CASE BRIEF

Esso Petroleum Ltd v Commissioners of Customs and Excise [1976] 1 WLR

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

FACTS:

Esso, a petrol company, conducted a sales promotion during the 1970 World Cup, offering customers a free World Cup coin featuring likenesses of the England 1970 squad players with the purchase of four gallons of petrol. The Customs and Excise Commissioners argued that these coins should be subject to purchase tax under the Purchase Tax Act 1963, Sch 1, Group 25, as they fell under the category of goods "produced in quantity for general sale."

Esso countered this argument by claiming that the coins were free gifts and not subject to tax. Their key contention was that by offering the coins to customers, they did not intend to create a legally binding contract involving the exchange of goods for money consideration. This raised the fundamental issue of whether there was a contract of sale, as defined under the Sale of Goods Act 1893.

The case involved a legal interpretation of whether the promotional coins constituted goods produced for general sale, and if so, whether Esso's intention to create legal relations and produce a legal effect through this promotion would subject them to purchase tax. The dispute revolved around the promotional nature of the coins and the intention behind their distribution.

ISSUES:

1. The primary concern was whether the distribution of the coins constituted goods "intended for general sale”.

2. Did the claimant and the customers have the mutual intention to be legally bound by an agreement for the supply of the coins?

JUDGEMENT:

ISSUE 1:

The Court found that Esso had a clear intention to create a legal obligation by offering the coins as part of a commercial transaction. However, there was no consideration for the coin transfer since it was linked to a separate petrol sale contract. Therefore, the Court ruled that it wasn't a sale by Esso, but rather a contract to produce coins as goods "for general sale."

ISSUE 2:

The House of Lords determined that there was a binding contract with customers who purchased more than four gallons of petrol, as both parties intended to create legal relations. However, the consideration was for petrol, not the coins as a "money consideration." Hence, the contract wasn't a sale, and no tax was applicable.

CONCLUSION:

In the case of Esso Petroleum Ltd v Officers of Customs and Excise, the court addressed the taxability of promotional coins offered by Esso during the 1970 World Cup. The judgment emphasized the significance of the parties' intentions in contractual agreements and clarified that while Esso intended to produce a legal obligation in a marketable sale, the absence of consideration specifically for the coins rendered it a contract to produce goods" for general trade" rather than a trade. This case underscores the significance of assessing the specific circumstances and intentions of the parties in contractual and duty-related matters, serving as a noteworthy precedent in contract and duty law.