Dunlop Pneumatic Tyre Co Ltd v Selfridge Ltd [1915] AC 847

Contract law – Construction of contract – Consideration

Facts

Dunlop was a tire manufacturer who agreed with their dealer to not sell the tires below a recommended retail price (RRP). As part of the agreement, Dunlop also required their dealers to gain the same agreement with their retailers, who in this instance was Selfridge. The agreement held that if tires were sold below the RRP, they would be required to pay £5 per tire in damages to Dunlop. This was agreed between the dealer and Selfridges, which effectively made Dunlop a third-party to that agreement. Sometime after this, Selfridge sold the tires below the agreed price and Dunlop sued for damages and an injunction to prevent them from continuing this activity. At the initial trial, the decision was given to Dunlop. This was appealed by Selfridge and the decision was reversed. Dunlop appealed.

Issue

Selfridge argued that Dunlop could not enforce the contract as Dunlop was not part of the agreement between the dealer and Selfridges. On this basis, the question for the court was whether Dunlop had the right to access damages without a contractual relationship.

Held

The court held in a unanimous decision that Dunlop could not claim for damages in the circumstances. The court found that firstly, only a party to a contract can claim upon it. Secondly, Dunlop had not given any consideration to Selfridge and therefore there could be no binding contract between the parties. Lastly, Dunlop was not listed as an agent within the contract and could therefore not be included as a valid third-party who had rights to claim on the contract.