Let’s compare the facts of the cases.

Both made it to the Court of Appeal, and Gibson the House of Lords, even though they were fairly simple cases of offer and acceptance. This is because they were test cases. There were hundreds of other tenants in the same position when Councils changed from Conservative to Labour in the 1971 elections.

The Conservative Council had been following a policy of offering council houses for sale to tenants. When Labour was voted in they reversed this policy and tried to end any negotiations with council tenants that had not yet led to the final sale of their property.

Here are the facts of both cases…

 

November 1970 – Manchester City Council send out brochures to tenants who are interested in buying their houses about a possible sale and the mortgages on offer from the council.

Both Gibson and Storer fill in the form entitled ‘Please inform me of the price of buying my council house’ and return it to the Council.

Jan/Feb 1971 – The Council send Storer and Gibson the following letter…the following is the version sent to Gibson but they received the same letter, the only difference being the price of their respective houses.

‘Dear Sir,

Purchase of Council House

Your Reference Number 8246303

I refer to your request for details of the cost of buying your Council house. The Corporation may be prepared to sell the house to you at the purchase price of £2,725 less 20% = £2,180 (freehold).

Maximum mortgage the Corporation may grant : £2,177 repayable over 20 years.

…

This letter should not be regarded as a firm offer a mortgage.

If you would like to make formal application to buy your Council house please complete the enclosed application form and return it to me as soon as possible.

Yours, faithfully,

(Sgd) H. R. Page

City Treasurer’

Feb 12th 1971 – the Council move Gibson’s house from the list of Council maintained properties to a list of ‘pending sales’. March 5th 1971 – Gibson fills in and returns the application form but leaves the box for ‘Price’ empty. He requests a reduction in the price because of work that needs to be done on the tarmac path. He also states that he would like to take out a mortgage with the Council. March 12th 1971 – the Council reply stating that the condition of the house had already been taken into consideration when setting the price so there would be no reduction. March 18th 1971 – Gibson replies, ‘I would be obliged if you will carry on with the purchase as per my application already in your possession’.

February 11th 1971 – Storer fills in and returns the application form, stating, ‘I now wish to purchase my Council house’, and asks for a mortgage. March 9th 1971 – The Town Clerk writes to Storer; ‘Dear Sir: Sale of Council House. I understand you wish to purchase your Council house and enclose the agreement for sale. If you will sign the agreement and return it to me, I will send you the agreement signed on behalf of the Corporation in exchange.’ Enclosed with the letter was a form headed:- ‘City of Manchester. Agreement for Sale of a Council House’. The Council had filled in details such as the name of the purchaser, the address of the property, the price, the mortgage, amount, and the monthly repayments. They had only left blank the date when the tenancy would cease and mortgage repayments would commence. March 20th 1971 – Storer signs and returns but without filling in the date that the tenancy ends.

May 1971 – election

July 1971 – policy of council house buying is ended by the new Labour council.

 

The Decision in Storer v Manchester City Council [1974] 1 WLR 1403

 

The Court of Appeal found in Storer’s favour. There had been a valid offer and acceptance and the Council were ordered to perform specific performance and sell Storer his house.

The Court held that the form ‘Agreement for Sale of a Council House’, sent to Storer on March 9th by the Town Clerk, was a valid offer and Storer’s return of the application on March 20th was valid acceptance of that offer. The Council had argued that their form was only an invitation to treat but the Court disagreed; the wording ‘If you will sign the agreement and return it to me, I will send you the agreement signed on behalf of the Corporation in exchange’ was sufficiently clear and certain to constitute a valid contractual offer.

The Council also argued that there could be no sale because there had been no exchange of contracts as was normal in a sale of land (the Council had changed to Labour before the Council’s signed copy could be sent to Storer). However, the Court held that because the standard application form, ‘Agreement for Sale of a Council House’, had been specifically designed by the Council to avoid the full legal formalities of a normal land sale this was not a valid argument. The Council’s intention had been to make the sale of council houses easier by doing away with some formalities such as exchange of contracts, they could not then argue that there had to be an exchange for a valid sale. Once Storer had returned the form his acceptance the contract had been formed, it was not reliant on the Council returning their signed form.

