Dunlop Pneumatic Tyre Co Ltd v Selfridge & Co Ltd

[1915] AC 847

Independent editorial summary — not the official judgment. Read the full judgment via the source link.

This page mainly applies to England and Wales. Scotland and Northern Ireland may have different rules — check the jurisdiction before relying on this information.

Ratio Decidendi

The doctrine of privity of contract means that only a party to a contract — someone who gave consideration and was a party to the agreement — may sue to enforce it. A third party who was the intended beneficiary of a promise cannot sue on that promise, however clear the intention to confer a benefit on them. The rule is reinforced by the requirement that consideration must move from the promisee: a person who has provided no consideration has no enforceable right even if the contract was plainly intended for their benefit. The case, decided on the same day as Dunlop v New Garage, confirmed two separate doctrines operating in tandem: privity and the rule that consideration must move from the promisee.

Facts

Dunlop sold tyres to Dew & Co (a dealer) on terms that Dew would not sell below list price and would obtain a similar undertaking from retailers. Dew sold to Selfridge, who agreed not to sell below list price. Selfridge sold below list price and Dunlop sued.

Judgment Summary

The House of Lords unanimously held that Dunlop could not enforce the agreement between Dew and Selfridge. Viscount Haldane LC, delivering the leading speech, identified two fundamental difficulties with Dunlop's claim. First, only a party to a contract can sue on it: Dunlop was not a party to the Dew-Selfridge agreement. Second, consideration must move from the promisee: Dunlop gave no consideration to Selfridge. The fact that the agreement was reached on Dunlop's behalf, or that Dunlop were the economic beneficiaries of the undertaking, was irrelevant — the common law admitted no exception for third-party beneficiaries. Lord Dunedin, noting Dunlop's difficulty, suggested Dunlop might have had a claim in tort (in the nature of inducing breach of contract against Dew) or under agency principles, but neither was made out on the pleadings. The case confirmed that Tweddle v Atkinson (1861) 1 B&S 393 correctly denied third-party enforcement rights and that the doctrine extended to commercial distribution chains.

Key Quotes

"In the law of England certain principles are fundamental. One is that only a person who is a party to a contract can sue on it."
— Viscount Haldane LC at 853

"A second principle is that if a person with whom a contract not under seal has been made is to be able to enforce it, consideration must have been given by him to the promisor or to some other person at the promisor's request."
— Viscount Haldane LC at 853

"My Lords, I confess that this case is to my mind a strong one for urging that a contract may be made with A to pay money to B … but our courts have decided to the contrary and I must follow them."
— Lord Dunedin at 855

Subsequent Treatment

Followed

Followed as the canonical House of Lords authority on privity, applied in Beswick v Beswick [1968] AC 58 (HL), where the Law Lords declined to depart from the privity rule and noted reform was for Parliament, not the courts.

Applied

Applied in Scruttons Ltd v Midland Silicones Ltd [1962] AC 446 (HL), where a third-party stevedore could not rely on an exclusion clause in a bill of lading contract to which it was not a party.

Limited

Significantly limited by the Contracts (Rights of Third Parties) Act 1999, which allows a third party who is expressly identified in the contract (by name or class) or whose benefit the contract is intended to confer to enforce relevant terms, subject to defences. The strict common law rule in Dunlop v Selfridge remains operative where the 1999 Act does not apply.