Dunlop Pneumatic Tyre Co Ltd v Selfridge & Co Ltd

Factual and Procedural Background

Company A (a manufacturer of motor-tyre products) sold its goods through authorised factors, including Company C. Under an October 12, 1911 “price-maintenance” agreement, Company C received discounts from Company A in exchange for agreeing not to resell below Company A’s list prices and for promising to secure identical undertakings from downstream purchasers.

On January 2, 1912 Company C resold tyres to Company B (a wholesale and retail merchant). In consideration of a discount, Company B signed a letter undertaking not to sell the tyres below Company A’s list prices and to pay £5 per item in the event of breach. Company A was not named as a party to that letter.

The trial judge found that Company B later sold tyres below the stipulated prices. Company A, although not an express party to the January 2 letter, sued Company B seeking (i) an injunction restraining further under-price sales and (ii) liquidated damages under the £5-per-item clause. Both the trial court and the Court of Appeal rejected Company A’s claim. Company A appealed to the House of Lords.

Legal Issues Presented

1. Whether Company A, not named in the resale contract, could nevertheless sue Company B on that contract as an undisclosed principal.
2. Whether valid consideration moved from Company A to Company B sufficient to support an enforceable contract between them.
3. Whether the contract created an enforceable jus quaesitum tertio in favour of Company A contrary to English contractual doctrine.

Arguments of the Parties

Appellants' Arguments (Company A)

• Company C acted as Company A’s agent when obtaining the January 2 undertaking; therefore Company A was an undisclosed principal entitled to sue.
• The discount allowed to Company B (10 %) should be treated as consideration moving from Company A because Company A “permitted and enabled” the sale on those terms.
• Even if agency were doubted, Company A acquired enforceable third-party rights under the contract.

Respondents' Arguments (Company B)

• Only parties to a contract may sue upon it; Company A was not a party to the January 2 letter.
• No consideration moved from Company A to Company B; the discount came solely from Company C’s margin.
• English law does not recognise contractual jus quaesitum tertio; therefore Company A could not enforce the promise.

Table of Precedents Cited

Court's Reasoning and Analysis

Privity principle. Viscount Haldane reiterated that, under English law, only a party to a contract may sue upon it; contractual rights cannot be conferred on a stranger save via property concepts such as trusts.

Consideration. All members of the House held that no consideration moved from Company A to Company B. The discount came entirely out of Company C’s pocket; Company A neither gave nor promised anything to Company B and did not forbear from any legal right.

Agency contention. Even assuming Company C could in some circumstances act for Company A, the same document could not operate uno flatu both as Company C’s own contract and as an agency contract. The written terms treated Company C as principal; allowing Company A to sue would contradict the document (Judge Atkinson invoking Humble v. Hunter).

No third-party right. The promise to pay £5 per tyre, although expressed to be payable to Company A, was characterised as an attempted jus quaesitum tertio, which English law does not recognise.

Resulting dilemma. If Company A alleged it was principal, it supplied no consideration; if it alleged consideration via “permission to sell,” that permission was external to, and inconsistent with, the written contract. Either way, the claim failed.

Holding and Implications

Appeal dismissed; judgment for Company B affirmed.

The House of Lords held that Company A could not enforce the resale price-maintenance undertaking because it was not a party to the contract and had furnished no consideration. The decision confirms the strict application of privity and consideration in English contract law and rejects attempts to enforce third-party rights absent statutory intervention. Its immediate effect is to leave Company A without a remedy against Company B, though Company C may have contractual remedies not addressed in the opinion. No new precedent was set, but existing doctrines were firmly restated.