Lastly they stated that the contract was not valid because Storer had left blank the date on which the lease would end, therefore not all of the material terms had been agreed. The Court dismissed this argument; the date was merely an administrative formality, its absence did not invalidate the whole contract.

In his judgment Lord Denning MR was keen to take a less formal and rigid view of offer and acceptance and emphasised the need to look at the conduct and intention of the parties. He stated;

‘In contracts you do not look into the actual intent in a man’s mind. You look at what he said and did. A contract is formed when there is, to all outward appearances, a contract. A man cannot get out of a contract by saying ‘I did not intend to contract’ if by his words he has done so. His intention is to be found only in the outward expression which his letters convey. It they show a concluded contract, that is enough.’

 

The Decision in Gibson v Manchester City Council [1979] UKHL 6

 

Both the Trial Judge and Court of Appeal decided in Gibson’s favour and ordered specific performance, i.e. that the Council had to fulfil the sale of the house.

In the Court of Appeal Lord Denning argued, as he had done in Storer, that the rigid formula of offer and acceptance did not always truly reflect the intentions of the parties. The court should look at the communication between the parties as a whole and decide whether they have come to an agreement. In this case he stated that offer and acceptance could be inferred from the conduct of the parties. His opinion was that it had clearly been the intention of both parties to buy/sell the house and that all material terms had been agreed, therefore there was a valid contract.

Ormrod L. J. argued that the letter, ‘Purchase of Council House’, from the Council to Gibson was an unconditional offer. The filling in of the application was valid acceptance by Gibson.

Geoffrey Lane L. J. dissented and stuck to a more traditional approach to offer and acceptance. In his view there was no valid contract between the parties.

The House of Lords disagreed with the Court of Appeal and Denning’s use of an holistic view of offer and acceptance, finding against Gibson. In their opinion the letter, ‘Purchase of Council House’ sent by the Council to Gibson in February 1971, did not constitute an offer, it was merely the start of a negotiation. Lord Diplock described the wording, that they ‘may’ be willing to sell the house, as ‘fatal’ to the argument that the Council was making a solid, contractual offer. Instead their letter was an invitation to treat, asking Gibson to make an offer of purchase which they could then accept or reject.

The Court of Appeal has also misinterpreted that part of the Council’s letter that read, ‘This letter should not be regarded as a firm offer a mortgage’. Their interpretation that this meant the other part of the letter, regarding the purchase price of the house, was a firm offer was incorrect. The meaning of one part could not be used to affect the plain meaning of another part.

The conduct of the parties was equivocal and not certain enough to infer offer and acceptance. Moving the house from the list of tenanted houses to the list of houses for sale did not indicate that they specifically intended to sell the house to Gibson. In addition there was not enough certainty regarding the mortgage; would he be granted the mortgage? Would he definitely go ahead with the mortgage that was offered? If this was a valid offer and acceptance would he have been legally bound to proceed with the mortgage offered by the Council?

The House of Lords’ conclusion was that there had been no valid offer, the wording of the Council was too unclear and uncertain. Gibson’s argument that he had accepted the Council’s offer in his letter of March 18th was therefore invalid as it was impossible to accept an offer that had never been made. There was also no mileage in arguing that it was Gibson’s letter that was an offer because there had been no acceptance of that offer by the Council.

The main difference between Gibson and Storer is the fact that Storer had been sent and returned the ‘Agreement for Sale of a Council House’ form which was deemed a valid offer. Gibson had not yet done so and had therefore tried to argue that the initial, ‘Purchase of Council House’, letter was a valid offer. Primarily based on the difference in the wording of the two documents one was held to be a valid offer and the other was not.

To read more about the difference between offers and invitations to treat click here.

The facts of Stilk v Myrick and Hartley v Ponsonby

In Stilk v Myrick (1809) (HC) two people had deserted from a crew of 11 on a ship that was returning to England from the Baltic. The captain couldn’t find replacements so offered to share the deserters’ wages between the rest of the crew if they agreed to sail the ship back home. However, when they returned home the captain refused to pay them the extra wages. Stilk, one of the crew members, sued. His case was unsuccessful; the court held that the crew’s existing contractual duty was to sail the ship home and that therefore they had not provided any fresh consideration for the captain’s promise to pay more. There had been no valid arrangement and the crew were only entitled to their original wages.

