Esso Petroleum Limited v Commisioners of Customs and Excise [1975] UKHL 4 (10 December 1975)

Esso ran a promotion giving 'free' World Cup coins to motorists buying four gallons of petrol. The issue was whether these coins were 'produced for sale' and thus subject to purchase tax. The House of Lords held the coins were gifts, not sales, as there was no intention to create legal relations regarding the coins.

Facts

Esso Petroleum conceived a sales promotion scheme in 1970 involving World Cup coins bearing likenesses of the 30 members of the England soccer squad for the 1970 World Cup. The scheme involved distributing millions of these coins through approximately 4,900 petrol outlets. Garage proprietors would give one coin to each motorist purchasing four gallons of petrol. The coins were wrapped in opaque coverings to encourage repeat purchases as motorists attempted to collect the complete set. Esso extensively advertised the promotion using terms such as ‘Free World Cup Coins’, ‘One coin given with every four gallons of petrol’, and ‘Free from Esso’. The coins had negligible intrinsic value, being supplied to garage proprietors at approximately three farthings each. The price of petrol was not increased during the promotion period.

Issues

Primary Issue

Whether the coins were ‘produced in quantity for general sale’ within Group 25 of Schedule 1 of the Purchase Tax Act 1963, thereby making Esso liable for approximately £200,000 in purchase tax.

Secondary Issues

1. Whether there was any intention to create legal relations between garage proprietors and motorists regarding the coins.

2. If a contract existed, whether it constituted a sale (requiring money consideration) or some other form of transaction.

Judgment

The House of Lords dismissed the appeal by a majority, affirming the Court of Appeal’s decision that the coins were not subject to purchase tax.

Lord Wilberforce

Agreed with Lord Simon of Glaisdale’s analysis and would dismiss the appeal.

Viscount Dilhorne

Held that there was no intention on the part of garage proprietors, motorists, or Esso to enter into legally binding contracts regarding the coins. The minimal intrinsic value of the coins and the circumstances of their distribution negated any contractual intention. Even if a contract existed, it would not constitute a sale since the consideration was entering into a contract to purchase petrol, not payment of money.

Lord Simon of Glaisdale

Disagreed that no legal relations were intended, stating that the promotion material was designed for commercial advantage in a business setting. Applying the principle from Rose and Frank Co. v J.R. Crompton & Bros. Ltd, the onus of proving no legal effect was intended lies on the party asserting it. However, Lord Simon analysed the transaction as a collateral contract: the garage proprietor offered a coin in consideration for the motorist entering into a contract to purchase petrol. Since the coins were transferred in consideration of entering a petrol purchase contract rather than for money, they were not ‘sold’ within the meaning of the Sale of Goods Act 1893, and thus not subject to purchase tax.

Lord Fraser of Tullybelton (dissenting)

Would have allowed the appeal. The correlation of one coin to every four gallons created a definite scale establishing a contractual right. The motorist ordering petrol was offering to enter a contract on the advertised terms, giving him a contractual right to a coin with his petrol purchase for one inclusive price.

Lord Russell of Killowen

Held that due to the minimal intrinsic value of the medals, there was no necessity for creating contractual liability. The absence of any suggestion that a qualifying motorist ever failed to receive a coin supported this view. Even assuming a contract existed, it was not a sale at a money price. The motorist entitled himself to receive a medal by carrying out a contract for petrol purchase, which is distinct from sale of the medal for money.

Implications

This case establishes important principles regarding promotional schemes and the distinction between gifts and sales. It confirms that the use of commercial promotional materials does not automatically create legally binding obligations, particularly where items of negligible value are involved. The case also clarifies that for a transaction to constitute a ‘sale’, there must be a money consideration; where goods are transferred in consideration of entering another contract, this does not amount to sale. The decision has significant implications for promotional schemes, advertising law, and the interpretation of taxing statutes.

Verdict: Appeal dismissed. The World Cup coins were not 'produced for sale' within Group 25 of Schedule 1 of the Purchase Tax Act 1963 and were therefore not chargeable goods subject to purchase tax.

Source: Esso Petroleum Limited v Commisioners of Customs and Excise [1975] UKHL 4 (10 December 1975)