 476

16

the reasons I have given, I cannot see the slightest difficulty in coming to the conclusion that

there is consideration.

It appears to me, therefore, that the defendants must perform their promise, and, if they have

been so unwary as to expose themselves to a great many actions, so much the worse for them.

Lord Justice Bowen

Bowen LJ's opinion was more tightly structured in style and is frequently cited. Five main

steps in his reasoning can be identified. First, he says that the contract was not too vague to

be enforced, because it could be interpreted according to what ordinary people would

understand by it. He differed slightly to Lindley LJ on what time period one could contract

flu and still have a claim (Lindley LJ said a "reasonable time" after use, while Bowen LJ said

"while the smokeball is used") but this was not a crucial point, because the fact was the Mrs

Carlill got flu while using the smokeball. Second, like Lindley LJ, Bowen LJ says that the

advert was not mere puff because £1000 was deposited in the bank to pay rewards. Third, he

said that although there was an offer to the whole world, there was not a contract with the

whole world. Therefore, it was not an absurd basis for a contract, because only the people

that used it would bind the company. Fourth, he says that communication is not necessary to

accept the terms of an offer; conduct is and should be sufficient. Fifth, there was clearly good

consideration given by Mrs Carlill because she went to the "inconvenience" of using it, and

the company got the benefit of extra sales.

“I am of the same opinion. We were asked to say that this document was a contract too vague

to be enforced”.

The first observation which arises is that the document itself is not a contract at all, it is only

an offer made to the public. The defendants contend next, that it is an offer the terms of

which are too vague to be treated as a definite offer, inasmuch as there is no limit of time

fixed for the catching of the influenza, and it cannot be supposed that the advertisers seriously

meant to promise to pay money to every person who catches the influenza at any time after

the inhaling of the smoke ball. It was urged also, that if you look at this document you will

find much vagueness as to the persons with whom the contract was intended to be made -

that, in the first place, its terms are wide enough to include persons who may have used the

smoke ball before the advertisement was issued; at all events, that it is an offer to the world in

general, and, also, that it is unreasonable to suppose it to be a definite offer, because nobody

17

in their senses would contract themselves out of the opportunity of checking the experiment

which was going to be made at their own expense. It is also contended that the advertisement

is rather in the nature of a puff or a proclamation than a promise or offer intended to mature

into a contract when accepted. But the main point seems to be that the vagueness of the

document shows that no contract whatever was intended. It seems to me that in order to

arrive at a right conclusion we must read this advertisement in its plain meaning, as the public

would understand it. It was intended to be issued to the public and to be read by the public.

How would an ordinary person reading this document construe it? It was intended

unquestionably to have some effect, and I think the effect which it was intended to have, was

to make people use the smoke ball, because the suggestions and allegations which it contains

are directed immediately to the use of the smoke ball as distinct from the purchase of it. It did

not follow that the smoke ball was to be purchased from the defendants directly, or even from

agents of theirs directly. The intention was that the circulation of the smoke ball should be

promoted, and that the use of it should be increased. The advertisement begins by saying that

a reward will be paid by the Carbolic Smoke Ball Company to any person who contracts the

increasing epidemic after using the ball. It has been said that the words do not apply only to

persons who contract the epidemic after the publication of the advertisement, but include

persons who had previously contracted the influenza. I cannot so read the advertisement. It is

written in colloquial and popular language, and I think that it is equivalent to this:

“100l. will be paid to any person who shall contract the increasing epidemic after having

used the carbolic smoke ball three times daily for two weeks.”

And it seems to me that the way in which the public would read it would be this, that if

anybody, after the advertisement was published, used three times daily for two weeks the

carbolic smoke ball, and then caught cold, he would be entitled to the reward. Then again it

was said: “How long is this protection to endure? Is it to go on for ever, or for what limit of

time?” I think that there are two constructions of this document, each of which is good sense,

and each of which seems to me to satisfy the exigencies of the present action. It may mean

that the protection is warranted to last during the epidemic, and it was during the epidemic

that the plaintiff contracted the disease. I think, more probably, it means that the smoke ball

will be a protection while it is in use. That seems to me the way in which an ordinary person

would understand an advertisement about medicine, and about a specific against influenza. It

could not be supposed that after you have left off using it you are still to be protected for