In Hartley v Ponsonby (1857) (HC) 19 out of a crew of 36 had deserted and the captain again offered the remaining men extra money to sail the boat home. However, in this case because of the severe reduction in the crew the remaining men would have been entitled to abandon the voyage and by agreeing to continue they went beyond their existing duty, taking on a much more difficult and dangerous journey. They were therefore entitled to the extra pay because they had provided fresh consideration for the captain’s promise to pay more.

What is the legal rule from Stilk v Myrick?

The main principle of law that arose from Stilk v Myrick was that the performance of an existing contractual duty is not good consideration for a further promise. This comes from Campbell’s law report. However, there was another law report of the same case written by Espinasse. His report focused more on the public policy reasons behind the decision. The courts wanted to discourage sailors from forcing captains to offer them better wages in circumstances such as Stilk v Myrick and Hartley v Ponsonby. In an era before the law of economic duress the courts had to use a lack of consideration instead.

Why do we now follow the legal rule from Campbell’s report rather than Espinasse? Partly it may be that Campbell’s version provides the courts with a rule that has a much wider application in law than Espinasse’s. The public policy rule only really applies to the specific area of sailors and captains. Law reports in the early 19thc. were much less formal and standardised and neither reporter was known for their complete accuracy! However, perhaps it is also because Espinasse had an even worse reputation than Campbell. Campbell was accused of going beyond mere factual reporting, i.e. sometimes adding his own interpretation to events. However, as Pollock CB (a later 19thc. judge) stated, Espinasse only heard half of what went on in court and reported the other half!

Has Stilk v Myrick been challenged by the courts?

The case of Stilk v Myrick was most recently challenged in the case of Williams v Roffey (1991) (CoA). Williams had been commissioned to refurbish a block of flats. In this agreement between Williams and the property owners, there was a penalty clause for late completion (meaning that Williams would have to pay an amount for being late). Williams subcontracted Roffey to do some carpentry work like installing windows within the block of flats. . When it became apparent that Roffey was running behind schedule on the carpentry work, Williams offered Roffey additional money to speed up and finish his existing work obligations on time. Later, Roffey tried to claim this additional amount from Williams. Williams refused to pay on the grounds that Roffey had provided no extra consideration for his promise to pay more. Completing the work on time was part of the initial promise, nothing more was given for additional payment. However, the court, rather than following the strict interpretation of consideration as set out in Stilk v Myrick, held that a “practical advantage” had been gained by Williams (not having to pay the penalty for missing the deadline) so Roffey was entitled to the extra payment even though they had only fulfilled their existing duty.

How did Stilk v Myrick survive Williams v Roffey?

The question of consideration

The issue around consideration that arose in Williams v Roffey can be easily demonstrated by comparing the case to Hartley v Ponsonby? Hartley v Ponsonby represents a more traditional exchange of consideration; the captain offered the benefit of higher wages and the sailors in return offered the detriment of doing the work of all of the men who had deserted. In Williams v Roffey Williams promised the benefit of more money to Roffey and gained the benefit of the work being done in time but Roffey had suffered no extra detriment.

The judges’ reasoning

So how did the three Court of Appeal judges who sat on the case of Williams v Roffey manage to argue that Stilk v Myrick is still good law even though they seem quite similar?

All differ slightly in their reasoning. Let’s look at each one in turn…

Glidewell LJ argued that there was no reason why a rule first stated over 200 years ago during the Napoleonic Wars, designed for the rigours of seafaring life, should not be subject to ‘a process of refinement and limitation in its application in the present day’.

He felt comfortable in distinguishing Stilk v Myrick from Williams v Roffey. He believed that in Stilk v Myrick the captain had gained no extra benefit from his promise of further payment, presumably because the sailors were expected to sail the ship home anyway. In Williams v Roffey the promisor had gained the benefit of the work being done on time and avoiding a penalty clause. It did not matter that the promisee had suffered no further detriment.

