ACCA F4 - Corp and Business Law (ENG)

Part B The law of obligations  3: Formation of contract I 51

The case of Carlill v Carbolic Smoke Ball Company 1893 includes one example of a unilateral contract.

Here the defendants advertised that they would pay £100 to anyone who caught influenza while using their

product. This was held to be an offer to the world at large capable of being accepted by anyone fulfilling

the necessary conditions. However, it was not necessary that anyone fulfilled the conditions, but as soon

Carlill began to use the product, the defendants were bound by their offer.

An ordinary offer can be revoked at any time before complete acceptance and, once revoked, can no

longer be accepted. However, in the case of a unilateral contract, the courts have held that an offer

cannot be revoked once the offeree has begun to perform whatever act is necessary.

9 Collateral contracts

In certain circumstances, the courts may infer the existence of a contract without the formalities of offer

and acceptance. This type of contract is a collateral contract.

A collateral contract is a contract where consideration is provided by the making of another contract. For

example, if there are two separate contracts, one between A and B and one between A and C, on terms

which involve some concerted action between B and C, there may be a contract between B and C.

There is a contract between B and C despite the absence of direct communication between them.

Shanklin Pier Ltd v Detel Products Ltd 1951

The facts: The defendants gave assurances to the claimants that their paint would be satisfactory and

durable if used to repaint the claimant's pier. The claimants in their contract with X for the repainting of

the pier specified that X should use this paint. The paint proved very unsatisfactory. The claimants sued

the defendants for breach of undertaking. The defendants argued that there was no contract between the

claimants and themselves.

Decision: The contract between the claimants and X requiring the use of the defendant's paint was the

consideration for a contract between the claimants and the defendant.

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