Esso Petroleum Co v Customs & Excise Commissioners – Case Summary

Esso Petroleum Co v Customs and Excise Commissioners

House of Lords

Citations: [1976] 1 WLR 1; [1976] 1 All ER 117; (1975) 120 SJ 49; [1976] CLY 2251.


The Purchase Tax Act 1963 specified a tax on ‘[p]ictures, prints, engravings, photographs, figures, busts, reliefs and similar articles of a kind produced in quantity for general sale’. The law defined a sale as the supply of goods ‘for money consideration’.

The claimant owned petrol stations. As part of a promotion connected to the World Cup, they offered to provide a promotional coin bearing an image of a footballer to any customer who bought more than four gallons of petrol at one of their stations.

The Customs and Excise Commissioner argued that the coins were taxable under the provisions of the Purchase Tax Act. The claimant argued that they were not, because they were not produce for ‘general sale’. They claimed that by offering the coins to customers, they did not intend to be legally bound by any contract – so there was no sale.

  1. Did the claimant and the customers intend to be legally bound by an agreement to supply the coins?
  2. Did customers provide consideration for the promise to supply the coins?
  3. Was any contract a sale contract?

The House of Lords held that the offer of coins did produce a binding contract with any customer who bought more than four gallons of petrol. The parties intended to create legal relations. The customers provided consideration by purchasing the necessary amount of petrol.

However, the consideration was a contract to purchase petrol. This meant that customer did not buy the coins for ‘money consideration’. The Lords therefore held that the contract was not a sale contract, so the tax was not applicable.

This Case is Authority For…

Where the ‘ agreement takes place in a commercial setting, there is a rebuttable presumption that the parties intend to be legally bound. Further evidence that the parties intend to be bound includes:

  • The fact that the offer was of commercial advantage to the offeror;
  • Whether the offer was attractive to the offeree;
  • The fact that the customer is unlikely to sue if the offeror reneges on their offer is not relevant.

Lord Simon noted that a contract for the supply of the coin only formed with those customers who were aware of the promotion. If they were unaware of the promotion, the coin was merely a gift. This indicates that a person cannot accept an offer which they are not aware of.


Viscount Dilhorne and Lord Russell differed from the majority, though they reached the same result. They argued that there was no contract because the claimant did not intend to be legally bound by their offer of the coins. They argued that the commercial presumption of intent should not be applied in this case. This was because the promotion described the coin as a free gift, and the coin was of negligible value.

Lord Fraser dissented because he thought that the contract was one of sale. He characterised the advert as an offer for the simultaneous sale of the coin and the petrol. Accordingly, the customer provided consideration for both with money. He could see no reason to break up the petrol sale and the coin contract into two separate contracts.