Reference no: EM132489196

Scenario:

Mrs Smoke read an advertisement in a magazine about a new health product (Carlill's Cough Ointment) that claimed to 'cure any type of cough within two weeks'. The instructions stated that 'users should apply the ointment three times daily to the throat region', and 'within two weeks the cough will completely disappear'. The advert also claimed it would fully refund the cost of the medicine as well as pay $500 to anyone who followed the instructions and continued to have a cough after a two-week period. The advert also stated that the company had deposited $10,000 with its bank, 'showing sincerity in the matter'. 

Mrs Smoke took the ointment three times daily for two weeks as per the instructions but continued to have a severe raspy cough. When she approached the Carlill Cough company to claim a refund and the $500, they refused to give her the money, claiming their advert was a mere puff and an invitation to treat, not an offer.

Which of the following are relevant RULE/S, defined and cited correctly, relating to the case above?

(may select more than one correct answer.)

Only select the RULES that are relevant to the stated HFS.

Question 2 options:

• In order to form a legally binding contract, there must be an offer and acceptance.
• In order to form a legally binding contract, there must be an invitation to treat.
• An advertisement is usually an invitation to treat (Pharmaceutical Society of Great Britain v Boots Cash Chemists (Southern) Ltd [1952] 2 QB 795). However, an advertisement may also amount to an offer to the world (a unilateral offer) if there is evidence in the advertisement of sincerity to perform a promise upon acceptance. If the evidence is present, that offeror will be bound by contract (Carlill v Carbolic Smoke Ball Co. [1893] 1 QB 256).
• An advertisement is an offer (Pharmaceutical Society of Great Britain v Boots Cash Chemists) which upon acceptance will form a contract between the advertiser and the offeror. When an offeree remains silent after an offer is made, there will be no acceptance (Felthouse v Bindley).
• Where there is a unilateral offer, provided the offeree responds to the offer in the same way (orally, or in writing), then the offeror will be bound in contract (Hyde v Wrench [1840] 49 ER 132).
• A legally binding contract requires consideration. Where there is no consideration provided by one party to the contract, the court will consider intention to create legal relations, because if there is intention then consideration does not matter (Anderson v Glass).