18

ever, as if there was to be a stamp set upon your forehead that you were never to catch

influenza because you had once used the carbolic smoke ball. I think the immunity is to last

during the use of the ball. That is the way in which I should naturally read it, and it seems to

me that the subsequent language of the advertisement supports that construction. It says:

“During the last epidemic of influenza many thousand carbolic smoke balls were

sold, and in no ascertained case was the disease contracted by those using” (not

“who had used”) “the carbolic smoke ball,”

and it concludes with saying that one smoke ball will last a family several months (which

imports that it is to be efficacious while it is being used), and that the ball can be refilled at a

cost of 5s. I, therefore, have myself no hesitation in saying that I think, on the construction of

this advertisement, the protection was to enure during the time that the carbolic smoke ball

was being used. My brother, the Lord Justice who preceded me, thinks that the contract

would be sufficiently definite if you were to read it in the sense that the protection was to be

warranted during a reasonable period after use. I have some difficulty myself on that point;

but it is not necessary for me to consider it further, because the disease here was contracted

during the use of the carbolic smoke ball.

“Was it intended that the 100l. should, if the conditions were fulfilled, be paid? The

advertisement says that 1000l. is lodged at the bank for the purpose. Therefore, it

cannot be said that the statement that 100l. would be paid was intended to be a mere

puff. I think it was intended to be understood by the public as an offer which was to be

acted upon”.

But it was said there was no check on the part of the persons who issued the advertisement,

and that it would be an insensate thing to promise 100l. to a person who used the smoke ball

unless you could check or superintend his manner of using it. The answer to that argument

seems to me to be that if a person chooses to make extravagant promises of this kind he

probably does so because it pays him to make them, and, if he has made them, the

extravagance of the promises is no reason in law why he should not be bound by them.

It was also said that the contract is made with all the world - that is, with everybody; and that

you cannot contract with everybody. It is not a contract made with all the world. There is the

fallacy of the argument. It is an offer made to all the world; and why should not an offer be

19

made to all the world which is to ripen into a contract with anybody who comes forward and

performs the condition? It is an offer to become liable to any one who, before it is retracted,

performs the condition, and, although the offer is made to the world, the contract is made

with that limited portion of the public who come forward and perform the condition on the

faith of the advertisement. It is not like cases in which you offer to negotiate, or you issue

advertisements that you have got a stock of books to sell, or houses to let, in which case there

is no offer to be bound by any contract. Such advertisements are offers to negotiate - offers to

receive offers - offers to chaffer, as, I think, some learned judge in one of the cases has said.

If this is an offer to be bound, then it is a contract the moment the person fulfils the condition.

That seems to me to be sense, and it is also the ground on which all these advertisement cases

have been decided during the century; and it cannot be put better than in Willes, J.'s,

judgment in Spencer v Harding20. “In the advertisement cases,” he says,

“There never was any doubt that the advertisement amounted to a promise to pay the

money to the person who first gave information. The difficulty suggested was that it

was a contract with all the world. But that, of course, was soon overruled. It was an

offer to become liable to any person who before the offer should be retracted should

happen to be the person to fulfil the contract, of which the advertisement was an offer

or tender. That is not the sort of difficulty which presents itself here. If the circular

had gone on, ‘and we undertake to sell to the highest bidder,’ the reward cases would

have applied, and there would have been a good contract in respect of the persons.”

As soon as the highest bidder presented himself, says Willes, J., the person who was to hold

the vinculum juris on the other side of the contract was ascertained, and it became settled.

Then it was said that there was no notification of the acceptance of the contract. One cannot

doubt that, as an ordinary rule of law, an acceptance of an offer made ought to be notified to

the person who makes the offer, in order that the two minds may come together. Unless this is

done the two minds may be apart, and there is not that consensus which is necessary

according to the English law - I say nothing about the laws of other countries - to make a

contract. But there is this clear gloss to be made upon that doctrine, that as notification of

acceptance is required for the benefit of the person who makes the offer, the person who

makes the offer may dispense with notice to himself if he thinks it desirable to do so, and I

suppose there can be no doubt that where a person in an offer made by him to another person,

20 (1870) 5 CP 561

20

expressly or impliedly intimates a particular mode of acceptance as sufficient to make the

bargain binding, it is only necessary for the other person to whom such offer is made to

follow the indicated method of acceptance; and if the person making the offer, expressly or

impliedly intimates in his offer that it will be sufficient to act on the proposal without

communicating acceptance of it to himself, performance of the condition is a sufficient

acceptance without notification.

