Although the last view was a minority view on the formation of the
contract, it is the view which is probably held by most judges today. The
following principles therefore emerge from the case:
- The giving away of a promotional ‘free’ item is likely to form a collateral
contract, in which the petrol company (or other seller) makes a general
offer – here it was stated that if a customer used this garage and bought
four gallons of petrol a coin would be given. - This stands beside the main contract of sale, which is a certain quantity
of petrol for a sum of money. - There was legal intent (see later) despite the trivial nature of the coin.
There is therefore a contract in which the customer can insist on a coin
if four gallons of petrol have been purchased. - The consideration (see later) for the coin was the purchase of four gallons
of petrol.
This case applies many of the principles dealt with in this chapter, in a
particular way. It is an important case, since promotional campaigns are
numerous, many of them working on a similar basis to the Esso campaign.
It was obviously important to the Commissioners to know where they stood
over the tax issue, but it could be equally important to customers to know
their position over apparently ‘free’ promotional goods. The goods could be
more valuable, and a binding contract over then would then become
important. The case is also an indication of a willingness to look at the
modern commercial environment and the position of the consumer, and
sets a pattern for present-day trading.
38 Contract law
formed part of the contract of sale. If they did, then Esso would be
liable for tax. If they did not, then the motorist may not be able to insist
on a coin after having bought the petrol.
The House of Lords held by a majority of four to one that Esso were
not liable for the tax, but the reasoning of the judges varied considerably.- One judge thought that the coins passed under the contract of sale of
petrol. - Two judges thought that there was no legally binding contract at all
concerning the coins. - Two other judges thought that a binding collateral contact existed,
whereby Esso promised that if motorists entered the premises and
bought a certain quantity of petrol, a coin or coins would be
transferred to them (one coin for four gallons). This was quite
separate from any contract of sale (i.e. a specific quantity of petrol
for the exact price).