Facts[]
Dunlop, a tyre manufacturing company, made a contract with Dew, a trade purchaser, for tyres at a discounted price on condition that they would not resell the tyres at less than the listed price and that any reseller who wanted to buy them from Dew had to agree not to sell at the lower price either. Dew sold the tyres to Selfridge at the listed price and made Selfridge agree not to sell at a lower price either and that they would pay £5 in damages if they violated this agreement. Selfridge proceeded to sell the tires below the price he promised to sell them for. Dunlop brought action and was successful at trial but this was overturned by the House of Lords
Issue[]
- Is it lawful for Dunlop to sue Selfridge even though no contractual relationship exists between them?
Decision[]
Appeal Dismissed.
Reasons[]
The Lords agree fundamentally with the decision of the Court of Appeal; there was no contract between Dunlop and Selfridge and therefore Dunlop cannot sue. There are a few fundamental principles of law underpinning this decision: a) the doctrine of privity, which states that only a party to a contract can sue in breach of the contract; b) the doctrine of consideration would require the promisee (Dunlop) to give consideration to Selfridge for the contract to be completed, and this did not occur as Dunlop did not give anything to Selfridge here (Selfridge made a promise to Dunlop to only sell at a certain price but it was gratuitous because Dunlop gave no consideration in return); c) the only way that a principal not named in a contract can be sued is if he acted as an agent on behalf of one of the parties privy to the contract. Dew was not acting as an agent for Dunlop, therefore this does not apply in this case. If Dew were Dunlop's agent, then the effect of the two deals would really be one deal. In an agency agreement, the Agent disappears and the contract is between the principal (Dunlop) and the third party (Selfridges) The principal gives tires and the third party gives money. This did not happen here. The court held that the tires belonged to Dew, not Dunlop. They had already sold them.
Ratio[]
- Only parties to a contract can sue for a breach of the contract.
- The only exception to this rule is if a party named in the contract was acting as an agent of an unnamed party; in this case, the unnamed party can be sued.