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

Key point

  • The approach here to the privity of contract rule characterises it as an extension of the doctrine of consideration

Facts

  • Dunlop contracted to sell its tires to an intermediary, Dew, and Dew contracted to sell the tires to Selfridge
  • Under the contract between Dunlop and Dew, Dew promised to pay liquidated damages of £5/tyre to Dunlop if sales of tyres were below list price
  • Under the contract between Dew and Selfridge, Selfridge promised to pay liquidated damages of £5/tyre to Dunlop if sales of tyres were below list price
  • Dunlop sought to claim liquidated damages against Selfridge

Held

  • Claim denied; Dunlop could not enforce the contract between Dew and Selfridge which it was not privy to
  • No consideration had been given by Dunlop and consideration had not been given by Dew as an agent of Dunlop

Viscount Haldane

There are 3 principles of contract:

  1. Only a person who is a party to a contract can sue on it
  2. A person with whom a contract not under seal has been made is able to enforce it only if consideration is given to the promisor or some other person at the promisor’s request
  3. A principal not named in the contract may sue upon it if the promisee really contracted as his agent, but he must have given consideration personally or through the promisee

Commentary

  • Contrary to the approach of Viscount Haldsme the privity rule is separate from the doctrine of consideration, since you can be a party to a contract but not have advanced consideration
    • g. A promises to pay B and C £100 each, in return for a promise from B only