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

Dunlop Pneumatic Tyre Co Ltd v New Garage & Motor Co Ltd (1915) AC 79, is a leading case on penalty clauses (bad) and liquidated damages clauses (good).

Lord Dunedin had suggested the following often quoted factors: • A provision is penal if the sum stipulated for is extravagant and unconscionable in amount in comparison with the greatest loss that could conceivably be proved to have followed from the breach. • A provision is penal if the breach consisted only in the non-payment of money and the provision provided for the payment of a larger sum. • There is a presumption (but no more) that a provision is penal if the same sum is payable in a number of events of varying gravity. • A provision is not penal by reason only of the impossibility of precisely pre-estimating the true loss.

Glossed over more recently by ParkingEye Ltd v Beavis and Cavendish Square Holdings v El Makdessi