19-Continued: Privity And Intent To Creat Legal Relations

Question 1

What is privity of contract?

Answer 1

Only those who are parties to a contract are bound by it and can benefit from it.

Question 2

Only those who are parties to a contract are bound by it and can benefit from it.

What principle is this referring to?

Answer 2

Privity of contract.

Question 3

What case demonstrates the principle of privity?

Answer 3

Dunlop Tyres v Selfridge (1915)

Facts: Dunlop sold tyres to B with promise not to sell for less. B sold to Selfridge for less and Dunlop attempted to sue Selfridge.

Question 4

Dunlop Tyres v Selfridge (1915)

What principle does this support?

Answer 4

Principle: Privity

Facts: Dunlop sold tyres to B with promise not to sell for less. B sold to Selfridge for less and Dunlop attempted to sue Selfridge.

Question 5

What rule is the rule of privity based on and what case supports that rule?

Answer 5

Consideration must move from the promisee

Tweddle v Atkinson (1861)

Question 6

What case demonstrates a judge going against the rule of privity regarding people acting on behalf of a group?

Answer 6

Jackson v Horizon Holidays (1975)

Facts: Jackson booked holiday for himself and fam but holiday was not satisfactory. Damages awarded reflected loss suffered by all members of party.

Question 7

Jackson v Horizon Holidays (1975)

What does this case demonstrate?

Answer 7

Example of: when rule of privity was not followed to avoid injustice.

Facts: Jackson booked holiday for himself and fam but holiday was not satisfactory. Damages awarded reflected loss suffered by all members of party.

Question 8

Name two general exceptions to the rule of privity, and example case or circumstance where necessary.

Answer 8

1) Agency-acting on behalf of another person (the principal). Such as employee making contract on behalf of company.
2) Collateral contracts-Shanklin Pier v Detel Products Ltd (1951)

Question 9

What case demonstrates that a general exception to the rule of privity can be found in collateral contracts?

Answer 9

Shanklin Pier v Detel Products (1951)

Facts: Pier told contractors only to use paint by Detel. Detel attempted defence of privity but consideration existed via contractors.

Question 10

Shanklin Piet v Detel Products (1951)

Answer 10

Example of: Collateral contract exempting the rule of privity.

Facts: Pier told contractors only to use paint by Detel. Detel attempted defence of privity but consideration existed via contractors.

Question 11

Under s1 Contracts (Rights of Third Parties) Act 1999 a third party may enforce obligation on both or either party if what three conditions are met?

Answer 11

1) 3rd party expressly identified by name.
2) expressly states that 3rd party may enforce contract
3) the terms of contract are attempt to confer benefit on the 3rd party

Question 12

What act and section provides that a third party can enforce a contract?

Answer 12

Contracts (Rights of Third Parties) Act 1999 s1

Question 13

What case demonstrates that before the Contracts (Rights of Third Parties Parties) Act 1999 a third party had difficulty in enforcing a contract?

Answer 13

Beswick v Beswick (1967)

Facts: Beswick made contract with nephew to sell business in exchange for weekly payments for life and for wife after his death. After death wife did not receive payment and D used defence of privity which was upheld.

Question 14

Beswick v Beswick (1967)

Answer 14

Example of: how before the Contracts (Rights of Third Parties) Act 1999 a 3rd party couldn’t enforce a contract.

Facts: Beswick made contract with nephew to sell business in exchange for weekly payments for life and for wife after his death. After death wife did not receive payment and D used defence of privity which was upheld.

Question 15

Contracts (Rights of Third Parties) Act 1999 s3

Answer 15

Provides that where 3rd party is enforcing a contract, person who made contract can rely on any defence or valid exclusion afforded the 2bd party.

Question 16

Provides that where 3rd party is enforcing a contract, person who made contract can rely on any defence or valid exclusion afforded the 2bd party.

Act and section?

Answer 16

Contracts (Rights of Third Parties) Act 1999 s3

Question 17

What case demonstrates that legal relations may not always exist in a business transaction?

Answer 17

Jones v Vernons Pools (1938)

Facts: C’s football betting slip had ‘binding in honour only’ written on it, meaning there was no intention to create legal relations.

Question 18

Jones v Vernons Pools (1938)

Answer 18

Principle: In business transactions there is not always intent to create legal relations.

Facts: C’s football betting slip had ‘binding in honour only’ written on it, meaning there was no intention to create legal relations.

Question 19

Which case demonstrates that burden of proof is on the party seeking to est. that there is no legal intention?

Answer 19

Edwards v Skyways (1969)

Facts: Redundancy pay to pilots.

Question 20

Edwards v Skyways (1969)

Answer 20

Principle: burden of proof is with party seeking to est. no legal intention.

Facts: Redundancy pay to pilots.

Question 21

What case demonstrates that promotional gifts can constitute a legal intention?

