Dunlop Pneumatic Tyre Co Ltd v New Garage & Motor Co Ltd

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Dunlop Pneumatic Tyre Co Ltd v New Garage & Motor Co Ltd
2008-08-19 Flat tire.jpg
CourtHouse of Lords
DecidedJuly 1, 1914 (1914-07-01)
Citation(s)[1914] UKHL 1, [1915] AC 79
Keywords
Termination, penalty clause

Dunlop Pneumatic Tyre Co Ltd v New Garage & Motor Co Ltd [1914] UKHL 1 (1 July 1914) is an English contract law case, concerning the extent to which damages may be sought for failure to perform of a contract when a sum is fixed in a contract. It held that only if a sum is of an unconscionable amount will it be considered penal and unenforceable.

It should not be confused with Dunlop Pneumatic Tyre Co Ltd v Selfridge & Co Ltd,[1] which held that the same resale price maintenance practice was unenforceable against a third party reseller as a matter of the English rule of privity of contract.

Facts[edit]

Dunlop sued its tyre retailer, New Garage, for breaching an agreement to not resell Dunlop tyres at a price lower than that listed in the contract. The agreement then said if that did happen, New Garage would pay £5 per tyre ‘by way of liquidated damages and not as a penalty’.

The judge held the £5 sum was liquidated damages and enforceable. The Court of Appeal held the clause was a penalty and Dunlop could only get nominal damages. Dunlop appealed.

Judgment[edit]

The House of Lords held the clause was not a penalty, and merely a genuine preestimate of Dunlop’s potential loss, and so Dunlop could enforce the agreement. Lord Dunedin set out the following principles.

See also[edit]

Notes[edit]

  1. ^ Dunlop Pneumatic Tyre Co Ltd v Selfridge & Co Ltd [1915] UKHL 1
  2. ^ [1905] A. C. 6
  3. ^ 6 Bing. 141
  4. ^ 21 Ch. D. 243
  5. ^ 11 App. Cas. 332
  6. ^ [1912] A. C. at p. 398

References[edit]

External links[edit]