That seems to me to be the principle which lies at the bottom of the acceptance cases, of

which two instances are the well-known judgment of Mellish, LJ, in Harris's Case, and the

very instructive judgment of Lord Blackburn in Brogden v Metropolitan Ry Co21, in which he

appears to me to take exactly the line I have indicated22.

Now, if that is the law, how are we to find out whether the person who makes the offer does

intimate that notification of acceptance will not be necessary in order to constitute a binding

bargain? In many cases you look to the offer itself. In many cases you extract from the

character of the transaction that notification is not required, and in the advertisement cases it

seems to me to follow as an inference to be drawn from the transaction itself that a person is

not to notify his acceptance of the offer before he performs the condition, but that if he

performs the condition notification is dispensed with. It seems to me that from the point of

view of common sense no other idea could be entertained. If I advertise to the world that my

dog is lost, and that anybody who brings the dog to a particular place will be paid some

money, are all the police or other persons whose business it is to find lost dogs to be expected

to sit down and write me a note saying that they have accepted my proposal? Why, of course,

they at once look after the dog, and as soon as they find the dog they have performed the

condition. The essence of the transaction is that the dog should be found, and it is not

necessary under such circumstances, as it seems to me, that in order to make the contract

binding there should be any notification of acceptance. It follows from the nature of the thing

that the performance of the condition is sufficient acceptance without the notification of it,

and a person who makes an offer in an advertisement of that kind makes an offer which must

be read by the light of that common sense reflection. He does, therefore, in his offer

impliedly indicate that he does not require notification of the acceptance of the offer.

21 (1877) 2 App Cas 666 HL

22 Contract and Specific Relief, 10th Edition, Avatar Singh, Eastern Book Company, p.25

21

A further argument for the defendants was that this was a nudum pactum - that there was no

consideration for the promise - that taking the influenza was only a condition, and that the

using the smoke ball was only a condition, and that there was no consideration at all; in fact,

that there was no request, express or implied, to use the smoke ball. Now, I will not enter into

an elaborate discussion upon the law as to requests in this kind of contracts. I will simply

refer to Victors v Davies and Serjeant Manning's note to Fisher v Pyne23, which everybody

ought to read who wishes to embark in this controversy. The short answer, to abstain from

academical discussion, is, it seems to me, that there is here a request to use involved in the

offer. Then as to the alleged want of consideration. The definition of “consideration” given in

Selwyn's Nisi Prius, 8th ed. p. 47, which is cited and adopted by Tindal CJ, in the case of

Laythoarp v Bryant, is this:

“Any act of the plaintiff from which the defendant derives a benefit or advantage, or

any labour, detriment, or inconvenience sustained by the plaintiff, provided such act

is performed or such inconvenience suffered by the plaintiff, with the consent, either

express or implied, of the defendant.”

Can it be said here that if the person who reads this advertisement applies thrice daily, for

such time as may seem to him tolerable, the carbolic smoke ball to his nostrils for a whole

fortnight, he is doing nothing at all - that it is a mere act which is not to count towards

consideration to support a promise (for the law does not require us to measure the adequacy

of the consideration). Inconvenience sustained by one party at the request of the other is

enough to create a consideration. I think, therefore, that it is consideration enough that the

plaintiff took the trouble of using the smoke ball. But I think also that the defendants received

a benefit from this user, for the use of the smoke ball was contemplated by the defendants as

being indirectly a benefit to them, because the use of the smoke balls would promote their

sale.

