Statements had been made by employees of Esso in the course of pre-contractual negotiations with Mr Mardon, the prospective tenant of a petrol station. The statements related to the potential throughput of the station. Mr Mardon was persuaded by the statements to enter into the tenancy; but he suffered serious loss when the actual throughput proved to be much lower than had been predicted. Mr Marden did his best but he lost his capital and incurred a large bank overdraft as a result of his trading losses.
Held: Mr. Mardon was entitled to recover damages from Esso, on the basis of either breach of warranty or (on this point affirming the decision of the judge below) negligent misrepresentation. A contractor is not free to carry on with a disastrous contract and then seek to recover any losses on the basis of fraud. A special relationship, giving rise to a duty of care, may arise between the parties negotiating a contract if information is given in connection with the contract.
Lord Denning MR held: ‘A professional man may give advice under a contract for reward; or without a contract, in pursuance of a voluntary assumption of responsibility, gratuitously without reward. In either case he is under one and the same duty to use reasonable care: see Cassidy v. Ministry of Health [1951] 2 K.B. 343, 359-360. In the one case it is by reason of a term implied by law. In the other, it is by reason of a duty imposed by law. For a breach of that duty he is liable in damages: and those damages should be, and are, the same, whether he is sued in contract or in tort.’ and: ‘He is only to be compensated for having been induced to enter into a contract which turned out to be disastrous for him. Whether it be called breach of warranty or negligent misrepresentation, its effect was not to warrant the throughput but only to induce him to enter the contract. So the damages in either case are to be measured by the loss he suffered. Just as in Doyle v Olby he can say: ‘I would not have entered into this contract at all but for your representation. Owing to it, I have lost all the capital I put into it. I also incurred a large overdraft. I have spent four years of my life in wasted endeavour without reward: and it will take sometime to re-establish myself.’ For all such loss he is entitled to recover damages.’
Ormrod and Shaw LJJ agreed that Mr. Mardon was entitled to recover damages either for breach of warranty or for negligent misrepresentation.
Lord Denning MR, Ormrod, Shaw LJJ
[1976] QB 801, [1976] EWCA Civ 4, [1976] 2 All ER 5
Bailii
England and Wales
Citing:
Cited – Doyle v Olby (Ironmongers) Ltd CA 31-Jan-1969
The plaintiff had been induced by the fraudulent misrepresentation of the defendant to buy an ironmonger’s business for 4,500 pounds plus stock at a valuation of 5,000 pounds. Shortly after the purchase, he discovered the fraud and started the . .
Cited by:
Cited – AMEC Mining v Scottish Coal Company SCS 6-Aug-2003
The pursuers contracted to remove coal by opencast mining from the defender’s land. They said the contract assumed the removal first of substantial peat depositys from the surface by a third party. They had to do that themselves at substantial cost. . .
Cited – Spice Girls Ltd v Aprilia World Service Bv ChD 24-Feb-2000
Disclosure Duties on those entering into contract
The claimants worked together as a five girl pop group. The defendants had signed a sponsorship agreement, but now resisted payment saying that one of the five, Geri, had given notice to leave the group, substantially changing what had been . .
Applied – Archer v Brown 1984
The defendant sold shares in his company to the plaintiff. He had however already sold them elsewhere. The plaintiff sought both rescission and damages. The defendant argued that he could not be entitled to both.
Held: The misrepresentation . .
Cited – Geldof Metaalconstructie Nv v Simon Carves Ltd CA 11-Jun-2010
The parties contracted for the supply and installation of pressure vessels by Geldof (G) for a building constructed by Simon Carves (SC). The contract contained a clause denying the remedy of set-off. G sued for the sale price, and SC now sought an . .
Cited – Downs and Another v Chappell and Another CA 3-Apr-1996
The plaintiffs had suceeded in variously establishing claims in deceit and negligence, but now appealed against the finding that no damages had flowed from the wrongs. They had been sold a business on the basis of incorrect figures.
Held: . .
Lists of cited by and citing cases may be incomplete.
Torts – Other, Damages, Negligence, Contract
Leading Case
Updated: 31 October 2021; Ref: scu.185449