Contract Law

Esso Petroleum Co. Ltd. v. Mardon

[1976] QB 801

Facts

Esso developed a petrol station and invited Mardon to become its tenant.
An experienced Esso representative estimated that the station would sell approximately 200,000 gallons of petrol annually.
Before the lease began, the local planning authority required changes that removed direct access from the main road.
This substantially reduced the station’s likely traffic and commercial potential.
Esso did not revise the earlier estimate to reflect the changed access.
Mardon relied on the figure, took the tenancy and operated the station.
Actual sales were far below the estimate, and he suffered severe financial losses.
Esso later sought possession and unpaid rent.
Mardon counterclaimed for misrepresentation and breach of warranty.

Whether Esso’s estimate was merely a non-binding opinion.
Whether a forecast made by a party possessing special skill and knowledge may amount to a contractual warranty or negligent misrepresentation.

A statement of opinion is not ordinarily treated as a statement of fact.
However, where one party:
holds itself out as possessing special expertise;
has access to information unavailable to the other;
makes an estimate intending reliance, the statement may imply that it has been prepared with reasonable skill and care.
Such a statement may constitute:
a contractual warranty; or
a negligent misstatement giving rise to damages.
The expert must revise or qualify an estimate where known circumstances materially change.

Esso had extensive experience in forecasting petrol-station throughput.
Mardon lacked comparable expertise and reasonably relied on Esso’s assessment.
The figure was not presented as casual sales talk.
It was a serious commercial estimate used to persuade him to enter the tenancy.
Although forecasts cannot guarantee future sales, Esso was obliged to prepare the estimate on a reasonable basis.
The loss of direct road access fundamentally affected the location’s potential.
Esso knew of that change but continued to rely on the original figure.
The estimate was therefore no longer reasonably supportable.
The Court distinguished Bisset v. Wilkinson, where the parties were equally capable of assessing the land.
Here, there was a clear inequality of expertise.
Esso’s statement amounted to a warranty that the forecast had been made with reasonable care.
Alternatively, Esso owed a duty of care in making the representation.
Mardon was entitled to the losses caused by entering and operating the business in reliance on the negligent forecast, rather than profit he would have made had 200,000 gallons actually been sold.

The Court of Appeal held Esso liable for breach of warranty and negligent misrepresentation.
Use this case for: an expert forecast may be actionable where it is presented for reliance without reasonable care.