End date July 1, 1914 | Court House of Lords | |
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Decided July 1, 1914 (1914-07-01) Citation(s) [1914] UKHL 1, [1915] AC 79 Similar Cavendish Square Holding B, Anglia Television Ltd v Reed, Ruxley Electronics and Cons, Hong Kong Fir Shipping, Victoria Laundry (Windsor | ||
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.
Contents
It should not be confused with Dunlop Pneumatic Tyre Co Ltd v Selfridge & Co Ltd, 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
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
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.