## Facts

- An oil company developed a petrol station site and prepared an expert forecast that annual throughput would reach 200,000 gallons by the third year.
- After planning restrictions required the station to be reoriented with less advantageous access and visibility, the company did not revise its forecast.
- The forecast was presented to a prospective tenant-operator during negotiations as the basis for rent, and the tenant relied on the company’s superior experience and data.
- The tenant entered a three-year tenancy at rents set on the assumption the station would achieve the forecasted throughput.
- Actual sales were far below forecast, the tenant incurred losses, and despite later rent reduction negotiations, the business remained unprofitable and the tenant could not meet financial obligations.
- The company sued for possession and monies due; the tenant counterclaimed alleging (i) breach of warranty regarding the forecast, or (ii) negligent misstatement inducing the tenancy.

## Issues

1. Whether the throughput forecast was merely an opinion or constituted a collateral contractual warranty that it was prepared with reasonable care and skill.
2. Whether, independent of contract, the company owed a duty of care under negligent misstatement principles when supplying an expert forecast intended to be relied upon in entering the tenancy.
3. What measure and temporal scope of damages applied, including whether damages were limited to losses before the tenant renegotiated rent and continued operating.

## Decision

- The Court of Appeal allowed the tenant’s appeal and held the company liable in damages.
- The forecast was not a guarantee of actual throughput, but it operated as a collateral warranty that the forecast was made with reasonable care and skill given the company’s special expertise and the reliance invited.
- Alternatively, the company was liable in tort for negligent misstatement because it supplied an expert forecast in circumstances creating a duty of care, and it negligently failed to revise the estimate after material site changes.
- Damages were not confined to an early period; the tenant could recover losses flowing from being induced to enter the tenancy on the basis of the unsound forecast.

## Legal Principles

- An estimate or forecast may be actionable where an expert party, intending reliance, represents that it has exercised reasonable care and skill in forming the forecast; this can amount to a collateral warranty of due care rather than a warranty of the predicted outcome.
- A duty of care for negligent misstatement arises where a party with special knowledge provides information or advice to be relied upon in contracting, and the recipient reasonably relies on that expertise.
- Failure to update or qualify an expert forecast after material changes can constitute negligence where reliance is foreseeable and intended.
- Where liability is established for either collateral warranty of due care or negligent misstatement inducing entry into a contract, damages may cover losses caused by entering and performing the contract that would not have been undertaken absent the misstatement.

## Conclusion

The court held that an expert throughput forecast given to induce a tenancy was actionable as a collateral warranty that it was prepared with reasonable care and skill and, in any event, as a negligent misstatement; damages extended to the tenant’s losses caused by entering the tenancy in reliance on the unsound forecast.


Esso Petroleum Co. Ltd. v. Mardon, [1976] Q.B. 801 (C.A. 1976)