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:

• 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.
• if the breach consisted only in the non-payment of money and the provision provided for the payment of a larger sum.
• if the same sum is payable in a number of events of varying gravity (this is a rebuttable presumption).
• 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, which seem better fit for the kinder, gentler world we now inhabit.