• In the case of Esso v Mardon [1976] QB 801, the local authority’s decision to relocate the pumps of the petrol station was not disclosed to the purchaser therefore constituting as a negligent misstatement.
  • This contract law case was related to negligent representations.

Facts of the Case

  • C represented a petol station to D as a station which fills 200,000 gallons annually. D questioned the figure since the local authority determined that the petrol pumps would be at the back of the site accessed by the side roads rather than the main road.
  • D lost money since sales did not surpass the thoroughput of 85,000 gallons and could not repay C’s loan. The petrol station was rendered inefficient. C sued to reclaim the site where the petrol station was built.
  • C claimed the figure of 200,000 gallons was simply a statement of opinion. The lower courts held otherwise since D relied on the representation as a statement of fact.

Issues

  • Does the company owe the tenant a duty of care?
  • Is there a special relationship between the parties?
  • Has the duty of care been breached?
  • Is the statement made a warranty or a condition?

Held by Court of Appeal

  • Appeal allowed but cross appeal dismissed – Esso breached duty of care as the approximate figure of petrol sales constitutes as a collateral warranty that C breached.

Lawson J

Warranty or condition?

  • This case heavily referred to Bisset v Wilkinson [1927] AC 177 because of the similar question as to whether there is a warranty or a statement made. In this case however C has a great degree of expertise unlike D.
  • It can also be inferred that predicting a future figure is not a false statement with damages involved.

Lord Denning

Collateral warranty

  • The given number was made by C with reasonable care. C then declared this to D.
  • C is therefore liable for the consequences of this huge disparity in numbers.

Negligent misrepresentation

  • Someone who induces the other party into an agreement has a duty to use reasonable care to see if the representation is a misstatement or not.
  • The Hedley Byrne & Co Ltd v Heller & Partners Ltd [1964] AC 465 principle applied because the actual thoroughput was drastically different to the initial prediction. The negligent misrepresentation was directly foreseeable for a claim in damages.
  • In other words, this error was fatal to D because they did not reach 200,000 gallons as expected. Therefore it was negligence and misrepresentation.  
  • “If he negligently gives unsound advice or misleading information or expresses an erroneous opinion, and thereby induces the other side into a contract with him, he is liable”.

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