Dunlop Pneumatic Tyre Co Ltd v New Garage and Motor Co Ltd
The case of Dunlop Pneumatic Tyre Co. Ltd. v New Garage and Motor Co. Ltd. [1914] created a precedent for the extent to which liquidated damages may be sought for failure to perform a contract.
The facts of the case are that Dunlop believed that New Garage had breached an agreement not to resell their tyres at a lower price than that stipulated in the contract, and so sued them. The agreement said that, in the event of such a dispute arising, New Garage would pay ‘by way of liquidated damages and not as a penalty’, a sum of £5 per tyre.
The £5 sum was held by the judge to be enforceable, however, the Court of Appeal held that it was a penalty. Dunlop appealed this decision. The House of Lords held that Dunlop were entitled to enforce the agreement as it was a ‘genuine pre-estimate’ of their potential loss as opposed to being a penalty. The ruling held that if the sum is not genuine, or of an unconscionable amount, it may be considered a penalty by the courts and so will be unenforceable.
The ruling of Dunlop has been significant in the construction industry, particularly in the case of contractors who have finished construction works later than the date required by the contract but try to demonstrate that the liquidated damages provision in the contract are not enforceable. In recent years, the courts have been increasingly unwilling to find such provisions to be penal.
For more details about the case ruling, see The distinction between liquidated damages clauses and penalty clauses.
[edit] Related articles on Designing Buildings Wiki
- Compensation event.
- Damages in construction contracts.
- Hadley v Baxendale.
- Liquidated damages.
- Liquidated v unliquidated damages.
- Relevant event.
- The distinction between liquidated damages clauses and penalty clauses.
- Unliquidated damages.
[edit] External resources
Featured articles and news
The 5 elements of seiri, seiton, seiso, seiketsu and shitsuke.
Shading for housing, a design guide
A look back at embedding a new culture of shading.
The Architectural Technology Awards
The AT Awards 2025 are open for entries!
ECA Blueprint for Electrification
The 'mosaic of interconnected challenges' and how to deliver the UK’s Transition to Clean Power.
Grenfell Tower Principal Contractor Award notice
Tower repair and maintenance contractor announced as demolition contractor.
Passivhaus social homes benefit from heat pump service
Sixteen new homes designed and built to achieve Passivhaus constructed in Dumfries & Galloway.
CABE Publishes Results of 2025 Building Control Survey
Concern over lack of understanding of how roles have changed since the introduction of the BSA 2022.
British Architectural Sculpture 1851-1951
A rich heritage of decorative and figurative sculpture. Book review.
A programme to tackle the lack of diversity.
Independent Building Control review panel
Five members of the newly established, Grenfell Tower Inquiry recommended, panel appointed.
Welsh Recharging Electrical Skills Charter progresses
ECA progressing on the ‘asks’ of the Recharging Electrical Skills Charter at the Senedd in Wales.
A brief history from 1890s to 2020s.
CIOB and CORBON combine forces
To elevate professional standards in Nigeria’s construction industry.
Amendment to the GB Energy Bill welcomed by ECA
Move prevents nationally-owned energy company from investing in solar panels produced by modern slavery.
Gregor Harvie argues that AI is state-sanctioned theft of IP.
Experimental AI housing target help for councils
Experimental AI could help councils meet housing targets by digitising records.
BSRIA Occupant Wellbeing survey BOW
Occupant satisfaction and wellbeing tool inc. physical environment, indoor facilities, functionality and accessibility.