He disagreed with counsel for the defence’s argument that consideration had not moved from the promisee (one of the rules of consideration set out in Tweddle v Atkinson (1861)). Glidewell LJ argued that this was more of a rule regarding privity of contract and there was clearly a contract between the two parties. He quoted Chitty on Contracts…

‘the requirement that consideration must move from the promisee may equally be satisfied where the promisee confers a benefit on the promisor without in fact suffering any detriment’.

So it was not a problem that only Williams had gained a benefit from the extra promise but Roffey had suffered no benefit. In Stilk v Myrick the captain had not gained anything and the sailors had not suffered any detriment.

Russell LJ held that ‘the rigid approach to the concept of consideration to be found in Stilk v Myrick is either necessary or desirable’. but was still good law because ‘a gratuitous promise, pure and simple, remains unenforceable’.

He argued that in more modern times a practical benefit (consideration) should be readily found from the intention of the parties as long as the parties were of equal bargaining power and there was no duress or fraud. In other words, the freedom to contract outweighs the strict interpretation of Stilk v Myrick. In Williams v Roffey both parties were in agreement that the new arrangement benefited them and therefore this was sufficient to satisfy the requirement for consideration – times had moved on since Stilk v Myrick.

The third judge, Purchas LJ, felt that Stilk v Myrick was an exceptional case that involved public policy issues regarding contracts at sea but he was not prepared to overrule two cases (Stilk v Myrick and Harris v Watson (1791)*) ‘of such veneration’ made by judges ‘of such distinction’. He went on to say that the cases ‘form a pillar stone of the law of contract’.

* Harris v Watson (1791) Peake 102 was a similar case to Stilk v Myrick and Hartley v Ponsonby. The master and commander of a ship sailing from England to Lisbon had offered the claimant extra wages to induce him to work harder and steer the ship whilst it was in danger. The court found in the commander’s favour on public policy grounds. It was a sailor’s duty to sail the ship during dangerous periods even without the promise of more money. If not sailors might be encouraged to put ships in danger in order to force captains to offer extra money.

However, he was willing to distinguish Williams v Roffey, arguing that as long as both parties gain a benefit it is not necessary that both parties suffer a detriment.

Criticisms of Williams v Roffey

The decision in Williams v Roffey has been criticised – one example is by Colman J who in obiter dicta comments in South Caribbean Trading Ltd v Trafigura Beheer BV [2005] 1 Lloyd’s Rep 128 argued that he would not have followed the judgment if he has not been bound by the fact it was a Court of Appeal case. He particularly felt that the fact that there had been no consideration moving from the promisee meant that there had been no valid agreement.

The decision has also created some confusion as to whether the “practical benefits” argument can apply to promises to accept less. Contract law has struggled with the circumstances in which part payment of a debt will relieve the debtor of their obligation to pay the rest of the sum. Read more on Part Payment of Debt & Promissory Estoppel. In Re Selectmove Ltd [1993] EWCA Civ 8, Gibson LJ said that Williams v Roffey Bros only applies where work was done or goods supplied. To extend it to debts would go against Foakes v Beer, which expressly said that a practical benefit was not good consideration in law.

Conclusion

So, in conclusion, Stilk v Myrick is still good law but would only be used in very particular circumstances in which there has been no real benefit to the promisor in exchange for their promise.

What are the facts of Currie v Misa and what is a Bill of Exchange?

 

The case involved three parties…

Joseph Javier de Lizardi, the owner of F. de Lizardi & Co, a general merchant.

The claimant Glyn, Mills, Currie, & Co, a bank. Lizardi had been a good customer of the bank for over thirty years.

The partner of the bank who dealt with Lizardi was the wonderfully named Bertram Wodehouse Currie, an enthusiastic collector of French 18th century books, oriental china and works of art, and great-grandson of the man who had established the bank. (Find out more here www.natwestgroup.com/heritage/people/bertram-wodehouse-currie.html)

The defendant M. Misa, Esq. of 41 Crutched Friars, a wholesale wine merchant based in London and Cadiz.

What are Bills of Exchange?

 

Bills of exchange, which are still used today in international commerce, were used by companies when they needed money in a different city or foreign country where there might not be a branch of their own bank. Rather than travel with cash companies would buy bills of exchange from brokers which they could use to draw down cash when abroad.

