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 long list with in the frame of key historical events.
Competence frameworks for sustainability in the built environment
Code of practice, core criteria consultation draft for comment.
UK Net Zero Carbon Buildings Standard Sept update
Pilot version for testing and feedback on its adoption due.
New Floods Resilience Taskforce
With a wet met office autumn prediction.
National Retrofit Hub takeover of Net Zero stage
At Birmingham UK Construction Week in October.
AT Awards 2024 finalists announced
With more to come, prior to the Awards ceremony in October.
London construction cools as hotspots appear nationally
Increases in the East of England, Yorkshire and Scotland.
ARB proposals for a new Architects Code
Announced in the shadow of the final Grenfell Inquiry report.
Combining human creativity and tech innovation now and in the future
Building automation and control systems market study
BSRIA 2024 North America BACS software & services.
Impact of digital technology on productivity in construction
New CIOB academy guidance for companies of all sizes.
Demolition and retrofit approaches in Planning Policy
MHCLG demolition and retrofit survey to inform future updates to national planning policy.
Expert taskforce to spearhead new, new town generation
Sir Michael Lyons given 12 months for recommendations.
Government policy statement on new towns
A coded vision for a new generation of new towns.
AT Principal Designer exemplars published
Supporting clear and comprehensive demonstration of the skills required.