Dunlop Pneumatic Tyre Co Ltd v New Garage & Motor Co Ltd [1914] UKHL 1 – Law Journals

Contracting: Limiting the damage

Clare Auty and Doris Woo examine the application of penalty clauses in procurement contracts ‘Although the penalty rule still stands, it is clear… that establishing a valid legitimate interest is effectively a trump card for allowing a broad spectrum of financial remedies in properly negotiated contracts.’The use of liquidated damages clauses and service credits, such …

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Penalty Clauses: A high threshold

The Supreme Court has issued a landmark judgment on penalty clauses. Paul Joukador, Nathan Searle, Jane Dockeray and Ingrid Stables discuss the implications ‘It remains to be seen how the courts will determine what is and is not extravagant, exorbitant or unconscionable, particularly where the contracting parties are not on a level playing field.’In its …

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Construction Trends: Keeping an eye on the ball

Riaz Hussain examines legal and litigation trends for construction in the year ahead ‘Although in most respects the Supreme Court is not saying anything new [in Arnold v Britton], the emphasis of the majority’s view claws back from some of the more purposive approaches taken in recent cases. The impact of this decision on construction …

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Damages: Avoiding a penalty

Noel McMichael and Clare Arthurs analyse the impact of Makdessi ‘The Supreme Court looked at two main questions: when is the penalty rule engaged, and what makes a contractual provision penal?’ The Supreme Court has re-examined the rule against penalties in contracts. Its judgment in the joined cases of Cavendish Square Holding BV v El …

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Damages: Offside – a new test for penalty clauses

Paul Joukador and Nathan Searle report on a landmark Supreme Court judgment ‘Provided that the relevant contractual provision: (i) serves a legitimate business interest(s); and (ii) is not extravagant, exorbitant or unconscionable, it will not be a penalty and therefore will be enforceable.’ It is common practice to include a clause in a contract which …

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The Law On Penalties: Where are we now?

Natalie Appleby considers the position on penalties after the recent Supreme Court ruling in Cavendish and ParkingEye ‘The Supreme Court considered the development of the doctrine over time and declared that Lord Dunedin’s four tests from Dunlop have been taken out of context and applied too rigidly as a “quasi-statutory code”.’ Just over a century …

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Construction Focus: Penalty shoot-out

A recent case has held that a parking charge was commercially justifiable, and not a penalty. John Starr outlines the case and how it affects liquidated damages clauses in construction contracts ‘A party is entitled to breach its contract and a provision in a contract which is designed to deter breach will generally be unenforceable …

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Employment Contracts: Parameters of penalty clauses

Nicola Bartholomew and Heather Barc consider two recent cases on penalty clauses in the employment context ‘Advisers and employers should discuss what steps the employer might take when owed money by a departing employee… while well-drafted express clauses permitting deductions from salary are useful, they might not be sufficient if the employee is not owed …

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Contracting: Showing the red card

Jack O’Farrell analyses the implications of a recent decision on penalty clauses ‘The underlying rationale of the doctrine of penalties is that the court will grant relief against the enforcement of provisions for payment in the event of breach, where the amount to be paid or lost is out of all proportion to the loss …

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Pay In Lieu Of Notice: Discovery of misconduct after dismissal

David Ashmore considers the impact of a recent Court of Appeal decision on the Boston Deep Sea Fishing principle ‘Cavenagh concerns whether Boston Deep Sea Fishing can come to the aid of an employer defending a debt claim brought by an employee for an unpaid payment in lieu of notice (PILON).’ In defending a claim …

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