Contracts cases


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Carlill vs carbolic smoke ball

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Contracts cases

  1. 1. Carlill v. Carbolic Smoke Ball Company, [1893] 1 Q.B. 256 C.A. The Carbolic Smoke Ball Company sold a medical remedy called a “smoke ball” thatconsisted of a ball with a nozzle on top from which the user could inhale vapours. The companyclaimed that using its product three times a day would prevent the flu. To back up this claim, thecompany placed advertisements in a newspaper, offering to pay £100 to anyone who contractedthe flu despite using the ball and informing the public that £1000 had been deposited in the bankfor that purpose. Mrs. Carlill purchased a smoke ball and used it as directed; nevertheless she caught theflu. When she tried to claim the money, the company refused to pay. Carbolic Smoke BallCompany asserted that the advertisement was an invitation to treat and did not constitute an offer.Mrs. Carlill sued Carbolic Smoke Ball for breach of contract and was successful. The Court ruledthat the company had made a serious offer, not an invitation to treat. By going so far as to placethe money in the bank, the company had indicated that it intended to create a unilateral contractwith users of the smoke ball. This case set a precedent that is still followed today: seriouspromises that are intended to be binding and that are made in advertisements must be kept.
  2. 2. Dickinson v. Dodds, [1876] 2 Ch.D. 463 (C.A.) On Wednesday, June 10, 1874, John Dodds signed and delivered to George Dickinsona document stating the following: I hereby agree to sell to Mr. George Dickinson the whole of the dwelling-houses, garden ground, stabling and outbuildings thereto belonging, situated at Croft, belonging to me, for the sum of 800 pounds. As witness my hand this tenth day of June, 1874. P.S. – This offer to be left over until Friday, 9 o’clock a.m. (the twelfth), 12th June, 1874 [signed] J. Dodds. On Thursday, June 11, Dodds sold his property to Thomas Allan, a third party. He senta Mr. Berry to inform Dickinson that the property had been sold. Nevertheless, Dickinsondelivered a formal acceptance to purchase the property to Dodd’s mother-in-law, as Dodds wasstaying at her house. He explained what the document contained and asked her to give it toDodds. She forgot to do so. On Friday morning at 7:00, Dickinson delivered a duplicate of his acceptance to Dodds.Dodds replied that it was too late; he had already sold the property to another party the previousday. Dickinson took Dodds to court, alleging that the property should rightfully have been soldto him. At the trial, the judge ruled in favour of Dickinson, but on appeal the property was awardedto Allan. The Court held that since Dickinson had been informed that the property had been sold,he knew that the offer was no longer open for acceptance. Dodds was under no obligation tokeep the property unsold for Dickinson, just as Dickinson was under no obligation to acceptDodd’s offer.
  3. 3. Marshall v. Canadian Permanent Trust Company (1968)According to doctors, John Walsh was "definitely not capable of transacting business" having justsuffered a stroke. This did not stop Marshall from seeking and obtaining his signature on an offerto purchase Walshs land. Two months later, Walshs affairs were formally turned over to theadministration of Canadian Permanent Trust, appointed under provincial mentally incapacitatedpersons legislation. The trust company refused to close the deal arguing that it wasunconscionable. The court said there were two criteria to be met: "(1) that Walsh was incapableof protecting his interests; (2) that it was an improvident transaction for Walsh. With respect to(1), it is not material whether Marshall was aware of Walshs incapacity. With respect to (2), theonus rests with the plaintiff (Marshall) to show that the price given for the land corresponded toits fair value." The plaintiff succeeded on both accounts and the contract was rescinded.
  4. 4. Etyan v. Bach (1977) 374 A 2d 879The plaintiffs paid $157.50 for three paintings believing them to be 19th century originals. Thepainting, in fact, turned out to be modern reproductions put in old frames. The defendant had saidnothing about their age, although the defendant probably knew that plaintiff thought that the paintingswere antiques. The court refused to grant relief for mistake. While the court noted that in somecircumstances, concealment of a material fact may be as fraudulent as a direct representation, thiswas not the case as the price was the key. There is no duty to inform of the obvious. "If a customer went into a jewellery store and bought for $50 an item which looked like adiamond pendant set with pearls, it would plainly not be incumbent upon the sales clerk to warn thecustomer that what he had selected was a piece of costume jewellery with synthetic gems."
  5. 5. R. v. Dawood (1976)A woman falsified a price tag on an article and then paid for it. "When the appellant took thejumper and blouse to the checkout counter ... she was representing to the cashier that botharticles had been displayed for sale at this price, although she knew such was false. Thecashier had authority to accept such offer which she did by accepting the cash proffered. Atthat point a contract of sale had been made; true, it was a voidable contract as having beeninduced by fraud. The cashier had a general authority to accept such offer and to sell thegoods on behalf of her employer."
  6. 6. Staiman Steel Ltd. v. Commercial & Home Builders Ltd. (1976)A purchaser bid for steel at an auction thinking it was a mix of new and used steel, when itwas really only used steel. The court said that since the one party thought that the lot includednew steel and the other that it did not, that this was a mutual mistake. In these cases, "thecourt must decide what reasonable third parties would infer to be the contract from the wordsand conduct of the parties. It is only a case where the circumstances are so ambiguous that areasonable bystander could not infer a common intention that the court will hold that nocontract was created. In this case ... a reasonable man would infer the existence of a contractto buy and sell the bulk lot without the building steel and therefore ... there was a contract tothat effect binding on both parties, notwithstanding such mutual mistake."
  7. 7. Lewis v. Averay (1972)A person managed to con a person selling a vehicle that he was a famous actor and made offwith the car leaving a forged cheque in the actors name. The con-man then sold the vehicleto another unsuspecting man who was looking for a car, this time assuming the identity of hisfirst victim. The court held that the first contract, though voidable for fraud or mistaken identity,was valid until so voided and the contract stands before third parties who have, in good faith,acquired rights under it. Thus, valid title was conveyed to the second victim and the loss wasabsorbed by the first victim.