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The defendant was the tenant of an Esso petrol station; when he took the tenancy, the Esso representative said the company estimated likely sales to be approximately 200,000 gallons per year. In fact, there was no likelihood of sales ever exceeding 70,000 gallons per year, and the estimate had been made without due care. This is because the local council had already made a planning decision that would result in a lack of any direct access by vehicles from the main street. This, of course, would mean fewer customers. But Esso still told the defendant that the estimated output was 200,000 (a figure that would have fell short even without the council's decision). The defendant, partly on the basis of Esso's estimate, bought the petrol station and business did not go well. Although he negotiated a lower rent with Esso, he still lost money. On the basis of a prolonged inability to fully pay his rent, Esso brought an action for possession against the defendant. He counterclaimed for damages due to either Esso's breach of warranty or its negligence under the Hedley Byrne principle. The trial court held there was no contractual warranty and tort misrepresentation damages were limited to losses incurred before the negotiated decrease in rent. On the defendant's appeal, the minority's view in Mutual Life v Evatt (1971) that the Hedley Byrne principle should be (more) widely construed was applied, resulting in an award of damages to the defendant for all losses suffered stemming from Esso's negligent misstatement.

In the view ofLord denningMR, it was quite clear that there had been a contractual warranty and that damages were not limited: 'Now I would quite agree ... it was not a warranty - in this sense - that it did not guarantee that the throughput would be 200,000 gallons. But, nevertheless, it was a forecast made by a party - Esso - who had special knowledge and skill. It was the yardstick ... by which they measured the worth of a filling station. They knew the facts. They knew the traffic in the town. They knew the throughput of comparable stations. They had much experience and expertise at their disposal. They were in a much better position than Mr Mardon to make a forecast. It seems to me that if such a person makes a forecast, intending that the other should act upon it - and he does act upon it, it can well be interpreted as a warranty that the forecast is sound and reliable in the sense that they made it with reasonable care and skill. It is just as if Esso said to Mr. Mardon: "Our forecast of throughput is 200,000 gallons. You can rely upon it as being a sound forecast of what the service station should do. The rent is calculated on that footing.” If the forecast turned out to be an unsound forecast such as no person of skill or experience should have made, there is a breach of warranty.'

Lord Denning MR further stated that if there had been no warranty (which there was), there would still be negligent misrepresentation liability on the part of Esso in this case. Esso, relying on Clark v Kirby-Smith (1964), argued that when a contract resulted from any pre-contractual negotiation, even where there was misstatement there could be no tort liability. (In Clark v Kirby-Smith, Plowman J held that a negligent solicitor was not liable in tort, only contract.) In response, his Lordship noted the considerable antiquity of this position, and cited with approval Lord Radcliffe's analysis in Lister v Romford Ice Cold Storage Co Ltd (1957) of tort duty as ‘comparable to the duty of reasonable care which is owed by a master to his servant, or vice versa’. It follows, he concluded, that there is always a duty to negotiate with care: 'if a man, who has or professes to have special knowledge or skill, makes a representation by virtue thereof to another ... with the intention of inducing him to enter into a contract with him, he is under a duty to use reasonable care to see that the representation is correct, and that the advice, information or opinion is reliable. Esso did profess special knowledge and had it. Their negligent misstatement was a fatal error.... 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.... 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.'

The significance of the judgment in Esso is threefold: First, it established a more liberal view regarding the scope of the Hedley principle (i.e. that a duty of care can exist in the context of a 'special relationship' between two parties where one has suffered pure economic loss in connection with the others' negligent misstatement) after the rather narrow reading employed by the court five years earlier in Mutual Life v Evatt (1971). In that case, the court had viewed liability under the Hedley principle as restricted to defendants whose primary purpose of business was providing the information or advice in question or who had at least made a representation to that effect. In Esso, on the other hand, the court adopted the position (which is the current law) that liability under the Hedley principle extends even to those defendants who merely represent themselves as possessing the requisite knowledge and skill relied upon by the other party.

The second significant thing about the ruling in this case is that it demonstrated that while there may not be a general duty as such to volunteer information, there is certainly a duty to provide pertinent and timely information in the context of pre-conractual negotiation that is both accurate (in both a real and constructed sense) and truthful. The corollary of this principle is that there is a duty in such circumstances to avoid (as best as one can) making any misleading statements that could conceivably influence the other party's decision to enter into the contract. As an instructive aside, it is worth noting that where a party is induced to contract as a result of negligent misstatement he may, apart from this action in tort, sue under section 2.1 of the Misrepresentation Act 1967. The advantage of a statutory action is that the defendant is saddled, in this instance, with the burden of proof. This is because under the 1967 Act it is the defendant who must show that he had reasonable grounds to believe, and did believe up to the time the contract was entered into, that the facts represented by him to the other party during any pre-contractual discussions were true.

The third significance of the ruling in Esso is that it implied that the divide between a statement of opinion and statement of fact is considerably blurred when one holds oneself out as possessing expert knowledge or privileged information. In such instances, a statement made by the 'knowledgeable' party is more likely to be treated by the court as factual than as mere opinion or belief. As a consequence, the legal requirement for accuracy and veracity in one's representations is, in such circumstances, more stringent than it would otherwise be, with the penalty for any misrepresentation correspondingly more onerous.

See also Hedley Byrne v Heller (1963), Mutual Life v Evatt (1971).