Esso Petroleum Co Ltd v Mardon [1976]

CITATION	[1976] EWCA CIV 4, [1976] QB 801, [1976] EWCA CIV 4
DATE OF JUDGEMENT	6 FEBRUARY 1976
APPELLANT	ESSO PETROLEUM COMPANY LIMITED
RESPONDENT	PHILIP LIONEL MARDON
COURT	COURT OF APPEAL
BENCH	LORD DENNING, LORD JUSTICE ORMROD, LORD JUSTICE SHAW

INTRODUCTION

The integrity of a tenancy agreement is essential to a peaceful partnership in the complex world of landlord-tenant relations. But when an inaccurate estimate throws off the careful equilibrium of contractual duties, the consequences can be severe and wide-ranging. This legal analysis examines the complex case of Esso Petroleum Co Ltd v Mardon, in which the plaintiff is caught up in a complex web of losses that were started by the defendant’s allegedly innocent estimate. This case highlights the critical role that precision and openness play in the preparation and implementation of rental agreements, as well as the ensuing legal consequences that occur when such approximated versions turn out to be gravely inaccurate.

FACTS OF THE CASE

• Esso Petroleum, the defendant, and the plaintiff, Mr. Mardon, entered into a tenancy agreement regarding the latter’s gas station.
• In the process of negotiating the agreement, “expert” advisers working for the defendant gave the gas station an estimate of sales that were significantly inflated because they were based on false information.
• Esso informed him that they had calculated that a gas station on Southport’s East Bank Street would handle 200,000 gallons annually.
• However, a decision about obtaining planning permission had been made by the local council, which meant that there would be no direct access from the main street and fewer patrons as a result.
• Despite being aware of the decision, Esso did not account for this in their estimate. After Mr. Mardon purchased the gas station, things did not go smoothly.
• Even after negotiating a reduced rent with Esso starting in 1964, Mr. Mardon was still losing money. After that, Esso filed a possession lawsuit against Mr. Mardon, who then filed a counterclaim under Hedley Byrne for damages alleging that Esso had breached a warranty or had been negligent.

ISSUES RAISED 

• whether the figure claimed to be an “estimate” rather than a statement of fact, raising the question of whether the plaintiff could pursue a claim for misrepresentation.
• whether the plaintiff could file a claim for negligence against the defendant if the defendant owed him any duty of care.
• What is the amount of damages that a negligent misstatement tort requires?

CONTENTIONS OF APPELLANT

• Mr. Mardon argues that there was a fundamental misrepresentation made during the tenancy agreement negotiation because the estimate given by the defendant’s advisers was false and inaccurate.
• Despite the fact that the amount was only given as an “estimate,” Mr. Mardon contends that he relied on it in good faith and that the defendant’s advisors had a duty to take reasonable precautions to provide accurate information.
• The plaintiff claims he suffered financial losses and damages because he was unable to run the gas station profitably as a result of the erroneous estimate.

CONTENTIONS OF RESPONDENT

• The sales figure given, according to Esso Petroleum, was clearly marked as a “estimate” and not a factual statement.
• Esso Petroleum acknowledges the use of experts, but maintains that since the estimate was given during a commercial negotiation, they did not owe Mr. Mardon a duty of care.

JUDGMENT

• In the end, the Court of Appeal decided in the plaintiff’s favor, emphasizing the defendant’s duty of care to guarantee that correct information was used in the estimation. The ruling stressed that there may still be a duty of care to make sure the information is not willfully wrong, even when it is given as an estimate.
• Esso was found accountable by the Court of Appeal for careless misrepresentation. At first, the trial judge had decided that the statement was negligent misrepresentation rather than a warranty.
• In an appeal, the Court of Appeal maintained this ruling, finding that Esso owed Mardon a duty of care when it made the representation and that it had violated this obligation by neglecting to provide a precise forecast.
• Mardon was given damages by the court to make up for the losses he suffered as a result of depending on Esso’s false sales projection.
• Esso was considered to have a unique relationship with Mardon because it was a big company with industry experience, and as such, it had a duty of care to be careful when expressing hopes for the gas station.
• The court also took into account the implications of depending on this kind of representation when making business decisions, emphasizing how crucial it is for parties in a position of knowledge to make accurate pre-contractual statements.
• The decision recognized the serious ramifications that these kinds of falsehoods can have on people who rely on them to make business decisions.

CONCLUSION

• A notable case in both contract and tort law is Esso Petroleum v. Mardon, which emphasizes the duty of care that emerges in pre-contractual discussions, particularly when one party is in a position of expertise.
• The concept of negligent misrepresentation was expanded in Esso Petroleum v. Mardon, highlighting the fact that businesses may be held accountable for making false claims to entice people to enter into agreements.
• This ruling recognizes the reliance that less informed parties have placed on companies’ pre-contractual statements and issues a warning to them to assure their accuracy.

ANALYSIS

• The Court of Appeal acknowledged Mr. Mardon’s right to damages based on either careless misstatement or breach of warranty in a collateral contract, even though it rejected the misrepresentation claim. 
• This case emphasizes how crucial it is to update estimates when conditions change and the legal options open to parties who incur financial losses as a result of false information supplied during contract negotiations.

REFERENCES 

https://en.wikipedia.org/wiki/Esso_Petroleum_Co_Ltd_v_Mardon

https://www.lawteacher.net/cases/esso-petroleum-v-mardon.php

DIYA BHASKAR, NEW LAW COLLEGE , BHARTIYA VIDYAPEETH UNIVERSITY, PUNE

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