Dunlop Pneumatic Tyre Company Limited v. Selfridge and Company
Case Analysis:
Dunlop Pneumatic Tyre Co. Ltd. v. Selfridge & Co. Ltd. (1915) AC 847 (House of Lords)
Background:
This is a classic case in English contract law, specifically dealing with the doctrine of privity of contract and resale price maintenance. It clarified who can enforce contractual terms and the limits of passing on contractual obligations to third parties.
Facts of the Case:
Dunlop Pneumatic Tyre Company Ltd., a manufacturer of tyres, sold tyres to a dealer named Dew & Co. under a contract.
The contract included a clause that Dew & Co. would not sell the tyres below a certain price (minimum resale price maintenance).
Dew & Co., in turn, sold the tyres to Selfridge & Co. (another company), with the same condition that they would not resell below a minimum price.
Selfridge & Co. sold the tyres below the agreed minimum price.
Dunlop sued Selfridge for breach of contract, claiming that Selfridge had violated the resale price maintenance clause.
Legal Issues:
Whether Dunlop, as a third party to the contract between Dew & Co. and Selfridge, can enforce the resale price maintenance clause?
What is the effect of the doctrine of privity of contract on third-party rights and obligations?
Whether the resale price maintenance clause is valid and enforceable?
Legal Principles Involved:
1. Doctrine of Privity of Contract:
Only parties to a contract can sue or be sued under that contract.
A third party, even if named or intended to benefit, generally has no enforceable rights under the contract.
2. Resale Price Maintenance:
Refers to agreements that restrict the price at which goods can be resold.
Historically, such agreements were seen as restraints of trade and unenforceable at common law, though modern competition law has evolved this.
Court’s Reasoning and Findings:
The House of Lords held that Dunlop could not sue Selfridge because there was no direct contract between Dunlop and Selfridge.
Dunlop’s contract was with Dew & Co., and Dew & Co. had a separate contract with Selfridge.
Therefore, the doctrine of privity prevented Dunlop from enforcing the resale price clause against Selfridge.
The court also held that the clause was enforceable between Dunlop and Dew & Co., and between Dew & Co. and Selfridge, but Dunlop could not enforce it against a party with whom it had no contract.
Judgment:
Dunlop’s claim against Selfridge was dismissed for lack of privity.
The court reinforced that third parties cannot enforce contractual terms unless they are parties to the contract.
Significance:
This case is a leading authority on privity of contract.
It clarified that only parties to a contract have rights and liabilities under it.
The case highlighted the limitations of passing contractual obligations through a chain of contracts.
The doctrine of privity was later softened by legislation (e.g., Contracts (Rights of Third Parties) Act 1999 in the UK), but this case remains foundational.
Related Case Law:
Tweddle v. Atkinson (1861) 1 B & S 393:
Established that a third party cannot enforce a contract even if it benefits them.
Beswick v. Beswick (1968) AC 58:
Exception where a third party, especially in trust or agency contexts, may enforce contractual rights.
Contracts (Rights of Third Parties) Act, 1999 (UK):
Statutory reform allowing third parties to enforce contract terms in specific circumstances, relaxing privity rules.
Carlill v. Carbolic Smoke Ball Co. (1893) 1 QB 256:
Important in contract law, though on offer and acceptance, not privity.
Summary:
| Aspect | Detail |
|---|---|
| Parties | Dunlop Pneumatic Tyre Co. Ltd. vs. Selfridge & Co. Ltd. |
| Jurisdiction | House of Lords (UK) |
| Legal Area | Contract law – privity of contract; resale price maintenance |
| Key Issue | Can a third party enforce a contract term? |
| Held | No, Dunlop could not enforce the clause against Selfridge due to lack of privity. |
| Significance | Established the doctrine of privity of contract |
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