Accepting by promise, accepting by doing

London, eighteen ninety one. Influenza is going through the city. A company sells a device called the carbolic smoke ball, and it puts an advertisement in the newspapers. One hundred pounds reward, it says, to any person who contracts the influenza after having used the ball three times daily for two weeks according to the printed directions. And then, to show it means it, the advertisement says that one thousand pounds is deposited with the Alliance Bank, shewing our sincerity in the matter.
A woman named Carlill reads the advertisement, buys a smoke ball, uses it as directed for weeks, and catches the flu. She asks for her hundred pounds. The company refuses. It says the advertisement was advertising, not a promise. It says it never heard from her until she was ill, so she never accepted anything. And it says she gave nothing for the promise anyway. She sues.
So here is the question. A company makes a promise to the whole world, in a newspaper. A stranger does what the promise asks, without ever telling the company. Is there a contract? Think about it before I go on, because every one of the company's three arguments is a real rule of contract law, and the court had to answer each of them.
The question I keep asking. What exactly did these people promise each other? The company promised a hundred pounds on a condition. Mrs Carlill promised nothing. She did something. Whether doing something can be a promise's other half is the whole of today.
First line for the board. An acceptance is a manifestation of assent to the terms of the offer, made in the manner the offer invites. Second line. An offer can invite acceptance in two ways. By a return promise, which makes a bilateral contract, or by performance, which makes a unilateral contract. Where the offer is not clear which it wants, the offeree may choose. Most commercial offers want a promise. Rewards, prizes and advertisements like this one want an act.
Third line, and it answers the company's second argument. Where the offer invites acceptance by performance, the offeree does not have to tell the offeror in advance that he is going to perform. The performance itself is the acceptance. The offeror still needs to learn of it, eventually, to know that he owes something, but he does not need notice before the performance begins.
Fourth line, and this one protects the person who starts performing. Once the offeree begins the invited performance, the offeror cannot revoke. The offer becomes irrevocable for the time reasonably needed to finish. We will see an American court say so at the end of today.
Now the case.  Carlill against the Carbolic Smoke Ball Company, in the English Court of Appeal in eighteen ninety two.  Three judges, and each gave reasons.  Start with the first argument, that the advertisement was mere advertising.  Lord Justice Lindley asked, was it a mere puff?  And answered, my answer to that question is no, and I base my answer upon this passage.  One thousand pounds is deposited with the Alliance Bank, shewing our sincerity in the matter.
A company that puts money in a bank to back its words has made a promise.
Then the second argument, that Mrs Carlill never notified the company of her acceptance. Here is Lindley. In point of law this advertisement is an offer to pay one hundred pounds to anybody who will perform these conditions, and the performance of the conditions is the acceptance of the offer. And on notice, that such offers are an exception to the rule, or, if not an exception, they are open to the observation that the notification of the acceptance need not precede the performance.
Lord Justice Bowen put the offer to the world in a sentence that has been quoted for a hundred and thirty years. It is an offer made to all the world, and why should not an offer be made to all the world which is to ripen into a contract with anybody who comes forward and performs the condition?
And the third argument, consideration, which you will meet fully in module four. The company said Mrs Carlill gave nothing. Lindley asked, does not the person who acts upon this advertisement and accepts the offer put himself to some inconvenience at the request of the defendants? And answered that there is a distinct inconvenience, not to say a detriment, to any person who so uses the smoke ball. The appeal was dismissed. Mrs Carlill got her hundred pounds.
Now three American cases, quickly, because they show the same rules at work in ordinary business. First, Louisiana, nineteen fifty three. The Greens signed a form for a roofing company to re-roof their house on credit. The form said this. This agreement shall become binding only upon written acceptance hereof, by the principal or authorized officer of the contractor, or upon commencing performance of the work.
