4.

Formation of unilateral contracts

JC Smith's The Law of Contract (2nd edn)

Paul S. Davies

Publisher: Oxford University Press Print Publication Date: Apr 2018

Print ISBN-13: 9780198807810 Published online: Sep 2018
DOI: 10.1093/he/
9780198807810.001.0001

4. Formation of unilateral contracts  

Chapter: (p. 41) 4. Formation of unilateral contracts

Author(s): Paul S. Davies

DOI: 10.1093/he/9780198807810.003.0004

Key Points

• A unilateral contract arises where O promises A something if A

does a particular act which is not the making of a promise to O.
• A unilateral contract only imposes obligations on O. A is not
obliged to do anything.
• A unilateral offer can be accepted by A regardless of A’s motive
for doing the required act. However, A must know of the offer in
order for a contract to be formed.
• O may not be able to revoke the offer if A has embarked upon
performance. This will depend upon whether or not O has made an
implied promise not to revoke the offer.

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4. Formation of unilateral contracts

O makes an offer of a unilateral contract to A when he promises A that he

will do something (or that something is so) if A will do a specified act,
other than the making of a promise to O; A may then accept the offer by
doing that act. A standard example arises when O promises A £100 if A
will walk to York. The promise becomes binding only when A reaches
York. If A falls and breaks his leg five yards from the city boundary and
completes the journey in an ambulance, he is entitled to nothing. Nor has
A committed a breach of contract. He did not promise to do anything. He
was entirely free not to start on the walk or to abandon it at any time.

When deciding whether an offer is an offer of a bilateral contract or of a

unilateral contract, the usual principles of interpretation must be
applied.1 Would a reasonable person in the position of A think he was
being asked to promise to do the act, or being asked simply to go ahead
and do it? For example, is A being asked to promise to walk to York (which
could lead to a bilateral contract) or is A being asked simply to walk to
York (which could lead to a unilateral contract)? If the latter, A cannot
turn the offer of a unilateral contract into a bilateral contract by
promising to walk to York. A’s promise would be irrelevant. It would not
be an acceptance. It is for O, and him alone, to prescribe the mode of
acceptance. O is therefore free to prescribe that A must actually walk to
York (rather than promise to walk to York) in order to accept the offer. Of
course, A is free just to ignore the offer if he considers it unattractive.

The classic case on unilateral contracts is Carlill v Carbolic Smoke Ball

Co.2 The company advertised that it would pay a £100 ‘reward’ to any
person who caught influenza after having used the smoke ball three times
daily for two weeks, according to the printed directions supplied with
each smoke ball. Mrs Carlill used the ball as prescribed and then caught
influenza. (p. 42) It was held by the Court of Appeal that she was entitled
to the reward. The act requested, and therefore the consideration
supplied by her, was the use of the ball for two weeks. As soon as she had
completed that act she had a contract with the company. Moreover, it was
clear that the company had made an offer in their advertisement, rather
than simply an invitation to treat,3 and intended to be taken seriously.
This was because the company explicitly stated that ‘£1000 is deposited
with the Alliance Bank Regent Street, shewing our sincerity in the
matter’. Thus, the reasonable reader would have understood the company
to be making an offer of a binding unilateral contract.

It should be emphasised that the company was not obliged to do anything

until Mrs Carlill caught flu. However, catching flu was a condition of the
company’s liability, not part of the consideration—clearly, catching flu was
not something which the company asked people to do. So this was rather
like a contract of insurance. The ‘premium’ was using the smoke ball
three times daily for two weeks. Catching flu—far from being something
that the offeree was asked to do—was ‘the accident’ in the event of which
compensation was payable. The terms of the offer made it clear that the
consideration to be provided by Mrs Carlill was the use of the smoke ball,
not simply the purchase of it. So it made no difference whether Mrs
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4. Formation of unilateral contracts

Carlill had bought the ball or been given it as a present, or even whether
she had borrowed it. Of course, the company was really interested in the
sales of the smoke balls, but the balls could not be used unless they were
first bought by someone.

