Nature of a contract — practice questions

Type of contract: This is a unilateral contract — the company promised payment in return for performance (using the smoke ball), not a return promise (Carlill v Carbolic Smoke Ball Co).

Offer: The advert was a firm offer, not mere puff — the deposit of £1,000 at the bank showed serious intent.

Acceptance: Mrs Carlill accepted by performing the required acts (purchase + use). In a unilateral contract, there is no need to communicate acceptance beforehand.

Consideration: Her inconvenience/detriment (using the product as directed) and the company's commercial benefit (increased sales) constitute valid consideration.

Intention: The commercial context and the specific promise backed by a bank deposit created a strong presumption of an intention to create legal relations.

Conclusion: A valid unilateral contract was formed. Mrs Carlill fulfilled the conditions, so the Carbolic Smoke Ball Co. is legally bound to pay her the £100 reward.

1. Identify the Legal Principle: The aim of damages in contract law is to put the innocent party (Jamal) in the financial position they would have been in had the contract been properly performed (Robinson v Harman).

2. Calculate the Original Contractual Cost:

• The agreed price with Build-It Ltd was £40,000.

3. Calculate the Actual Final Cost to Jamal:

• Payment already made to Build-It Ltd: £20,000
• Cost to hire Finish-It Services to complete the work: £25,000
• Total cost incurred by Jamal = £20,000 + £25,000 = £45,000

4. Calculate the Financial Loss (Damages):

• This is the difference between the actual cost and the original contract price.
• Financial Loss = Actual Final Cost - Original Contract Price
• Calculation: £45,000 - £40,000 = £5,000

Conclusion: Jamal's expectation loss is £5,000. He can sue Build-It Ltd for breach of contract and claim this amount in damages. This sum represents the extra cost he incurred to get the loft conversion completed as originally agreed.