Then we were pressed with Gerhard v Bates24. In Gerhard v Bates, which arose upon

demurrer, the point upon which the action failed was that the plaintiff did not allege that the

promise was made to the class of which alone the plaintiff was a member, and that therefore

there was no privity between the plaintiffs and the defendant. Then Lord Campbell went on to

give a second reason. If his first reason was not enough, and the plaintiff and the defendant

23 (1960) 3 All ER 731

24 2 E. & B. 476

22

there had come together as contracting parties and the only question was consideration, it

seems to me Lord Campbell's reasoning would not have been sound. It is only to be

supported by reading it as an additional reason for thinking that they had not come into the

relation of contracting parties; but, if so, the language was superfluous. The truth is, that if in

that case you had found a contract between the parties there would have been no difficulty

about consideration; but you could not find such a contract. Here, in the same way, if you

once make up your mind that there was a promise made to this lady who is the plaintiff, as

one of the public - a promise made to her that if she used the smoke ball three times daily for

a fortnight and got the influenza, she should have 100l., it seems to me that her using the

smoke ball was sufficient consideration. I cannot picture to myself the view of the law on

which the contrary could be held when you have once found who are the contracting parties.

If I say to a person, “If you use such and such a medicine for a week I will give you 5l.,” and

he uses it, there is ample consideration for the promise.

Lord Justice AL Smith

AL Smith LJ's judgment was more general and concurred with both Lindley LJ and Bowen

LJ's decisions.

The first point in this case is, whether the defendants' advertisement which appeared in the

Pall Mall Gazette was an offer which, when accepted and its conditions performed,

constituted a promise to pay, assuming there was good consideration to uphold that promise,

or whether it was only a puff from which no promise could be implied, or, as put by Mr.

Finlay, a mere statement by the defendants of the confidence they entertained in the efficacy

of their remedy.

Or as I might put it in the words of Lord Campbell in Denton v Great Northern Ry. Co 25 . ,

whether this advertisement was mere waste paper. That is the first matter to be determined. It

seems to me that this advertisement reads as follows:

“100l. reward will be paid by the Carbolic Smoke Ball Company to any person who

after having used the ball three times daily for two weeks according to the printed

directions supplied with such ball contracts the increasing epidemic influenza, colds,

or any diseases caused by taking cold. The ball will last a family several months, and

can be refilled at a cost of 5s.”

25 (1865) 5 E&B 860

23

If I may paraphrase it, it means this: “If you” - that is one of the public as yet not ascertained,

but who, as Lindley and Bowen, L.JJ., have pointed out, will be ascertained by the

performing the condition — “will hereafter use my smoke ball three times daily for two

weeks according to my printed directions, I will pay you 100l. if you contract the influenza

within the period mentioned in the advertisement.” Now, is there not a request there? It

comes to this: “In consideration of your buying my smoke ball, and then using it as I

prescribe, I promise that if you catch the influenza within a certain time I will pay you 100l.”

It must not be forgotten that this advertisement states that as security for what is being

offered, and as proof of the sincerity of the offer, 1000l. is actually lodged at the bank

wherewith to satisfy any possible demands which might be made in the event of the

conditions contained therein being fulfilled and a person catching the epidemic so as to entitle

him to the 100l. How can it be said that such a statement as that embodied only a mere

expression of confidence in the wares which the defendants had to sell? I cannot read the

advertisement in any such way. In my judgment, the advertisement was an offer intended to

be acted upon, and when accepted and the conditions performed constituted a binding

promise on which an action would lie, assuming there was consideration for that promise.

The defendants have contended that it was a promise in honour or an agreement or a contract

in honour - whatever that may mean. I understand that if there is no consideration for a

promise, it may be a promise in honour, or, as we should call it, a promise without

consideration and nudum pactum; but if anything else is meant, I do not understand it. I do

not understand what a bargain or a promise or an agreement in honour is unless it is one on

which an action cannot be brought because it is nudum pactum, and about nudum pactum I

will say a word in a moment.

In my judgment, therefore, this first point fails, and this was an offer intended to be acted

upon, and, when acted upon and the conditions performed, constituted a promise to pay.

In the next place, it was said that the promise was too wide, because there is no limit of time

within which the person has to catch the epidemic. There are three possible limits of time to

this contract. The first is, catching the epidemic during its continuance; the second is,

catching the influenza during the time you are using the ball; the third is, catching the

influenza within a reasonable time after the expiration of the two weeks during which you

have used the ball three times daily. It is not necessary to say which is the correct

construction of this contract, for no question arises thereon. Whichever is the true

24

construction, there is sufficient limit of time so as not to make the contract too vague on that

account.