The traditional examples of unilateral contracts are of a trivial domestic

nature—walking to York, using the smoke ball, and so on—but the
concept plays a large and useful part in commercial transactions. If a
shipper of goods says to a firm of stevedores, ‘If you will load my goods
on to the ship, I promise you that your liability shall be limited to £500’,
and, in consequence, the stevedores do load the goods on to the ship, it is
clear that there is a unilateral contract and that the stevedores’ liability is
accordingly limited.4

1 Motive and ignorance

Where A is aware of the offer and does the act requested, a

contract is formed. This will be the case even if his motive in doing the
act may have been something quite different from obtaining the
consideration offered by O. In Williams v Carwardine,5 a woman knew (or
at least it was assumed that she knew) of the existence of an offer of a
reward for information leading to the conviction of a murderer. The
woman provided the relevant information, but she only did so because
she thought she was going to die and wanted to ease her conscience. She
did not give the information in order to receive the reward. Nevertheless,
it was held that she was entitled to the reward. Motive is irrelevant when
considering whether or not a contract has been formed. Mrs Carlill would
have been no less entitled to the reward if it had been proved that her
sole reason for using the ball was to avoid catching flu.

However, motive should be distinguished from ignorance. Where A does

the required act in ignorance of the offer, it seems that there is no
contract. In an Australian case,6 it was held that where A had once known
of the offer but had forgotten its existence when he did the act (p. 43)
requested, there was no contract. The court said that a contract could not
be made in ignorance of the offer; and forgetting about the offer was
apparently the same as never even hearing of it.

This analysis of the Australian courts might be criticised. There may be

arguments of public policy in support of the view that, where an offer is
made to the whole world, anyone who does the act requested should be
entitled to recover the promised reward, whether or not that particular
person has heard of the offer. For example, consider offers of rewards for
information leading to the apprehension of criminals. The public-spirited
citizen who gives the information as soon as it comes to his attention may
be at a disadvantage compared to the selfish person who waits to see if a
reward is offered. If knowledge of a reward is required, it would seem
that only the selfish person, and not the public-spirited citizen, has a
contractual right to claim the reward offered. At first glance, this might
seem inappropriate. But, on balance, it is suggested that the law is

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4. Formation of unilateral contracts

satisfactory. It must be remembered that the offeror will usually have

made the offer in order to induce people to provide information, and not
simply out of a desire to reward a worthy citizen. Since the offeror should
only have a liability imposed on him if he can properly be said to have
undertaken it, the better view is that the offeror has not undertaken to
reward those who provide information in ignorance of his offer.
Admittedly, the law treats the person who knows of the offer as an
acceptor even though he is not in fact induced by the offer because his
motive is something else, but that is because of the more general
principle that motive is normally irrelevant in the law of contract. It
would seem wrong to go further and say that even ignorance of the offer
made should be irrelevant.

Knowledge of the offer is therefore required. But when must the offeree
know of the offer? Gibbons v Proctor7 suggests that it is sufficient that the
offeree knows at the moment before the act of acceptance is complete. O
had offered a reward in return for information. A was a policeman who
was unaware of the offer, but gave the relevant information to a fellow
officer, B, who gave it to a superior, C, who gave it to O. When C gave the
information to O, A knew of the offer. It was held that that was sufficient
for there to be a contract between O and A. Even though A did not know
of the offer when he passed the information on, acceptance of the offer
was only complete when the information was communicated to O, and A
did know by that point. It would follow that if A posted a letter to O
containing information, being unaware that O had offered a reward for
that information, A would be entitled to the reward if he learned of the
offer before the letter arrived. Similarly, if Mrs Carlill had learned of the
offer only when she had used the smoke ball three times daily for 13 days,
there would still be a binding contract between her and the Carbolic
Smoke Ball Company when she continued to use the smoke ball on the
fourteenth day and then fell ill. Indeed, the same result would presumably
follow had Mrs Carlill learned of the offer after the fourteenth day but
before she caught flu, provided she was continuing to use the smoke ball
in accordance with the directions.

