The case of the Carbolic Smoke Ball is perhaps the most famous contract case of all time, demonstrating some important fundamentals.

In Leonard v. Pepsico, Inc., 88 F.Supp.2d 116 (1996), Wood J. stated,

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.

Background

In Carlill v. Carbolic Smoke Ball Company [1893] 1 QB 256, the Carbolic Smoke Ball Company advertised anyone who took medication using their smoke ball product as directed would not contract influenza, guaranteed by a reward of £100.

Mrs. Carlill used the product as directed, but still caught influenza and sought the guarantee. The company rebuked the claim and said that it was not an offer.

Their rational was that Mrs. Carlill had not notified them of the acceptance of any offer.

They also claimed in their defence mere “puffery,” or exagerrated claims for promotional purposes. An offer, they claimed, cannot be made with the entire world.

Unilateral v. Bilateral Contracts

The court stated that advertisements are generally invitations to treat. This was not a contract made with the whole world, but an offer made to the whole world.

A company is able, if so foolishly inclined, to make such extravagant offers to the general public. Just because an offer is extravagant, doesn’t mean the company is not bound by it.

The advertisement in this case constituted a unilateral contract, which only require performance for acceptance, as opposed to bilateral contracts that require mutual promises.

This was confirmed by the subsequent case, Goldthorpe v. Logan, [1943] 2 DLR 519 (Ont CA), which found that if an offer is made to the public using an advertisement, any member of the public is free to lend themself to the terms and conditions.

Contemporary Cases of Puffery

In Leonard v. Pepsico, Inc., the defendant sought to claim an airplane from Pepsi based on a points program promoted in an ad.

However, in this case the judge found that the ad did not constitute an offer because no reasonable person would have seriously expected to collect on the offer of 7 million points, or expect to receive a military grade fighter jet.

Over a decade ago, the National Conference of Commissioners on Uniform State Laws sought to amend the Uniform Commercial Code in the U.S.

The intent was to shift the burden of proof to the defendants to demonstrate that a reasonable person will not normally be misled by extravagant advertising claims.

The reasonable person, a fictitious figure used by the courts, is probably the most influential persona in the Common Law system.
Resources

David A. Hoffman. (2006). The Best Puffery Article Ever. 91 IOWA LAW REVIEW.