The credit check took about nine days. The next morning the company loaded two trucks with roofing materials and drove its crew from Shreveport to the house. When they arrived, another roofer was already at work. The Greens had hired someone else and never told the company. The company sued. The court held for the company. Here is the sentence. This commencement began with the loading of the trucks with the necessary materials in Shreveport and transporting such materials and the workmen to defendants' residence.
The Greens had chosen the terms. Their own form said the contract became binding on commencing performance. Loading the trucks was commencing performance. And the court noted that from the day they signed until the crew arrived, the Greens at no time notified or attempted to notify the company that they wanted out. The acceptance by performance was complete before any revocation reached the company.
Second, New York, eighteen seventy one, the case that draws the other line. A builder received a note from merchants asking him to fit out their offices in two weeks. He said nothing to them. He went out, bought lumber, and started working on it in his own shop. The next day the merchants withdrew. He sued and won before a jury. The Court of Appeals reversed.
Here is the rule the court stated.  Where an offer is made by one party to another when they are not together, the acceptance of it by that other must be manifested by some appropriate act.  And the reason his acts failed.  But a mental determination not indicated by speech, or put in course of indication by act to the other party, is not an acceptance which will bind the other.
Buying wood in your own shop, where the merchants could not see it, told them nothing.  New trial ordered.
Put those two beside each other. Louisiana. Trucks loaded and on the road to the customer's house, doing the very thing the customer's form named. Acceptance. New York. Lumber bought and worked in a private shop, with nothing to show the merchants. No acceptance. The difference is not effort. It is whether the act was one the offeror named, or one the offeror could reasonably be expected to learn of.
Third, New Mexico, nineteen sixty seven, on revocation.  A property owner offered, in writing, to sell to a named buyer and to pay a broker a commission if the sale closed within six days.  On the morning of the sixth day the owner revoked.  The broker had already been working on the buyer.  The Supreme Court of New Mexico adopted the rule of the Restatement.
Where an offer invites an offeree to accept by rendering a performance, an option contract is created when the offeree begins the invited performance or tenders part of it.  The case went back to find out whether the broker had in fact begun.
Now let's change one fact. A poster offers a hundred dollars for the return of a lost dog. A neighbour finds the dog and brings it home, having never seen the poster. Is there a contract? Choose an answer before I go on.
Most people say yes, because the dog is home and the act was done. But an acceptance is a response to an offer. A person who does not know an offer exists cannot be accepting it. The neighbour performed, but did not accept, and most American courts would say no contract. It is a hard result, and the reason for it is that a contract is an agreement, not a coincidence.
Change one fact again. Same poster, but the neighbour saw it before searching. Contract? Choose.
Most people say yes, and they are right. The offer invited performance. The neighbour knew of it and performed. Notice before performance was not required, because the poster did not ask for it. This is Carlill in a suburb.
Change one fact a third time. A homeowner says to a painter, I will pay you five hundred dollars if you paint my fence. The painter has painted half of it when the owner walks out and says, I revoke. Can the painter finish and be paid? Choose.
Most people say no, because an offer can be revoked any time before acceptance, and the painter has not finished. But look at what the painter has done. He has begun the invited performance. Under the rule New Mexico adopted, that beginning creates an option. The owner may not revoke while the painter completes within a reasonable time. Now compare a painter who has only bought the paint. Preparation is not performance, and the offer could still be withdrawn.
Here is what people get wrong here, and why it is tempting.  The first mistake is thinking unilateral offers are common, because the famous cases are all rewards and advertisements.  In commerce, almost every offer wants a promise back.  The second mistake is thinking that performance always needs advance notice.  Carlill says it does not, where the offer dispenses with it.  The third mistake is the New York trap.  Believing that any effort is acceptance.
It must be an act the offeror named, or one that will reach the offeror in the ordinary course.
Here is the rule, in one breath. An offer that invites performance is accepted by the performance itself, knowingly done, without advance notice where the offer dispenses with it, and once performance has begun the offer cannot be revoked until the offeree has had a reasonable time to finish. Now, five questions.