2 Revocation of the offer of a unilateral contract

It is clear that O’s offer becomes a binding contract only when

A completely performs the act requested. At first sight, it therefore
appears that O may revoke his offer at any moment before the act is
complete. Clearly, A is free to abandon performance at any time and so it
(p. 44) has been argued that O should be equally free to call the whole

thing off. This may, however, seem very unfair where A has expended
time, money, and effort in reliance on the promise. Does the law really
allow O to drive by in his Rolls-Royce, as A toils along the last hundred
yards into York, and call out, ‘Offer revoked’? Could the Carbolic Smoke
Ball Company really have revoked its offer when Mrs Carlill was
embarking on the fourteenth day of sniffing?

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4. Formation of unilateral contracts

The answer to these questions is not altogether straightforward. But it

should be noted at the outset that if A has conferred a benefit on O before
O revokes the offer, then A may recover the value of that benefit in an
action in unjust enrichment.8 So, if the request was to dig the whole of O’s
garden and O, without justification, told A to get out when the job was
nearly done, A would be entitled to the value to O of the service rendered
—which might be more or less than the reward offered. But this would be
of no help in the walking to York or the Carbolic Smoke Ball case because
no discernible benefit has been conferred on the offeror.

The most common, and most attractive, solution that has been proposed
is that O is unable to revoke his offer after A has begun performance if O
has also made a second, implied promise that O will not revoke the offer if
A embarks upon performance. So, when O says to A, ‘I will pay you £100 if
you walk to York’, he might be considered to be making two promises.
First, the express promise to pay £100 when the walk is complete (and
not before). Secondly, an implied ‘collateral’ promise not to revoke his
offer if A sets out on the walk. By making a start, A accepts the second
offer. He supplies consideration for the implied promise by starting to
walk.

The courts will, however, imply a promise only when it is necessary to do

so to give ‘business efficacy’ to the transaction (in other words, to make
the contract work) or because the parties, as reasonable persons, must
have intended such a promise (in other words, it was something that went
without saying).9 In the examples discussed above, such a promise might
well be implied—what reasonable person would expect to embark, or
expect another to embark, on some arduous endeavour to earn a reward
on the basis that the offeror could, on a whim, call the whole thing off?
But such a promise will not always be implied in the case of offers of
unilateral contracts. In Luxor (Eastbourne) Ltd v Cooper,10 O offered A
£10,000 if A introduced to O a party who bought O’s two cinemas. A
introduced X to O. X agreed, subject to contract, to buy the cinemas.
However, O ultimately declined to proceed with the sale, despite the fact
that X remained ready and willing to buy. A argued that the consideration
for O’s promise was supplied when A introduced X to O, and that it
therefore followed that the contract between O and A was made at that
point. Although the sale of the cinemas was a condition of recovery of the
commission (like the catching of flu in Carlill), this event was outside the
control of A, and O had prevented that event from happening.
Nevertheless, the courts rejected A’s arguments. A’s action for the
commission failed because the commission was payable only on the
completion of the sale of the cinemas, and this had never occurred.
Furthermore, A’s action for the breach of an alleged implied promise by O
to do nothing to prevent the completion of the sale also failed. The House
of Lords held that there was no room for the implication of such a
promise. It was not necessary to imply such a promise to give business
efficacy to the contract: A was taking a risk in the hope of substantial
(p. 45) remuneration (the equivalent, the House of Lords observed, of the

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4. Formation of unilateral contracts

Lord Chancellor’s salary for a year) for a comparatively small exertion

(eight or nine days’ work). The prospective bargain was a very reasonable
one without the implication of any term that O would do nothing to
prevent the completion of the sale. A reasonable person may well have
been glad to take the chance of obtaining such a lucrative reward without
any such implied term.

