ESSO PETROLEUM v COMMISSIONERS OF CUSTOMS & EXCISE INTENTION TO CREATE LEGAL RELATION: Rebuttable Presumption

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Commercial Agreements
Esso had a sales promotion scheme by which garage owners offered a 'free' World Cup coin with every four gallons of petrol. The Customs and Excise Commissioners claimed that the coins were chargeable to purchase tax because they were 'produced in quantity for general sale'.

Held (Lord Fraser dissenting): The coins were not being sold, since if there was a contract (an issue on which there was some disagreement), the consideration for the transfer of the coin was not money, but the customer's undertaking to enter into a collateral contract to purchase four gallons of petrol.

(p. 193) The majority reasoning differed as to whether there was a contract relating to the coins. Viscount Dilhorne and Lord Russell considered the coins to be a gift (as opposed to a sale); the coins had little intrinsic value, there was therefore no intention to create legal relations in such an arrangement. Lords Simon and Wilberforce came to the opposite conclusion since the arrangement was set in the context of business relations.

LORD RUSSELL: ... The first question ... is whether, notwithstanding the liberal references in the documents attending the promotion scheme to 'giving', 'gifts', and 'free', that which would and did take place gave rise to a contract, enforceable by a motorist who bought four gallons from a participating proprietor, that he should receive one of these medals. It is to be borne in mind in this connection that the mere fact that Esso and the garage proprietors undoubtedly had a commercial aim in promoting the scheme does not deprive the delivery of a medal of the quality of a gift as distinct from a sale: for benevolence is not a necessary feature of a gift, which may well be motivated by self interest. On the other hand it is trite law that if on analysis a transaction has in law one character, the fact that the parties either accidentally or deliberately frame the transaction in language appropriate to a transaction of a different character will not deny to it its true character.

We have here, my Lords, a promotion scheme initiated by Esso, who procured the production of the medals. Each medal was of negligible intrinsic value, though the incentive to soccer enthusiasts to collect all 30 may have been strong. Plainly it was never in Esso's mind that this negligible intrinsic value should be reflected in an increase in the pump price of petrol, and it never was: indeed the price of a gallon could not be increased by 3/16 of a penny. In my opinion it would have been thought by Esso, and rightly, that there could have been no occasion, in order to ensure success of the scheme, for an outlet proprietor to subject himself to a contractual liability to deliver a coin to a motorist who had bought four gallons.

The subject matter was trivial: the proprietor was directly interested in the success of the scheme and would be in the highest degree unlikely to

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