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
Professional practical experience for Architects in training
The long process to transform the nature of education and professional practical experience in the Architecture profession following recent reports.
A people-first approach to retrofit
Moving away from the destructive paradigm of fabric-first.
International Electrician Day, 10 June 2025
Celebrating the role of electrical engineers from André-Marie Amperè, today and for the future.
New guide for clients launched at Houses of Parliament
'There has never been a more important time for clients to step up and ...ask the right questions'
The impact of recycled slate tiles
Innovation across the decades.
EPC changes for existing buildings
Changes and their context as the new RdSAP methodology comes into use from 15 June.
Skills England publishes Sector skills needs assessments
Priority areas relating to the built environment highlighted and described in brief.
BSRIA HVAC Market Watch - May 2025 Edition
Heat Pump Market Outlook: Policy, Performance & Refrigerant Trends for 2025–2028.
Committing to EDI in construction with CIOB
Built Environment professional bodies deepen commitment to EDI with two new signatories: CIAT and CICES.
Government Grenfell progress report at a glance
Line by line recomendation overview, with links to more details.
An engaging and lively review of his professional life.
Sustainable heating for listed buildings
A problem that needs to be approached intelligently.
50th Golden anniversary ECA Edmundson apprentice award
Deadline for entries has been extended to Friday 27 June, so don't miss out!
CIAT at the London Festival of Architecture
Designing for Everyone: Breaking Barriers in Inclusive Architecture.
Mixed reactions to apprenticeship and skills reform 2025
A 'welcome shift' for some and a 'backwards step' for others.