Understanding Of Contract Law

Problem

An advertisement in the Herald Sun (a newspaper) states that: a new health drink can protect people from being infected with mumps and the manufacturer will pay $10,000 to anyone who is diagnosed with mumps provided they drink a bottle each day for at least one year. Trevor Brown buys the drink in response to the advertisement and drinks a bottle every day. Two years later, he catches a severe case of mumps and is very ill for two weeks. Is the manufacturer legally obliged to pay $10,000 to Trevor? Give reasons for your answer.

Issue

The main issue that arose as per the facts of the case is that whether there is a valid contract amid the manufacturer and Trevor. If yes, then whether the manufacturer is liable to pay $10,000 to Trevor.

Relevant law

In Australia, in order to formulate a valid contract, there must be the presence of offer, acceptance, intention, capacity and consideration.

An offer is the intention of the offeror which is communicated to the offeree to undertake a task which when confirmed by the offeree results in acceptance. An offer and acceptance are valid when the same is communicated to the parties. An offer once accepted results in a binding agreement. However, not every communication of intention is an offer, for instance, communication of intention through advertisements, auctions, tenders are called invitation to treats because in such cases offers are intended to receive from the general public. 

In the invitation, offers are received which when confirmed by the inviter results in a binding contract. But many times invitations are made in such a manner that they act like offers and are called unilateral offers. In unilateral offers, the offeror lays down the terms of the offer and whosoever comply with such terms is considered to have accepted the offer. There is no requirement of communication of acceptance and fulfilment of terms are in itself are deem acceptance. The law behind the unilateral offer is established in  Carlill v Carbolic Smoke Ball Co.

In Carlill case, an advertisement is displayed by the company and it was contended that any person who complies with the terms will not be contracted with influenza. If a person still suffers from the disease then the company will pay 100 pounds to such person and authenticate the intention the amount is deposited in Bank. Mrs Carlill acted in the advertisement but still suffers from the disease. The company was held liable and compensation was awarded to Mrs Carlill. The main reasons which lead the judgement in favour of Mrs Carlill are:

1. That the advertisement by the company is a unilateral contract where an offer is made by the company through advertisement and the same was accepted by the plaintiff by acting on the advertisement as directed.
2. The offer made by the company is valid because an offer made to the world at large is valid. Also, the offer made is not a puff as the language of the advertisement is crystal clear and an amount is deposited in the bank to authenticate the intention of the company. 
3.  The action of the plaintiff is considered as deem acceptance and is an exception to the basic rule that every acceptance must be communicated in order to make it valid. This may happen when the offeror himself specifies the mode of acceptance and if the offeror desires that compilation of offer terms must be considered as acceptance then there is no obligation on the offeree to communicate the acutance. 
4. There is a valid consideration to support the contract, that is, the problems suffered by the plaintiff by complying with the terms of the offer is a sufficient consideration in the eyes of law. 

Thus, unilateral offers may result in the binding contract provided the other elements of the contract that is intention and capacity must be present.