Then it was argued, that if the advertisement constituted an offer which might culminate in a

contract if it was accepted, and its conditions performed, yet it was not accepted by the

plaintiff in the manner contemplated, and that the offer contemplated was such that notice of

the acceptance had to be given by the party using the carbolic ball to the defendants before

user, so that the defendants might be at liberty to superintend the experiment. All I can say is,

that there is no such clause in the advertisement, and that, in my judgment, no such clause can

be read into it; and I entirely agree with what has fallen from my Brothers, that this is one of

those cases in which a performance of the condition by using these smoke balls for two

weeks three times a day is an acceptance of the offer.

It was then said there was no person named in the advertisement with whom any contract was

made. That, I suppose, has taken place in every case in which actions on advertisements have

been maintained, from the time of Williams v Carwardine,26 and before that, down to the

present day. I have nothing to add to what has been said on that subject, except that a person

becomes a persona designata and able to sue, when he performs the conditions mentioned in

the advertisement.

Lastly, it was said that there was no consideration, and that it was nudum pactum. There are

two considerations here. One is the consideration of the inconvenience of having to use this

carbolic smoke ball for two weeks three times a day; and the other more important

consideration is the money gain likely to accrue to the defendants by the enhanced sale of the

smoke balls, by reason of the plaintiff's user of them. There is ample consideration to support

this promise. I have only to add that as regards the policy and the wagering points, in my

judgment, there is nothing in either of them.

26 (1833) 2 LJKB 101

25

Legacy and modern perspectives

Carlill is frequently cited as a leading case in the common law of contract, particularly where

unilateral contracts are concerned. This is perhaps due to the ingenuity of Counsel for the

Defendant in running just about every available defence, requiring the court to deal with

these points in turn in the judgment.

It provides an excellent study of the basic principles of contract and how they relate to every

day life. The case remains good law. It still binds the lower courts of England and Wales and

is cited by judges with approval. However, in addition to the contractual remedy afforded to

users, the same facts would give rise to a number of additional statutory remedies and

punishments were an individual to place an advert in the same terms today.

Firstly, although it was not discussed in the case, there was evidence at the time that using the

smokeball actually made people more vulnerable to the flu (carbolic acid was put on the

poisons register in 1900). Secondly, the Consumer Protection Act 1986 creates a statutory

tort of strict liability for defective products that cause any kind of personal injury or death, or

damage over £100. This is the primary method for individuals to get compensation for any

loss resulting from products. Similar regimes for product liability have developed around the

world through statute and tort law since the early twentieth century, one of the leading cases

being Donoghue v Stevenson.

Viewed with a modern eye, many have argued that Carlill should be seen as redolent of

another era, not a foundational case in the law of contract. For instance, Professor Hugh

Collins writes the following.

"The amusing circumstances of the case should not obscure the surprising extent to which the

court was prepared to conceive social relations in terms of contracts. The parties to the

alleged contract had never met or communicated with each other directly. Nor had they

exchanged goods, money or services between themselves. The law of contract is used by the

court as an instrument for discouraging misleading and extravagant claims in advertising

and for deterring the marketing of unproven, and perhaps dangerous pharmaceuticals... The

judges run through a shopping-list of questions: Was there a promise? Was the promise

serious and intended to be acted upon? Was the promise sufficiently definite and certain?

Was the promise accepted by the plaintiff? Did the plaintiff perform some action in exchange

for the promise? The generality and abstraction of the rules permit both the extensive

26

utilization of [contract law] and its application to the case, without any discussion of such

matters as the moral claims of the parties, the nature of the market for pharmaceuticals and

the problems generated by misleading advertising... Its doctrinal integrity helps to achieve

legitimacy, because the law can be presented as objective and neutral, not a matter of politics

or preference, but a settled body of rules and principles, legitimated by tradition and routine

observance, and applied impartially and fairly to all citizens."

Professor A. W. B. Simpson, in an article entitled 'Quackery and Contract Law'27 gave the

background of the case as part of the scare arising from the Russian influenza pandemic of

1889-90. He points out that nobody knew what the flu actually was yet, nor how to prevent or

cure it. After it was patented, the Carbolic Smoke Ball had in fact become rather popular in

many esteemed circles including the Bishop of London who found it "has helped me

greatly".28 The inventor, Frederick Roe, had advertised heavily when the epidemic hit

London, which was getting extensive press coverage. But in the Pall Mall Gazette (just one

instance where he put ads) there were many, many more quack remedies for misunderstood

problems. Once the case had been decided by the Court of Appeal, it met with general

approval, but especially so from the medical community. The Pharmaceutical Society of

Great Britain had been fighting an ongoing battle against quack remedies, and had wanted

specifically to get carbolic acid on the poisons register since 1882. Although without

sympathy for the Carbolic Smoke Ball Company itself, Simpson casts doubt on whether

Carlill was rightly decided.

