Esso Petroleum Ltd v Commissioners of Customs and Excise


[1976] 1 All ER 117

House of Lords


In 1970 Esso launched a World Cup promotion scheme whereby motorists could collect one World Cup coin for every four gallons of petrol that they purchased. The coins were advertised as 'Going free, at your Esso Action Station now', and: 'We are giving you a coin with every four gallons of Esso petrol you buy.' The Customs and Excise Commissioners claimed that the coins were subject to purchase tax since they had been 'produced in quantity for general sale' within the meaning of the Purchase Tax Act 1963.


One of the issues before the court was whether Esso had intended to create legal relations with the motorists.


Viscount Dilhorne


Was there any intention on the part of the garage proprietor and also on the part of the customer who bought four gallons, or multiples of that quantity, of petrol to enter into a legally binding contract in relation to a coin or coins?


The facts of [Rose and Frank Co v J R Crompton & Bros Ltd.]were very different from those of this. In that case there was an agreement dealing with business matters. In this case the question has to be considered whether there was any agreement as to a coin or coins between the garage proprietor and the customers and also, if there was, was it intended on both sides to be one having legal relations? If a coin was just to be given to the motorist, it would not be necessary for there to have been any agreement between him and the garage proprietor with regard to it...


True it is that Esso are engaged in business. True it is that they hope to promote the sale of their petrol, but it does not seem to me necessarily to follow or to be inferred that there was any intention on their part that their dealers should enter into legally binding contracts with regard to the coins; or any intention on the part of the dealers to enter into any such contract or any intention on the part of the purchaser of four gallons of petrol to do so.


If on the facts of this case the conclusion is reached that there was any such intention on the part of the customer, of the dealer and of Esso, it would seem to exclude the possibility of any dealer ever making a free gift to any of his customers, however negligible its value, to promote his sales.


If what was described as being a gift which would be given if something was purchased was something of value to the purchaser, then it could readily be inferred that there was a common intention to enter into legal relations. But here, whatever the cost of production, it is clear that the coins were of little intrinsic value.


I do not consider that the offer of a gift of a free coin is properly to be regarded as a business matter in the sense in which that word was used by Scrutton LJ in the passage cited above [in Rose and Frank Co v J R Crompton & Bros Ltd]. Nor do I think that such an offer can be comprehended within the 'business relations' which were in the Skyways case, as Megaw LJ said, 'the subject matter of the agreement'. I see no reason to imply any intention to enter into contractual relations from the statements on the posters that a coin would be given if four gallons of petrol were bought.


Nor do I see any reason to impute to every motorist who went to a garage where the posters were displayed to buy four gallons of petrol any intention to enter into a legally binding contract for the supply to him of a coin. On the acceptance of his offer to purchaser four gallons there was no doubt a legally binding contract for the supply to him of that quantity of petrol, but I see again no reason to conclude that because such an offer was made by him, it must be held that, as the posters were displayed, his offer included an offer to take a coin. The gift of a coin might lead to a motorist returning to the garage to obtain another one, but I think the facts in this case negative any contractual intention on his part and on the part of the dealer as to the coin and suffice to rebut any presumption there may be to the contrary.


... [T]here was no legally binding contract as to the coins...


Lord Russell of Killowen agreed with Viscount Dilhorne on this point.


Lord Simon of Glaisdale


I am, however, my Lords, not prepared to accept that the promotion material put out by Esso was not envisaged by them as creating legal relations between the garage proprietors who adopted it and the motorists who yielded to its blandishments. In the first place, Esso and the garage proprietors put the material out for their commercial advantage, and designed it to attract the custom of motorists. The whole transaction took place in a setting of business relations. In the second place, it seems to me in general undesirable to allow a commercial promoter to claim that what he has done is a mere puff, not intended to create legal relations (cf Carlill v Carbolic Smoke Ball Co. The coins may have been themselves of little intrinsic value; but all the evidence suggests that Esso contemplated that they would be attractive to motorists and that there would be a large commercial advantage to themselves from the scheme, an advantage in which the garage proprietors also would share. Thirdly, I think that authority [Rose and Frank Co v J R Crompton & Bros Ltd and Edwards v Skyways Ltd.] supports the view that legal relations were envisaged.


I respectfully agree [with Rose and Frank Co v J R Crompton & Bros Ltd and Edwards v Skyways Ltd]. And I would venture to add that it begs the question to assert that no motorist who bought petrol in consequence of seeing the promotion material prominently displayed in the garage forecourt would be likely to bring an action in the county court if he were refused a coin. He might be a suburb Hampden who was not prepared to forego what he conceived to be his rights or to allow a tradesman to go back on his word.


Believing as I do that Esso envisaged a bargain of some sort between the garage proprietor and the motorist, I must try to analyse the transaction. The analysis that most appeals to me is one of the ways in which Lord Denning MR considered the case [in the Court of Appeal], namely a collateral contract of the sort described by Lord Moulton in Heilbut, Symons & Co v Buckleton:


'... there may be a contract the consideration for which is the making of some other contract. 'If you will make such and such a contract I will give you one hundred pounds', is in every sense of the word a complete legal contract. It is collateral to the main contract...'


So here. The law happily matches the reality. The garage proprietor is saying, 'If you will buy four gallons of my petrol, I will give you one of these coins'. None of the reasons which have caused the law to consider advertising or display material as an invitation to treat, rather than an offer, applies here. What the garage proprietor says by his placards is in fact and in law an offer of consideration to the motorist to enter into a contract of sale of petrol. Of course, not every motorist will notice the placard, but nor will every potential offeree of many offers be necessarily conscious that they have been made. However, the motorist who does notice the placard, and in reliance thereon drives in and orders the petrol, is in law doing two things at the same time. First, he is accepting the offer of a coin if he buys four gallons of petrol. Secondly, he is himself offering to buy four gallons of petrol: this offer is accepted by the filling of his tank.


Lord Wilberforce agreed with Lord Simon.


Lord Fraser of Tullybelton held that the whole transaction was 'a simple operation of acquiring four gallons of petrol and a coin as a sale of both articles in one transaction' not 'two separate operations, a sale of the petrol and a collateral contract for acquiring the coin'.