1. Law of Contract Privity of Contract/Third Party Rights

2. Third party rights Doctrine of Privity of Contract 1) Only a party to a contract can be sued on a contract 2) Only a party to a contract can sue on a contract

3. Third party rights 1) Common law rules & exceptions 2)Common law amended by Contracts (rights of third parties) Act 1999

4. Third party rights Two general common law rules of doctrine 1) A 3rd party cannot be subjected to a burden by a contract 2)A person who was not party to a contract could not sue upon the contract, in order to obtain the performance, and benefit from it. (even if it was intended to benefit him)

5. No privity to be sued Dunlop v Selfridge (1915) Facts : Dunlop contracted with Dew & Co and at their request Dew & Co, had placed a minimum sale price in their contract with Selfridge. Selfridge sold some tyres below the minimum price. Held : Dunlop cannot sue selfridge as they were not party to the contract between Dunlop and Dew.

6. No privity to sue Tweedle v Atkinson (1861) Facts : The fathers of married couple agreed in writing that both should pay money to the husband, adding also that the husband should have the power to sue them for the respective sums. Held : The husbands suit was dismissed as he had no privity to sue in the contract.

7. No privity to sue Beswick v Beswick (1968) Facts : Peter Beswick sold his coal business to his nephew John Beswick, in return for a promise to pay £6 10s a week to Peter Beswick for the rest of his life and thereafter £ 5 a week to Peter Bewick’s wife for the rest of his life. John stopped paying his Uncle’s wife upon his uncle’s death. Held : Mrs Beswick cannot sue in her personal capacity as she had no privity to the contract.

8. Privity-Statutory exception The rule of the doctrine that prohibits the conferring of benefits to a third party via a contract that he has no privity to has been amended by statute: Contracts (Rights of 3rd parties Act 1999)

9. Harsh rule-common law exceptions If Privity was inflexibily applied it would cause considerable injustice and inconvenience : Common law exceptions : 1)Collateral Contracts 2) Agency 3)Trusts 4)Restrictive Covenants 5)Statutes

10. Collateral Contracts A contract between two parties may be accompanied by a collateral contract between one of them(either the promisor or the promisee) and a third person relating to the same subject matter.

11. Collateral Contracts Shanklin Pier v Detel Products [1951] Facts : The Plaintiff’s had employed contractors to paint a pier. They told them to buy paint made by the defendants. The defendants had told them that the paint would last for seven years. It only lasted three months. Held : The court decided that the plaintiffs could sue the defendants on the collateral contract.

12. Agency Scruttons Ltd v Midland Silicones Ltd [1962] Facts : The claimants who were the owners of a drum of chemicals entered into a contract with a firm of shippers for the transportation of the drum. Under the contract the shippers limited their liability to the claimants to £500 per package. Stevedores who were employed by the carriers to offload the drums negligently dropped it. The claimants brought an action in tort against the stevedores. The stevedores sought to rely on the exemption clause.

13. Agency Scruttons Ltd v Midland Silicones Ltd [1962] Held : as per Lord Reid 1) There was no doctrine of vicarious immunity in the English law. 2) The limitation clause only referred to the carrier shipping company, and thus in capable of protecting the stevedores. This lead to immense commercial inconvenience, because it became difficult for employers to give his employees and agents the benefit of an exclusion clause negotiated by the employer.

14. Agency Scruttons Ltd v Midland Silicones Ltd [1962] As per Lord Reid’s obiter : The stevedores could have claimed if : 1) The bill of lading makes it clear that the stevedore is intended to be protected by the provisions. 2) The carrier in addition to contracting for these provisions on his own behalf is also contracting as agent for the stevedore. 3) The carrier has authority from the stevedores to do that. 4) consideration must move from the stevedore

15. Agency New Zealand Shipping Co. v A M Satterthwaite (The Eurymedon) [1975] Privy Council : Facts : Similar to the Scruttons case Held : 1) When the consignor signed the bill of lading they made an offer to all the world that anyone who unloaded their goods would be entitled to the benefit of the exclusion clause. 2) This offer was accepted once stevedores started handling the goods. 3) The consideration supplied was the performance of the contractual duty owed to the shipper.

16. Trusts A trust is an equitable obligation to hold property on behalf of another. A trust is an equitable obligation to hold property on behalf of another. Les Affreteurs Reunis v Walford [1919] HL Facts : Terms of charterparty between a shipowner and a charterer stated that the shipowner would pay a commission to the broker who had negotiated the contract but was not party to the contract. Facts : Terms of charterparty between a shipowner and a charterer stated that the shipowner would pay a commission to the broker who had negotiated the contract but was not party to the contract. Held : It was held that the broker was a “beneficiary” of the trust, : the subject matter of the trust being the contractual right of action created by the promise of the shipowner

17. Tort / Restrictive covenants Tulk V Moxhay (1848) Tulk V Moxhay (1848) Facts : P owned several houses in Leicester Square, and he sold the garden in the cenre to Elms, who covenated that he would keep the gardens and railings in their present condition. Facts : P owned several houses in Leicester Square, and he sold the garden in the cenre to Elms, who covenated that he would keep the gardens and railings in their present condition. The land was sold to the defendants who knew of the restriction contained in the contract. The defendant wanted to build on the land and the claimant sought to get an injunction to stop the defendant. Held : The covenant could be enforced in equity in land law, against all subsequent purchasers who had notice of the covenant.

18. Statutory exceptions Price maintenance agreements Price maintenance agreements Various insurance contracts Married Woman’s Property Act 1882 S148(4) Road Traffic Act 1927 : allows injured party to recover compensation from insurance company.

19. Damages for 3rd party The question of the extent to which a contracting party may recover for loss sustained by a third party who is intended to benefit from the contract was raised in : The question of the extent to which a contracting party may recover for loss sustained by a third party who is intended to benefit from the contract was raised in : Jackson v Horizon Holidays [1975] : Lord Denning Facts : Plaintiff recovered £500 for “mental stress” due to disastrous holiday. CA thought that the amount was reasonable because he was also claiming for the distress that the family suffered. But see Woodar Investment Development v Wimpey Construction (1980) where the HL decided that a contracting party cannot claim for loss of 3rd party.

20. Criticisms of Doctrine of Privity General criticisms against the doctrine : General criticisms against the doctrine : 1) that it failed to give effect to the expressed intentions of the parties e.g. Tweddle v Atkinson 2) Law was unduly complex, as exceptions lie in trust, tort & “artificial” exceptions like collateral contracts 3) It was commercially inconvenient. e.g. The Eurymedon, Scruttons v Midlands 4) Would lead to results that were fundamentally unjust. e.g. Tweddle v Atkinson, Beswick v Beswick

21. Contracts (Rights of third parties) Act 1999 Upon the recommendations of the Law commission report (1996), the 1999 Act was passed. S1(1)a & b of the act provides : Right of 3rd party to enforce contractual terms S1 (1): subject to the provisions of this act, a person who is not a party to a contract may in his own right enforce a term of the contract if - a) the contract expressly provides that he may, or b) subject to subsection (2), the term purports to confer a benefit on him.

22. Contracts (Rights of third parties) Act 1999 S (3) The third party must be expressly identified in the contract by name, as a member of a class or as answering a particular description but need not be in existence when the contract is entered into. S(5) …there shall be available to the third party any remedy that would have been available to him in an action for breach of contract, if he had been a party… S(6) Where a term of contract excludes or limits liability in relation