Esso Petroleum Co Ltd v Mardon [1976] QB 801

Facts

• Esso Petroleum provided Mr. Mardon with an estimate of the potential sales volume for a petrol station as part of negotiations for a tenancy agreement.
• The sales estimate was produced by Esso’s expert advisors but was based on inaccurate information, resulting in an inflated projection.
• The rental value in the tenancy agreement was calculated using this overstated sales forecast.
• Mr. Mardon relied on Esso’s specialist assessment and estimate, but actual sales were much lower than predicted, rendering profitable operation of the station impossible.
• Mr. Mardon suffered financial loss and brought a legal action claiming that Esso was liable for the misrepresentation.

Issues

1. Whether Esso’s forecast, given as an estimate rather than a statement of fact, could ground a claim for misrepresentation or negligent misstatement.
2. Whether Esso, given its specialist knowledge and the nature of the negotiation, owed a duty of care to Mr. Mardon in providing the sales estimate.
3. Whether Esso’s breach of any such duty rendered it liable for Mr. Mardon’s resulting financial losses.

Decision

• The court found that Esso’s sales forecast, though described as an estimate, could give rise to liability if made negligently by an expert intended to induce reliance.
• It was held that Esso owed a duty of care to Mr. Mardon when providing projections, given their specialist knowledge and Mr. Mardon's dependency on their assessment.
• The standard applied was whether Esso exercised reasonable care and skill in preparing the estimate.
• The court concluded that Esso breached this duty of care, and that Mr. Mardon was entitled to recover damages for the losses suffered as a result.
• The decision relied in part on the principles from Hedley Byrne v Heller regarding negligent misstatement, and distinguished the facts from Bisset v Wilkinson, as here the representor was an expert.

Legal Principles

• A party with specialist knowledge who makes a representation during contractual negotiations may be liable for negligent misstatement if the recipient relies upon it and suffers loss.
• The duty of care, established in Hedley Byrne v Heller, applies where an expert undertakes to provide information or advice intended for reliance.
• Estimates or opinions provided by experts can found liability if carelessly made, contrasting with statements of opinion by non-experts (as in Bisset v Wilkinson).
• The existence and breach of such a duty require evidence of reliance, causation, and financial loss.

Conclusion

Esso Petroleum Co Ltd v Mardon affirmed that an expert’s negligent estimate, intended to be relied upon in contractual negotiations, can give rise to a duty of care and liability for resulting losses, clarifying and reinforcing the scope of negligent misstatement and the obligations of professional advisors.