However, in many cases it will be necessary to imply a term that the offer
will not be revoked once the other party begins to perform. The leading
example of this is Errington v Errington.11 A father bought a house in his
own name for his son and daughter-in-law to live in. He paid part of the
price in cash and borrowed the rest from a building society. He left the
couple to pay the instalments and told them that the house would be
theirs when all the instalments were paid. Denning LJ treated this as an
offer of a unilateral contract, namely: ‘If you will pay off the instalments, I
will convey the house to you.’ The couple were not bound to pay the
instalments, since a unilateral contract was at issue. However, if the
couple did pay all the instalments, they would be entitled to the house.
The couple moved into the house and began to pay the instalments, but
before the couple had paid all the instalments the father died and his
widow claimed possession of the house. The Court of Appeal dismissed
her claim. Denning LJ held that there was an implied promise by the
father not to revoke his offer once the couple embarked upon
performance by moving into the house and beginning to pay the
instalments. The widow, as the personal representative of her late
husband, could be in no better position than her husband. As a result, the
couple were entitled to remain in possession. An arrangement which
would have allowed the father to turn the couple out when they had paid
almost all the instalments on his house was (it may well be thought) one
which no reasonable couple would expect, or be expected, to agree to.

If this is the right approach, there is no universal rule as to the

revocability of offers of unilateral contracts. Everything depends on the
circumstances of the particular case. This has the disadvantage of
uncertainty but the corresponding advantage of flexibility. It enables the
court to reach a just solution when a rigid rule—either that such offers
are always revocable or that they are always irrevocable—would not do
so. This approach is consistent with the reasoning of Denning LJ in
Errington v Errington, and has been supported, albeit obiter, by Goff LJ
in Daulia v Four Millbank Nominees Ltd12 and Longmore LJ in Soulsbury v
Soulsbury.13 However, it is worth noting that Chitty on Contracts takes a
different view,14 and suggests that A accepts O’s offer by beginning to
perform the contract, even though A cannot enforce O’s promise before
satisfying the stipulated conditions. This explanation was favoured by
Waller LJ, dissenting, in Schweppe v Harper.15 More recently, in Wells v
Devani, Lewison LJ also appeared to support the position taken by
Chitty,16 whereas Arden LJ, dissenting, left the matter open.17 Yet it
seems artificial to say that A has accepted O’s offer to pay the price
simply by beginning to perform, particularly since A cannot sue O for the

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4. Formation of unilateral contracts

price at that point, and it may be difficult to judge what constitutes

sufficiently unequivocal conduct for acceptance. The flexibility afforded
by an implied, collateral obligation on O not to revoke the offer once A
begins to perform should be preferred.

But what is A’s remedy if O does revoke the offer to pay £100 after
(p. 46)

A has started to walk to York? A should generally be able to treat the

revocation as inoperative and proceed to earn the £100.18 But if A
requires the cooperation of a third party in order to fulfil all the
conditions required for payment by O, then A may sue for damages for
loss of a chance to earn the agreed sum.19

3 Communicating acceptance of offers of unilateral

contracts

Whether communication of an acceptance is required depends on the

terms of the offer. Communication is for the benefit of the offeror, so he
can dispense with it if he wishes.20 In the case of many offers of unilateral
contracts, it is obvious from the nature of the offer that communication is
not required. No reader of the Carbolic Smoke Ball Company’s
advertisement would have supposed that he was expected to write and
tell the company that he was using the ball and accepting its offer of a
reward in the event of his catching flu. The same will generally be true of
offers made to the public. However, in the case of offers of rewards for
information, the act of acceptance is obviously the communication of the
information, albeit not necessarily to the offeror: communication to the
police, for example, might constitute the acceptance. As always, the test
must be: how would the reasonable reader of the offer understand it?

