July 1, 1914
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The House took time for consideration.
July 1. LORD DUNEDIN. My Lords, the appellants, through an agent, entered into a contract with the respondents under which they supplied them with their goods, which consisted mainly of motor-tyre covers and tubes. By this contract, in respect of certain concessions as to discounts, the respondents bound themselves not to do several things, which may be shortly set forth as follows: not to tamper with the manufacturers' marks; not to sell to any private customer or co-operative society at prices less than the current price list issued by the Dunlop Company; not to supply to persons whose supplies the Dunlop Company had decided to suspend; not to exhibit or to export without the Dunlop Company's assent. Finally, the agreement concluded (clause 5), "We agree to pay to the Dunlop Pneumatic Tyre Company, Ltd. the sum of 5 l. for each and every tyre, cover or tube sold or offered in breach of this agreement; as and by way of liquidated-damages, and not as a penalty." The appellants, having discovered that the respondents had sold covers and tubes at under the current list price, raised action and demanded damages. The case was tried and the breach in fact held proved. An inquiry was directed before the Master as to damages. The Master inquired, and assessed the damages at
The respondents appealed to the Court of Appeal, when the majority of that Court, Vaughan Williams and Swinfen Eady L.JJ., held, Kennedy L.J.(dissenting, that the said sum of 5 l. was a penalty, and entered judgment for the plaintiffs for the sum , of 2 l. as nominal damages. Appeal from that decision is now before your Lordships' House.
My Lords, we had the benefit of a full and satisfactory argument, and a citation of the very numerous cases which have been decided on this branch of the law. The matter has been handled, and at no distant date, in the Courts of highest resort. I particularly refer to the Clydebank Case1 in your Lordships' House and the cases of Public Works Commissioner v. Hills2 and Webster v. Bosanquet3 in the Privy Council. In both of these cases many of the previous cases were considered. In view of that fact, and of the number of the authorities available, I do not think it advisable to attempt any detailed review of the various cases, but I shall content myself with stating succinctly the various propositions which I think are deducible from the decisions which rank as authoritative:-
Clydebank Engineering and Shipbuilding Co. v. Don Jose Ramos Yzquierdo y Castaneda
Clydebank Case Kemble v. Farren Lord Elphinstone v. Monkland Iron and Coal Co.
Turning now to the facts of the case, it is evident that the damage apprehended by the appellants owing to the breaking of the agreement was an, indirect and not a direct damage. So long as they got their price from the respondents for each article sold, it could not matter to them directly what the respondents did with it. Indirectly it did. Accordingly, the agreement is headed "Price Maintenance Agreement," and the way in which the appellants would be damaged if prices were cut is clearly explained in evidence by Mr. Baisley, and no successful attempt is made to controvert that evidence. But though damage as a whole from such a practice would be certain, yet damage from any one sale would be impossible to forecast. It is just, therefore, one of those cases where it seems quite reasonable for parties to contract that they should estimate that damage at a certain figure, and provided that figure is not extravagant there would seem no reason to suspect that it is not truly a bargain to assess damages, but rather a penalty to be held in terrorem.
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1[1905] A. C. 6
2[1906] A. C. 368.
3[1912] A. C. 394.
1[1906] A. C. 368.
2[1912] A. C. 394.
3[1905] A. C. 6.
46 Bing. 141.
521 Ch. D. 243.
611 App. Cas. 332
1[1905] A. C. at p. 11.
2[1912] A. C, at p. 398.
1[1905] A. C. 6
2[1906] A. C. 368.
3[1912] A. C. 394.
1[1906] A. C. 368.
2[1912] A. C. 394.
3[1905] A. C. 6.
46 Bing. 141.
521 Ch. D. 243.
611 App. Cas. 332
1[1905] A. C. at p. 11.
2[1912] A. C, at p. 398.