Esso Petroleum Co Ltd v Mardon [1976]

Esso Petroleum Co Ltd v Mardon [1976] EWCA Civ 4 is a notable English contract law case concerning misrepresentation. The Court of Appeal held that the divide between a statement of opinion and fact becomes more factual if one holds himself out as having expert knowledge.

Mr Mardon was purchasing a petrol station franchised by Esso Petroleum Co Ltd. Esso provided an estimate that the throughput of a petrol station in Southport would be 200,000 gallons a year. However, this estimate did not take into account a local council decision that affected the accessibility of the station, leading to fewer customers. Mr Mardon relied on this estimate when purchasing the petrol station, and business did not go as expected.

Lord Denning MR, in the Court of Appeal, held that there was a contractual warranty, and damages were not limited. He considered Esso's estimate to be a forecast made by a party with special knowledge and skill. Even though it may not have been a guarantee, Lord Denning interpreted it as a warranty that the forecast was sound and reliable, made with reasonable care and skill. He explained that if a person with special knowledge makes a forecast, intending the other party to act upon it, and they do act upon it, it can be seen as a warranty.

Lord Denning distinguished the case from Bisset v Wilkinson [1927], stating that in Esso v Mardon, Esso had special knowledge that Mr Mardon did not possess. The damages awarded were for the loss suffered, not the loss of a bargain. Lord Denning also argued that even without a warranty, there would still be negligent misrepresentation liability in tort. He rejected the notion that when a contract results, there is no tort liability, emphasising the duty to negotiate with care when a party with special knowledge makes a representation with the intention of inducing another to enter into a contract.

In summary, the case established that a statement of opinion can be treated as a warranty if made by a party with special knowledge and skill, and damages for negligent misstatement can be awarded in both contract and tort.
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