What are the facts of Currie v Misa?

 

Misa buys Bills of Exchange from Lizardi – Misa required foreign currency in Cadiz, the equivalent of 2000l (about £125,500 today) so their agent contacted a bill of exchange broker and purchased four bills of exchange, or drafts, from Lizardi which they could use to draw down Spanish currency (at the time escudos and pesetas) from M. Manuel Paul in Cadiz.

These drafts were dated 11th February 1873. At the time it was customary to pay for bills of exchange on the next postal day (Tuesdays and Fridays) so Misa would have had to pay Lizardi on the following Friday, 14th February. However, the bills were not due (and could therefore not be used by Misa) until 25th February.

 

Currie becomes concerned about Lizardi’s debts – Meanwhile, back in London, on 12th February Mr Currie had become worried about how withdrawn Lizardi was on his bank accounts. He was overdrawn by 83,436l 13s 8d (about £5,500,000 today). Currie had also become suspicious that the securities Lizardi had deposited for his debt were not valid. He pressed Lizardi to reduce his debt by making a significant payment into his bank account.

 

Lizardi gives Currie Misa’s debt – On 13th February Lizardi passed on to Currie the payment that Misa owed him as security on his debts. However, the bank was not reassured and later that day stopped honouring Lizardi’s cheques or making payments from his accounts. It was later discovered that Lizardi had absconded and was declared bankrupt owing over £1 million (about £65 million today).

 

Currie calls in Misa’s debt – On 14th February Currie contacted Misa, payment was due for the bills of exchange which was now owed to Currie. Later that day Misa delivered a cheque to Currie for the amount owed. However, when they discovered that payments were not being made from Lizardi’s account, including the bills of exchange, they contacted their bank to stop the cheque they had made out to Currie. Currie sued Misa for the amount owed.

 

The legal arguments in Currie v Misa

Fraud Misa argued that the bills of exchange had been sold fraudulently. Lizardi had known he was about to be bankrupt and couldn’t honour the bills of exchange when they were sold so the contract had been created fraudulently.

No Fraud The court found no evidence that Lizardi knew at the time of contracting that he wouldn’t be able to honour the bills so there was no fraud.

No consideration between Misa and Lizardi Misa argued that no consideration had passed to them from Lizardi for the bills because they had never been able to collect the money in Cadiz.

Consideration had passed The court held that at the time of contracting consideration had passed between Misa and Lizardi. The fact that the bills were only available to draw upon in Cadiz on 25th February by which time Lizardi had been made bankrupt was not important. Whether there has been valid consideration must be evaluated at the time of contracting, future events cannot be taken into consideration.

No transfer of debt Misa stated that their debt had not been transferred to Currie; the bank was merely acting as Lizardi’s agent when asking for payment of the bills and therefore had no right to sue for the debt themselves.

Transfer of debt The court found that Currie was not acting as Lizardi’s agent; the debt had been transferred to them by Lizardi as payment for his debts and they could therefore legally request the payment from Misa.

No consideration between Misa and Currie Misa argued that no consideration had passed between them and Currie therefore there was no valid contract on which to sue.

Consideration had passed The court held that there had been valid consideration. Currie owned something of value that they would be giving up in exchange for the cheque from Misa. ‘giving up that document was undoubtedly a detriment to Glyn & Co.[Currie], which amounted in law to a sufficient consideration moving from them for the cheque which was substituted for it.’ Lord Chelmsford

Both the Exchequer Chamber and House of Lords disagreed with Misa’s arguments and found in Currie’s favour.

 

Click here for more information about consideration; including cases such as Hartley v Ponsonby, Chapple v Nestlé, White v Bluett, Ward v Byham or legal concepts such as past consideration is not good consideration, consideration need not be adequate but must be sufficient.

The Facts

The claimant provided business moving services, the defendant was an IT company that wanted to move its operations from Bradford Wood to Telford in Shropshire.

The focus of the case was where offer and acceptance had occurred and the difference that made to the amount owed to the claimants for their services.

