December 07 , 2015

ONTIER UK Newsletter: ParkingEye and penalties – the Supreme Court puts fresh tyres on the rule in Dunlop


On 4 November 2015 the Supreme Court delivered a judgment rewriting the aged test on contractual penalty clauses. The new modern authorities on contractual penalties are Cavendish Square Holdings BV (Appellant) v. Talal El Makdessi (“Makdessi”) and ParkingEye Limited v. Beavis (Appellant) [2015] UKSC 67 (“ParkingEye”).

The rule on penalties has been controversial over the years, and there have been calls to abolish the rule altogether as an affront on the freedom to contract. The clarification in Makdessi has been welcomed and long awaited since the penalties test was set a century ago in Dunlop Pneumatic Tyre Co. Ltd v New Garage and Motor Co Ltd [1915] AC 79 ('Dunlop'). The Supreme Court was unanimous that the test relating to penalties should remain, but it was also decided that there should be a shift in focus from the classic genuine pre-estimate of loss test to a more flexible emphasis on protecting a legitimate interest.

Read the article, written by Derek Stinson -corporate lawyer at ONTIER UK-, in the document attached.