Questions

1. On 1 April, Jack placed an advertisement in a national English

newspaper which states that Jack will pay £50,000 to anybody
who cycles from London to Zagreb in 30 days, leaving on 1 June.
Many competitors set off on 1 June. Only Curtis, David, Edgar,
and Tony reached Zagreb within 30 days.
On 10 May, Jack heard that Curtis—a famous cyclist—intended to
take part in the challenge. Jack posted a letter to Curtis to
inform him that he would not be eligible for the prize, but this
letter was lost in the post and never read by Curtis. After the
start of the race, Jack’s financial situation took a turn for the
worse, and on 15 June, Jack placed another advertisement in the
same newspaper to withdraw his offer of a £50,000 prize. David
only learned of this once he had reached Zagreb. Edgar was told
of Jack’s second advertisement by a journalist on 16 June, but
Edgar did not believe the journalist. Tony only found out about
both advertisements on arriving in Zagreb. Tony had decided to

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4. Formation of unilateral contracts

cycle from London to Zagreb in order to keep his friend, Edgar,

company and to see if he could rise to the physical challenge.
Advise Jack. Would your answer be different if Jack’s newspaper
announcement had appeared on the morning before the start of
the race?
(p. 47) 2. When is an offeror prevented from revoking an offer of

a unilateral contract? Is the law satisfactory?

For guidance on how to answer these questions visit the Online

resources at www.oup.com/uk/davies2e/

Here you will also find links to the key cases in this chapter, multiple
choice questions with instant feedback, and example essays from
students which have been ‘marked’ by the author.

Further Reading
I Wormser, ‘The True Conception of Unilateral Contract’ (1916) 26 Yale LJ
136.

Discusses the example of ‘$100 to walk across the Brooklyn Bridge’ and
offers the view (contrary to that given here) that the offeror should be
free to revoke his offer at any point up until the walk has been completed.

A Hudson, ‘Gibbons v Proctor Revisited’ (1968) 84 LQR 503.

Considers the troublesome case of Gibbons v Proctor and whether a

contract can be concluded in ignorance of an offer.

AWB Simpson, ‘Quackery and Contract Law: Carlill v. Carbolic Smoke Ball
Company (1893)’ in AWB Simpson, Leading Cases in the Common Law
(Clarendon Press, 1996).

Analyses the circumstances and context of Carlill v Carbolic Smoke Ball

Co and how it came to be a leading case in the common law.

D Clark, ‘Revocation and the Unilateral Contract: A Reappraisal’ (2000)

NZLR 17.

Useful discussion of the advantages and disadvantages of allowing

revocability mid-performance, as well as what the remedy might be for
purported but wrongful revocation.

Notes:
1 See Chapter 12.

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4. Formation of unilateral contracts

2 [1893] 1 QB 256, CA.

3 See Chapter 3, Section 2.

4 See Chapter 10, Section 5.

5 (1833) 5 C & P 566.

6 R v Clarke (1927) 40 CLR 227.

7 (1891) 55 JP 616.

8Morrison Shipping Co Ltd (in liquidation) v R (1925) 20 Lloyd’s List Law

Reports 283 (Viscount Cave LC); see Chapter 29, Section 3.

9 See Chapter 13.

10 [1941] AC 108.

11 [1952] 1 KB 290.

12 [1978] Ch 231.

13 [2007] EWCA Civ 969, [2008] Fam 1.

14H Beale (ed), Chitty on Contracts (31st edn, Sweet & Maxwell, 2012)
para 2-079.

15 [2008] EWCA Civ 442.

16 Wells v Devani [2016] EWCA Civ 1106, [2017] 2 WLR 1391 [37].

17 Ibid, [100]–[101].

18 Mountford v Scott [1975] 2 WLR 114, CA.

19Schweppe v Harper [2008] EWCA Civ 442 [51]–[54] (Waller LJ,

dissenting on a different issue).

20Attrill v Dresdner Kleinwort Ltd [2013] EWCA Civ 394, [2013] 3 All ER
607 [98].

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