This revolved around three documents…

The Documents

Document One

The claimant sent a fax to the defendant on 13 September 2001. The fax was a ‘budget cost’ for relocation. It was quoted as £890 plus VAT per vehicle load with an estimated 96 vehicle loads needed. Plus a few extras for things like insurance. The fax stated; ’Therefore we have an estimated budget figure to include all the above at 100k’.

Document Two

After a survey of the defendant’s precise needs the claimant sent a much more detailed ‘move program’ on 27 September 2001. This included a ‘Fixed Price Schedule’ at £98760.00 plus VAT. Along with the detailed proposal this document also included Pickfords’ terms and conditions which had not been included in the first fax.

Document Three

On 15 October 2001 the defendant sent a message to the claimants headed ‘CONFIRMATION’. It followed with…

‘PLEASE NOTE THE FOLLOWING ORDER NUMBER HAS BEEN RAISED TO COVER YOUR QUOTATION

‘Ref your fax 13/9/01 from MDawson/PSpencer

Relocation of Celestia Equipment from Bradwell Wood to Telford

(Not to exceed 100K)’

The Dispute

The claimant had accepted the offer and the defendant carried out the work. However, a dispute arose as to which offer had been accepted. The claimant’s case was that the third document was an acceptance of their 27 September quote but the defendant argued that they had accepted the 13 September quote and should therefore not be charged over 100k for the job.

The court held that both faxes were valid offers but did the second offer revoke the first even though there had been no express revocation? And which one had the defendant accepted?

Is the second offer a revocation of the first?

When discussing these points Dyson LJ gave the example of a painter who is hired to carry out a decoration job. They firstly quote a day rate and then later quote a fixed price for the job. In this scenario the second does not revoke first but simply gives the offeree two options from which they can chose. However, this case was not comparable. The second quote in this case was too different from the first to exist at the same time. It included a different method of calculating the costs and it imposed different contractual terms, e.g. the terms and conditions which hadn’t been included in the first fax. Therefore, the court held that the second had been an implied revocation of the first offer. (See Dickinson v Dodds)

Counter Offers

The court also found that that the defendant had accepted the first offer, this was clear from the reference to the date in their acceptance and the addition of ‘not to exceed 100K’ which was clearly a reference to the 13 September fax. However, as the first offer had been revoked by the second their acceptance could not give rise to a valid contract.

Instead they had unknowingly made a counter offer. Dyson LJ highlighted that the inclusion of ‘not to exceed 100K’ was a material new term and therefore a counter offer had been made. This counter offer was then accepted by conduct when Pickfords carried out the relocation. (See Hyde v Wrench)

Conclusion

Therefore the parties had contracted on the terms of the initial offer. Celestia’s ‘acceptance’ of it had been a counter offer which was accepted by Pickfords’ conduct.

* Arden LJ added that although the second offer had been sent to a different employee at Celestia this made no difference. It is enough that it was received by the company, it did not have to be received by the same specific individual.

 

For more detail on Revocation of an Offer, Acceptance and Counter-Offers visit the Termination of an Offer page.

 

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What happened to Mrs Donoghue?

On 26th August 1928 she left her home to meet a friend in Paisley, just outside Glasgow. They met at the Wellmeadow Café where she ordered a Scotsman’s Ice Cream Float, a mixture of ginger beer and ice cream. When Mrs Donoghue topped up her float with the rest of the ginger beer from the Stevenson’s bottle the remains of what seemed to be a dead snail ended up in her glass. She suffered shock and gastroenteritis, later being treated at the Glasgow Royal Infirmary.

Donoghue v Steveson – the legal background

The presence of decomposing animals in Scottish ginger beer bottles in the late 1920s seems to have been more common than one would have thought. The solicitor who represented Mrs Donoghue, Walter Leechman, had already been involved in a couple of other cases involving dead mice in ginger beer bottles. However, these conjoined cases (known as Mullens v Barr (1929)) had been dismissed by the Scottish Courts which stated that the defendants did not owe the claimants a duty of care and there was no claim in contract as the claimants had not been the ones to buy the product.

