Dunlop Pneumatic Tyre Co Ltd v Selfridge & Co Ltd [1915] AC ...

Facts

• Dunlop Pneumatic Tyre Co Ltd, a tyre manufacturer, contracted with Dew, a dealer, agreeing that Dew would not sell tyres below a designated retail price, backed by a liquidated damages clause of £5 per tire sold below this price.
• Dew subsequently contracted with Selfridge & Co Ltd, a retailer, incorporating a similar price restriction and damages clause, requiring Selfridge to pay £5 per tyre to Dunlop if Selfridge breached the price restriction.
• Dunlop was not a direct party to the contract between Dew and Selfridge.
• Selfridge sold tyres below the agreed price.
• Dunlop sought to enforce the damages clause against Selfridge, relying on the agreement between Dew and Selfridge.

Issues

1. Whether Dunlop, not being a direct party to the contract with Selfridge, could enforce the price restriction clause.
2. Whether Dunlop had provided consideration necessary to sue Selfridge for breach of contract.
3. Whether Dew acted as Dunlop’s agent in the relevant contract with Selfridge, justifying enforcement by Dunlop.
4. Whether the privity of contract doctrine allowed a third party to enforce contractual terms to their benefit.

Decision

• The House of Lords held that Dunlop could not enforce the contract against Selfridge because Dunlop was not a party to it.
• Dunlop did not provide consideration to Selfridge within the relevant contract.
• Dew did not act as Dunlop’s agent in making the contract with Selfridge; thus, no principal-agent exception applied.
• The claim failed as the requirements of both privity and consideration were not satisfied.

Legal Principles

• Only parties to a contract can enforce its terms or claim damages for its breach (privity of contract).
• Consideration must move from the promisee; a party cannot enforce a contract unless they have provided consideration.
• Agency can provide an exception only if the agent is shown legally to represent the principal in the contract.
• The intent to benefit a third party does not override the need for privity and consideration.
• Assignment of rights may enable an intended beneficiary to enforce a contract, as later illustrated in distinct subsequent cases.

Conclusion

The House of Lords reaffirmed that only a party to a contract who has provided consideration may enforce its terms or claim damages for breach. Dunlop’s inability to establish privity or consideration, or to show agency in the relevant contract, barred its claim against Selfridge, solidifying the foundational requirements of English contract law regarding contractual enforcement by third parties.