Answer 21

Esso v Customs and Excise (1976)

Facts: World Cup coins with buying petrol. Esso trying to gain business from promotion, therefore legal intention exists.

Question 22

Esso v Customs and Excise (1976)

Answer 22

Principle: promotional gifts can constitute intention to create legal relations.

Facts: Esso offered World Cup coins to people buying fuel.

Question 23

What case demonstrates that prizes offered in competitions can constitute intention to create legal relations?

Answer 23

McGowan v Radio Buxton (2001)

Facts: Radio offered prize car to winner, but only sent a model car. Radio attempted defence of no legal relations but this failed.

Question 24

McGowan v Radio Buxton (2001)

Answer 24

Principle: competition prizes can constitute intention to form legal relations if they are to increase business.

Facts: Radio offered prize car to winner, but only sent a model car. Radio attempted defence of no legal relations but this failed.

Question 25

What case demonstrates that a letter of comfort is not always an intention to create legal relations?

Answer 25

Kleinwort v Malaysian Mining Corp (1989)

Facts: K lent £10m to a subsidiary of MMC. MMC would not guarantee loan but issued comfort letter. No intention to create legal relations, if K needed a guarantee they should have insisted on one.

Question 26

Kleinwort v Malaysian Mining Corp. (1989)

Answer 26

Principle: A letter of comfort is not always an intention to create legal relations.

Facts: K lent £10m to a subsidiary of MMC. MMC would not guarantee loan but issued comfort letter. No intention to create legal relations, if K needed a guarantee they should have insisted on one.

Question 27

What is a letter of comfort?

Answer 27

Written assurance by parent company in respect of its subsidiary that it can repay a loan.

Question 28

Written assurance by parent company in respect of its subsidiary that it can repay a loan.

What is this called?

Answer 28

A letter of comfort

Question 29

What case demonstrates an occasion when it was not clear whether it was a business or domestic agreement?

Answer 29

Sadler v Reynolds (2005)

Facts: Journalist ghost-writing for businessman who were friends.

Question 30

Sadler v Reynolds (2005)

Answer 30

Example of: somewhere between business and domestic agreement.

Facts: Journalist ghost-writing for businessman who were friends.

Question 31

Are social and domestic agreements assumed to be binding or non-binding?

Answer 31

Non-binding

Question 32

What case demonstrates that an agreement between a married couple may not be binding especially after divorce?

Answer 32

Balfour v Balfour (1919)

Facts: Husband working abroad agreed to pay wife income of £30/month then they divorced but agreement was not legally binding.

Question 33

Balfour v Balfour (1919)

Answer 33

Example of: a case where an agreement made by married couple may not be binding especially after divorce.

Facts: Husband working abroad agreed to pay wife income of £30/month then they divorced but agreement was not legally binding.

Question 34

What case is an example of agreements made between a previously married couple would usually be regarded as binding?

Answer 34

Merritt v Merritt (1970)

Facts: Husband left wife and agreed to pay income if she paid off mortgage. Held to he legally binding.

Question 35

Merritt v Merritt (1970)

Answer 35

Example of: agreements made after divorce are usually seen as intended to be binding.

Facts: Husband left wife and agreed to pay income if she paid off mortgage. Held to he legally binding.

Question 36

What case demonstrates that there is a presumption that cohabitants would not intend to create enforceable contracts between themselves?

Answer 36

Jones v Padavatton (1969)

Facts: Mother asks daughter to move in with her while she studies but daughter doesn’t pass exams for years. No legal intention found.

Question 37

Jones v Padavatton (1969)

Answer 37

Principle: presumed that cohabitants don’t intend to create enforceable contracts amongst themselves.

Facts: Mother asks daughter to move in whilst she studies for exams but girl doesn’t pass after years. No legal intention found.

Question 38

What case demonstrates that if money changes hands even in social situations this is usually regarded as intending to create legal relations?

Answer 38

Simpkins v Pays (1955)

Facts: A lodger and 2 other household members enter competition and fill in form in landlords name. They must share winning for as seen as legally binding.

Question 39

Simpkins v Pays (1955)

Answer 39

Principle: if money changes hands even in social situations then legal intention is presumed.

Facts: A lodger and 2 other household members enter competition and fill in form in landlords name. They must share winning for as seen as legally binding.

Question 40

What case demonstrates that if parties put financial security at risk then there is presumed to be an intention to create legal relations?

Answer 40

Parker v Clarke (1960)

Facts: Young couple persuaded by older couple to move in to their house with promise to inherit property. Couples fell out but it was legally binding.

Question 41

Parker v Clarke (1960)

Answer 41

Principle: if parties risked financial security then contract is usually seen as binding.

Facts: Young couple persuaded by old couple to move in and inherent house. Couples fall out but agreement was binding.