Shell UK Ltd v Lostock Garages Ltd [1976] 1 WLR 1187
Competition law – Restraint of trade – Agreements
Facts
The defendant was a small garage which was tied to Shell along with two other neighbouring garages, by way of a solus agreement. There was a petrol price war in 1975, during which Shell had a support scheme that enabled them and their partner garages to sell for 70p per gallon. However, in line with the terms that had been agreed by the parties, Shell restricted the defendant garage to sell for no less than 75p per gallon and as such, their sales sold dramatically, by 44,000 gallons in a year. As such, the defendant purchased their fuel elsewhere and Shell sought for an injunction to prevent them from doing so. The defendant garage claimed that Shell had unreasonably restricted their trade. The judge during the initial trial found that Shell could not enforce the contract and awarded the defendant damages. Both parties appealed this decision.
Issue
The court was required to consider whether the imposition by Shell on to the defendant garage constituted an unreasonable restriction on the defendant. If so, the court may enable the defendant to terminate the original agreement and to seek supply from another party under better contractual terms.
Decision/Outcome
The court dismissed the appeal and cross-appeal of the parties. It was found that the agreement was unreasonable for as long as the agreement infringed upon the defendant garage, but was not unreasonable at its inception. However, it should be noted that there was no implied contractual term that enabled the defendants to terminate the original agreement.
Updated 20 March 2026
This article accurately summarises the Court of Appeal’s decision in Shell UK Ltd v Lostock Garage Ltd [1976] 1 WLR 1187. The case remains good law and continues to be cited in discussions of implied terms and restraint of trade in English contract law. No subsequent statutory changes or later appellate decisions have overturned or materially altered the principles established in this case. Students should note, however, that the broader legal landscape governing solus agreements and petrol supply arrangements has evolved significantly since 1976, primarily through EU and now UK competition law (including the Competition Act 1998 and the retained EU vertical agreements block exemption framework, as updated by the Vertical Agreements Block Exemption Order 2022). The restraint of trade doctrine as discussed in this case remains relevant, but modern challenges to such agreements would typically engage competition law analysis alongside common law principles. The article’s summary of the implied terms aspect of the judgment — that no implied term permitted termination — reflects the orthodox position and remains accurate.