"The analytical problems arose in a particularly acute form in the smoke ball case. Thus it

seemed very peculiar to say that there had been any sort of agreement between Mrs Carlill

and the company, which did not even know of her existence until January 20, when her

husband wrote to them to complain. There were indeed earlier cases permitting the recovery

of advertised rewards; the leading case here was Williams v Carwardine29, where a reward of

£20 had been promised by a handbill for information leading to the conviction of the

murderer of Walter Carwardine, and Williams, who gave such information, successfully sued

to recover the reward. But this was long before the more modern doctrines had become so

firmly embodied in legal thinking, and in any event the case was quite distinguishable. It

27 (1985) 14 Journal of Legal Studies 345

28 1985) 14 Journal of Legal Studies 345, 354

29 (1833) 2 LJKB 101

27

concerned a reward, whereas Mrs Carlill was seeking compensation. There could be at most

only a few claimants for this, but there is no limit on the number of those who may catch

influenza. Furthermore, the Carbolic Smoke Ball Company had had no chance to check the

validity of claims, of which there could be an indefinite number; much was made of this point

in the argument. But the judges were not impressed with these difficulties, and their attitude

was no doubt influenced by the view that the defendants were rogues. They fit their decision

into the structure of the law by boldly declaring that the performance of the conditions was

the acceptance, thus fictitiously extending the concept of acceptance to cover the facts. And,

since 1893, law students have been introduced to the mysteries of the unilateral contract

through the vehicle of Carlill v Carbolic Smoke Ball Co. and taught to repeat, as a sort of

magical incantation of contract law, that in the case of unilateral contracts performance of the

act specified in the offer constitutes acceptance, and need not be communicated to the

offeror."

In a much more recent American case from the Southern District of New York, Leonard v

Pepsico, Inc,30 Judge Kimba Wood wrote,

"Long a staple of law school curricula, Carbolic Smoke Ball owes its fame not merely to "the

comic and slightly mysterious object involved"... but also to its role in developing the law of

unilateral offers."

Mr Leonard had sued Pepsi to get a fighter jet which had featured in a TV ad. Supposedly

one might get the jet if one had acquired loads of "Pepsi Points" from buying the soft drink. It

was held that Mr Leonard could not get the fighter jet, because the advertisement was not

serious. Cashing in "Pepsi Points" could certainly mean various prizes, but the fighter jet

thing was really a joke. Kimba Wood J distinguished the case on a number of different

grounds from Carlill, but it is clear that not all advertisements are always to be taken

seriously.

30 88 F.Supp.2d 116 (S.D.N.Y 1996)

28

Indian Perspective

The case of the Carlill vs Carbolic Smoke Ball Company covers the section 8 of the Indian

Contract Act, 1872. It says

“Acceptance by performing conditions or receiving consideration: performance of

the conditions of a proposal, or the acceptance of any consideration for a reciprocal

promise which may be offered with a proposal, is an acceptance of the proposal”31.

The principle of the section was followed by YEARS CJ of the Allahabad High Court in

Harbhajan lal vs Harcharan Lal32 and applied to a situation where the terms of a general

offer were substantially, though not literally complied with.

A boy ran away from his father’s home. The father eventually issued a

pamphlet, offering a reward in these terms: “Anybody who finds trace of the boy and brings

him home, will get Rs 500.” The plaintiff was at the Dharmshala of a railway station, there he

saw the boy, overheard part of the conversation, realized thet the boy was missing boy and

promptly took him to the police station and sent a telegram to the boy’s father that he had

found his son. It was held that the handbill was an offer open to the whole world and capable

of acceptance by any person who fulfilled the condition, and that the plaintiff substantially

performed the condition and was entitled to the amount offered33.

There are many other leading cases on this topic which are being discussed further. It has

been observed in a decision of the Patna High Court34 that “where the acceptance is to consist

of an act, as for example, despatching of goods ordered by post, the rules is that no further

communication is necessary”.

