Most people think a contract only exists when two parties sit down, negotiate, and exchange promises. In reality, the law also recognises a different kind of agreement known as a unilateral contract. These contracts are surprisingly common in everyday life, especially in advertisements, reward offers, and promotional campaigns.
A unilateral contract works differently from the usual “I promise, you promise” arrangement. Instead, one party makes a promise to the world at large, and the other party accepts it not by saying “I agree”, but simply by performing the required act.
A classic example would be a reward poster. If someone offers RM5,000 for the return of a lost pet, nobody needs to formally “accept” the offer beforehand. The contract is formed once someone finds and returns the pet according to the stated conditions.
The most famous case on this subject is Carlill v Carbolic Smoke Ball Co [1893] 1 QB 256, a landmark decision that still appears in contract law textbooks today.
The “Smoke Ball” Case
The facts of the case were almost bizarre.
A company called the Carbolic Smoke Ball Company advertised a product which supposedly prevented influenza. The company boldly claimed that anyone who used the smoke ball exactly as instructed and still contracted influenza would receive £100 as compensation. To show they were serious, they even announced that £1,000 had been deposited in a bank.
Mrs Carlill purchased the product, used it properly, and unfortunately still caught influenza. She then claimed the promised reward.
The company refused to pay and argued that the advertisement was not legally binding. According to them, it was merely sales talk or an “invitation to treat”. They also argued that there was no proper acceptance because Mrs Carlill never informed them that she intended to accept the offer.
The court disagreed.
The Court of Appeal held that the advertisement was a genuine unilateral offer made to the public. Mrs Carlill accepted the offer simply by performing the required conditions namely purchasing and using the smoke ball as instructed. There was no need for separate communication of acceptance because the company had effectively waived that requirement.
The court also found several important points:
- the advertisement showed a serious intention to be legally bound;
- an offer can be made to the public at large;
- the terms of the offer were sufficiently clear; and
- Mrs Carlill’s use of the product amounted to valid consideration.
As a result, the company was required to pay the reward.
Even today, the case remains one of the clearest examples of how unilateral contracts operate.
Can the Offer Be Withdrawn?
A more difficult question arises once someone has already started performing the conditions of a unilateral contract.
Imagine a reward is offered for completing a task. What happens if the person offering the reward changes their mind halfway through, after someone has already begun performing?
The courts have generally taken the view that this would be unfair.
In Daulia Ltd v Four Millbank Nominees Ltd [1978] Ch 231, the court confirmed an important principle: while a unilateral offer can usually be withdrawn before performance begins, it becomes effectively irrevocable once the offeree starts carrying out the required act.
This principle was also discussed in Errington v Errington and Woods [1952] 1 KB 290, a case involving a family home rather than a commercial reward.
In Errington, a father purchased a house for his son and daughter-in-law. He told them that if they continued paying the mortgage instalments, the house would eventually belong to them once the mortgage was fully settled.
The couple began making the payments as agreed.
After the father passed away, his widow attempted to take possession of the property, arguing that the house now belonged to her.
The court, however, held that a unilateral contract existed between the father and the couple. Although the couple never expressly promised to continue paying the mortgage, their conduct in making the payments amounted to acceptance through performance.
Importantly, the court decided that the promise could not simply be revoked once the couple had already started fulfilling the conditions. As long as they continued making the payments, they were entitled to remain in the house.
The widow therefore failed in her claim for possession.
Key Takeaways
Although these cases are old, the principles remain highly relevant today. Businesses frequently make promotional promises to consumers, and individuals often make offers that depend on performance rather than mutual negotiation.
The law recognises that once someone has relied on such a promise and begun performing the required act, fairness requires a certain level of protection.
In simple terms, unilateral contracts remind us that in law, actions can sometimes speak louder than words.