Mr Leechman was clearly committed to the cause and, not to be discouraged, he offered to represent Mrs Donoghue for free and brought her case only twenty days after the decision had been handed down against the claimants in Mullens v Barr. Although Mrs Donoghue was unsuccessful in the Scottish Court of Appeal it was decided to take the case to London and the House of Lords. In order to not have to put up security for her legal costs she had to officially register as a pauper which entailed a signed affidavit in which she swore ‘I am very poor. I am not worth five pounds in all the world’, this was sent with a petition to a committee of the House of Lords (which included the Duke of Wellington) to be confirmed.

When Mrs Donoghue’s case made it to the House of Lords she was represented by a Scottish barrister, Mr Milligan, who was an Olympic runner and had participated in the race round the Cambridge quad made famous by the film ‘Chariots of Fire’.

Donoghue v Stevenson – the verdict

The House of Lords in their decision split 3:2 in Mrs Donoghue’s favour. The three assenting judges were Lord Atkin, Lord Macmillan and Lord Thankerton. But why did they find in her favour? Lord Atkin was clearly interested in the interplay between Christian morality and tort law and whether the latter should reflect the former more closely. His ‘Neighbour Principle’ was a reflection of this. Mrs Donoghue’s case also turned out to be well timed as he had made a speech on the subject not six weeks before the case. Unlike the dissenting judges Lord MacMillan agreed with Lord Atkin and was happy to extend the bounds of negligence law famously saying, ‘the categories of negligence are never closed’ and Lord Thankerton, well, he was known for not only knitting during trials but also often falling asleep.

Once the House of Lords had decided that legally Mr Stevenson, as the manufacturer, could owe Mrs Donoghue, as the ultimate consumer, a duty of care the case went back to the court in Scotland to be tried on the facts. However, before it could be heard Mr Stevenson died and Mrs Donoghue did not transfer the claim to his estate. Because there was no trial on the facts controversy arose as to whether there had ever been a snail in the bottle. This, however, seems to have been a rumour started by the barrister who had unsuccessfully represented Mr Stevenson in the House of Lords. Mrs Donoghue was given a settlement nonetheless although the amount is disputed. In all likelihood £200, the equivalent of about £10,000 today.

The Offer

The company’s advert had offered £100 to anyone who bought and used their product but still caught influenza. This was a significant amount of money; the equivalent of about £9,000 today, it represented about 75% of a skilled tradesman’s annual wage at the time.

The Background

At the time that she bought her smokeball the world was in the midst of the Russian Flu Epidemic (c.1889-1895) which is estimated to have killed around one million people worldwide including Queen Victoria’s grandson, Prince Albert Victor.

The Smokeball

Despite the name the smokeball didn’t produce any smoke but was filled with powdered carbolic acid which the user squirted up their nose via a tube. The theory was that this would make the user’s nose run and flush out any infection!

How did the Company react?

As we all know the company lost. However, that didn’t stop the Company from trading, in fact the inventor of the smokeball and owner of the company Frederick Roe, turned the case to his advantage. Rather than drop the offer he upped it to £200 with the claim that as only three people, out of the many thousands that had bought the product, had ever tried to claim the £100 then the product had proved itself as an ‘invaluable remedy’. However, these adverts did include extra restrictive conditions to limit liability.

The law…

This landmark case marked the beginning of consumer protection law. It is still considered a foundational case with regard to unilateral contracts, and contracts in general, partly because so many different defences were put forward that had to be addressed by the judges.

OFFER – the advertisement was sufficiently clear and certain enough to be an offer. It was an offer to the whole world but a contract would be made only with those who performed the conditions set out. It was not ‘mere puff’, the claim that £1,000 had been put in the bank by the company was sufficient to prove this, especially as the advert itself states that this deposit is for ‘showing our sincerity in the matter.’

INTENTION – Again, the deposit of money by the company showed that they intended to create legal relations.

ACCEPTANCE – it was not necessary for the person performing the conditions to communicate their acceptance to the offeror, their completion of the conditions is acceptance.

CONSIDERATION – Mrs Carlill had provided consideration by buying the Company’s product rather than anything else based on the advertisement’s claims. The ‘inconvenience’ of squirting powdered carbolic acid up her nose was also set out as valid consideration.

And then…

Mrs Carlill’s lived to the age of 96, dying in 1946. The cause of death on her death certificate was influenza!

Read more here about how the case of Carlill v Carbolic is applied in contract law.

 

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