DUNLOP PNEUMATIC TYRE CO LTD V NEW GARAGE MOTOR CO LTD
Dunlop Pneumatic Tyre Co Ltd (‘Dunlop’) entered into a contract to sell tyres and other accessories to New Garage Motor Co Ltd (‘New’) on terms design to ensure that the tyres were not sold below the manufacturers listed price. New agreed to pay Dunlop “the sum of £5 for each and every tyre … sold in breach of this agreement, as and by way of liquidated damages and not as a penalty”. New sold tyres in breach of the agreement.
Whether the clause constituted a penalty and, consequently, was unenforceable.