From time to time, a company may be involved in a contractual dispute that is subject to a hefty fine. These disputes relate to sanction clauses and there are certain circumstances in which such sanctions may or may not be enforceable. This is a condition imposed on a party that states that it is necessary for the party to fulfil the condition, since one of the main conditions of the contract is that it be included in the agreement. The Law on Contractual Penalties in England was entirely drafted by ordinary judges, with no general right of intervention. The Supreme Court stated that “[d] there is a punitive rule in England is an old building built at random that has not stood up well.”  The history of the law in this area is the best way to look at in the case of Dunlop Pneumatic Tyre Co Ltd – v – New City Garage , in the New City Garage broke a contract with Dunlop for the sale of tires at an agreed price and the sale of Dunlop tires to certain customers on the blacklist. Dunlop filed a complaint and attempted to impose a provision in the contract that provided that, in the event of a breach of contract, a fixed amount would be payable. The House of Lords rejected Dunlop`s assertion on the grounds that the amounts set were penalties and not genuine pre-assessments of the injury. In its decision, the Court was undoubtedly influenced by the fact that the contract provided that, in the event of an infringement, a fixed price was payable, regardless of the nature of the offence. Such a clause made it more difficult to assert that the lump sum constituted a genuine pre-emption of the injury.
In its decision, the Court set out the following: in recent cases, the courts have taken a much more relaxed approach to sanctions. In The Philips Hong Kong Ltd/AG case of Hong Kong, the Privy Council expressly approved Dickson J.`s submissions to the Supreme Court of Canada in Elsey/J.G. Collins Insurance Agencies Ltd that, as part of its comprehensive review of Makdessi`s previous authorities, the Supreme Court made a series of obiter diktats in respect of sanctions. , many of which were considered questionable, misinterpreted by previous decisions or simply misinterpreted.  The origin of the Common Law Rules on sanctions is often seen as a decision of the House of Lords in the Dunlop Pneumatic Tyre Co Ltd v. New Garage- Motor Co Ltd decision in 1914.  But the jurisdiction is actually much older.