The High Court considered the case of Rameshwarlal Bhagchand35 on which reliance was

placed by the Raiwlays. In that case the plaintiff-respondent, M/s. Rameshwarlal Bhagchand

had transported 210 bags of groundnut through Railways, but when it took delivery, the

consignments were found to be so damaged as not fit for human consumption. It was so

certified by the Railway Officer concerned. The consignee served a notice on the Railway

31 See Bare Act, Indian Contract Act

32 AIR 1925 All 539

33 Contract and Specific Relief, 10th Edition, Avatar Singh, Eastern Book Company, p.19

34 State of Bihar vs Bengal C&P Works, AIR 1954 Pat 14.

35 Union of India v. Rameshwarlal Bhagchand AIR 1973 Gauhati 111

29

Administration claiming compensation in the sum of Rs. 2,368.25 ps.. The General Manager

sent a cheque in the sum of Rs. 1173.19 ps. to the consignee on May 5, 1964 alongwith a

letter stating that the cheque was being sent in full and final settlement of the claim. The

consignee encashed the cheque but subsequently communicated to the General Manager by

its letter dated July 29, 1964 that the cheque received satisfied only a part of the claim and

that the balance amount should be remitted. Since the General Manager failed to make

payment of the balance amount claimed by the consignee a suit for recovery of the balance

amount was filed. In these facts the High Court took the view that the plaintiff having

encashed the cheque without first communicating to the General Manager that it did not agree

to the proposal made by him, it must be assumed in terms Section 8 of the Contract Act to

have accepted the proposal by mere acceptance of the cheque. It was held that the fact that it

wrote a letter on July 29, 1964 after encashing the cheque, and denying that the amount had

fully settled its claim, did not alter the position. If the consignee did not agree to the offer

made by the General Manager in his communication dated May 5, 1964, it should have

communicated its refusal to accept the offer, before encashing the cheque. Otherwise it would

be assumed that the cheque was encashed on the terms offered by the General Manager, and

only later the consignee changed its mind after realizing the proceeds of the cheque.

The judgment of the Gauhati High Court in Assam Bengal Cereals Limited proceeded on a

different set of facts. In that case the consignee/claimant had received an offer from the

Railways to accept the cheque in full and final settlement of its claim. In response thereto, by

letter addressed to the Railways, it informed the Railways that the cheque had been retained

and the Railways should give reasons for withholding the balance amount. It was stated in the

letter that if no reply was received within 15 days, the acceptance of the cheque would not

amount to full and final settlement. In fact, the cheque was not encashed for 15 days after

issuance of the letter by the claimant/consignee. In these facts it was held that that principle

laid down in Rameshwarlal Bhagchand case was not applicable to the case since the claimant

had responded to the offer of the Railways demanding from them the reasons as to why the

entire claim was not admitted, and further provided that unless reasons are assigned within 15

days from the receipt of the letter, the retention of the cheque would not be treated as

acceptance of the payment in full and final settlement. In the peculiar facts of the case,

therefore, it was held that the encashment of the cheque did not amount to acceptance of the

offer made by the Railways.

30

In the impugned judgment and order, the Division Bench of the High Court has agreed with

the view in Rameshwarlal Bhagchand case We may refer to the other decisions cited at the

Bar.

Amar Nath Chand Prakash v. Bharat Heavy Electricals Limited36 the facts were that the

respondent gave a contract to the appellant for doing certain construction work which was

completed by the first week of March 1965. The appellant company prepared a final bill of

the work done on March 29, 1965. The appellant signed a no claim declaration and also gave

a receipt in token of accepting the amount found due to the appellant. The appellant thereafter

raised a dispute alleging short payment etc. It invoked the arbitration clause and called upon

the respondent to appoint an arbitrator. When the respondent did not respond to the notice

issued by the appellant, an application under Section 20 of the Arbitration Act was filed by

the appellant. The respondent contested the application contending that the appellant having

given a no claim certificate in final settlement of its claim and having accepted the payment

by means of a cheque in full and final settlement of its dues, it amounted to discharge of the

contract alongwith which the arbitration agreement also stood extinguished and, therefore,

there was no dispute capable of being referred to arbitration. The High Court considered the

material on record and found that though the declaration was signed by the appellant, as also

the memorandum of payment, in the final bill there was an endorsement to the effect that the

appellant had accepted the payment under protest. This was done on March 29, 1965 whereas

the cheque was actually prepared and delivered much later on December 14, 1965. In the

absence of any oral evidence, the High Court was required to construe the document in order

to ascertain the intention of the contractor in making such an endorsement and of the

company in permitting such an endorsement to be made. In the facts of the case the High

Court observed that the endorsement dispelled any intention to remit the performance in

regard to the balance of the claim. On the contrary it clearly evinced that the receipt of the

amount was not unconditional so as to effect the discharge of the contract. On the contrary it

safeguarded the position of the contractor and indicated that he was not accepting the

payment without any reservation. The appellant specifically stated that he was receiving the

money 'under protest' which clearly amounted to making a reservation. The reservation could

only be that the acceptance of payment was not in discharge of the contract. Consequently it

could not be said that the appellant dispensed with, or remitted the performance of the

36 AIR 1972 All 176

31

contract, for the rest of his dues. Reliance was placed on the principle enunciated in Day v.

Mciea37 in which it was observed:

“If a person sends a sum of money on the terms that it is to be taken, if at all, in

satisfaction of a larger claim: and if the money is kept it is a question of fact as to the

terms upon which it is so kept. Accord and satisfaction imply an agreement to take the

money in satisfaction of the claim in respect of which it is sent. If the accord is a

question of agreement, there must be either two minds agreeing or one of the two

persons acting in such a way as to induce the other to think that the money is taken in

satisfaction of the claim, and to cause him to act upon that view. In either case it is a

question of fact.”

Applying this principle it was held that there was no accord and satisfaction in the sense of

bilateral consensus of intention. The appellant made it clear that it was accepting the money

'under protest', that is, conditionally. Under the circumstances it cannot be said that signing

the no claim certificate and the grant of the receipt amounted to discharge of the contract.

In Union of India and Anr. v. Gangaram Bhagwandas38, the respondent had filed a suit on

January 6, 1970 claiming by way of damages a sum of Rs. 504.58 ps. on account of goods

being damaged due to negligence and misconduct on the part of the Railways and its

employees. While the suit was pending a cheque for Rs. 283.05 was sent under cover of a

letter dated March 6, 1970 which stated that the amount was being sent in full and final

settlement of the claim. The respondent encashed the chque. The High Court on facts found

that there was no denying the fact that the plaintiff did not accept the cheque in full

satisfaction. It had not passed a receipt in full satisfaction, nor did it send a receipt to the

Railways acknowledging receipt of the amount. On the contrary, even after receiving the

cheque the respondent prosecuted the suit for the balance of the amount. The Railway had led

no evidence to show that the intention of the plaintiff was to accept the cheque in full and

final settlement of its claim. On this finding, relying upon the principle laid down in Day v.

Mciea39 it was held that:

37 (1889) 22 QBD 610

38 AIR 1977 MP 215

39 (1889) 22 QBD 610

32

“The question was thus primarily one of fact and since the defendant did not choose

to lead any evidence on the point nor are there such circumstances brought on the

record to lead to the conclusion that the cheque was accepted in discharge of the

whole debt, I am unable to come to the conclusion that the acceptance of the cheque

amounted to satisfaction of the whole claim.”

The decision of this Court in Lala Kapurchand Godha and Ors. v. Nawab Himayatalikhan

Azamjah40, may not be of much assistance as in that case apart from the fact that the appeal

was decided with reference to Section 63 of the Contract Act, there was clear evidence on

record that the plaintiffs therein had received the sum of Rs. 20 lakhs in full satisfaction of

their claim and duly discharged the promissory notes by endorsement of "full satisfaction"

and received payment in full.

40 [1963]2SCR168

33

Bibliography

1. Contract Act and Specific Relief Act, Avtar Singh, 10th Edition, Eastern Book Company.

2. http://en.wikipedia.org/wiki/Carlill_v_Carbolic_Smoke_Ball_Company.

3. http://en.wikipedia.org/wiki/Offer_and_acceptance

4. Indian Contract Act, Bare Act.

5. Contract-I, 11th Edition, S.K.Kapoor, Central Law Agency.