A.3. Limits of the Contractual Obligation Flashcards
Tweddle v Atkinson (1861) 1 B & S 393
The claimant must provide consideration to enforce the promise and that if a person cannot be sued under the contract as he is not a party, he should not be able to sue himself. Third parties cannot acquire rights in a contract between two other parties.
Married Women’s Property Act 1882
Beneficiaries of a life insurance contract can acquire rights under that contract since they are the direct object of that contract.
Dunlop v Selfridge (1915) AC 847
AGENCY. A principal not named in the contract may sue upon it if the promisee really contracted as his agent.
Scruttons LTd v Midland Silicones Ltd (1962) AC 446
AGENCY. Success of agency agreement against privity, the LORD REID TEST: 1. Instrument must clearly state that the contracting parties intend another category of people to be bound by the clauses; 2. The “agent” must be contracting as both an agent and in their personal capacity; 3. the people being acted for need to authorize the “agent” as such (before or after); 4. the unnamed principal need give proof he has given consideration. In New Zealand Shipping v Satterthwaite (The Eurymedon) the test was later fulfilled.
Lockett v Charles (1938) 4 All ER 170
JOINT PARTIES. The wife sued even though her husband had paid. The defense that she was a third party was rejected as they were considered Joint Parties and severally liable.
Jackson v Horizon Holidays Ltd (1975) 1 WLR 1468
SUING ON BEHALF OF 3rd PARTIES. The family went on vacation, it was not as advertised, father sued. It was ruled he could recover damages not just for himself but for the entire family.
Darlington Borough Council v Wiltshier Northern Ltd (1995) 2 All ER 895
ASSIGNMENT: It is possible to assign contractual rights to a third party as long as long as the assignment is valid. Even though the assignor, the subcontractor, did not own the land and would not usually be awarded large damages, but only nominal damages, the court allowed the Council (the assignee) to gain substantial damages as they were the valid assignee.
Shanklin Pier Ltd v Detel Products Ltd (1951) 2 KB 854
COLLATERAL CONTRACTS (A contract which is ancillary to the main contract). Shanklin asked Detel for advice on paint, which was given and told it would last 7 years. Detel was sold on the idea and asked their subcontractor to use this paint. There was a contract between the subcontractor and Detel. Shanklin sued Detel directly. Their defense was that Shenklin was a 3rd party. This was refused by the court, who held there was an acillary contract between Shenklin and Detel, who had offered its paint. When the painters bought the Detel paint at the request of Shanlin, there was a benefit conferred on Detel, which amounted to consideration.
Gregory and Parker v Williams (1817) 3 Mer 582
TRUST CONCEPT. Where a two parties enter into a cantract to do something for a thrid party, the promisee can be seen as a trustee of the contractual rights of the 3rd party. If the promissor fails on his promise, the trustee and the beneficiary are allowed to join together as co-claimants. If a 3rd party wishes to make use of the trust concept, they must prove an intention to create a trust.
Beswick v Beswick (1968) AC 58
EQUITABLE REMEDY OF SPECIFIC PERFORMANCE. “Where a contract is made for the benefit of a third person who has a legitimate interest to enforce it, it can be enforced by the third person in the name of the contracting party or jointly with him or, if he refuses to join, by adding him as a defendant. In that sense and it is a very real sense, the third person has a right arising by way of contract.” The old man made a deal with his nephew in exchange for the nephew doing something for the old man’s wife. He did not perform, she sued, and was held to be able to do so because the contract was made in her favor. Even though Lord Denning’s opinion to do away with privity was not held, she was awarded specific performance on the grounds of being the adminsistratrix of her husband’s estate.
Equitable exceptions where third parties are bound by duties
EQUITABLE EXCEPTIONS WHERE 3rd PARTIES ARE BOUND BY DUTIES. here are exceptional circumstances where where equity may impose a duty on a third party - no case cited
Tulk v Moxhay (1848) 2 Ph 774
3.4.04. RESTRICTIVE COVENANTS IN RESPECT OF LAND. Mr. Tulk sold land with the with a restriction to build on the land. The land was sold several more times undtil Moxhay acquired it, wishing to build. Tulk sued, and although he was not party to the newest purchase, the court allowed him to obtain an injuction as equitable remedy. The court was willing to assist Mr. Tulk as he retained other land in the vicinity, and the principle of equity applied - Mr. Moxhay was aware of the restriction on building. The covenant runs with the land. 1. The covenant must be restrictive 2. At the date of the covenant, the covenantee owned land that was benefited by the covenant 3. The original parties intended the burden to run with the land to bind successors 4.The covenantor must take with notice of the covenant
Lord Strathcona Steamship Ltd v Dominion Coal Company Ltd (1926) AC 108
RESTRICTIONS ON THE USE OF SHIPS. Tulk v Moxhay was applied where a person buys a ship knowing there is a restriction on its use.
Donoghue v Stevenson (1932) AC 562
A snail entered into a bottle of beer that was sold by a merchant to a customer. The customer was allowed to sue the manufacturer in tort even though there was no contract between the consumer and the manufacturer.
Contracts (Right of 3rd Parties) Act 1999
Main provisions: a third party the right to enforce a contractual term if one of two conditions is satisfied: 1. the contract expressly states that the third party could sue, or 2. the purpose of the contract term is to confer a benefit on the third party. Section 1(1)(b) is, however, subject to s.1(2), which takes away the right of the third party to sue, if, in construing the contract, it appears that the parties to the contract did not intend to confer a right of action on the third party. Under s.1(3) the third party must be expressly identified in the contract in one of the following ways: • the third party’s name must be mentioned or • a class of persons is mentioned and the third party is a member of that class (e.g. independent contractors) or • there is a description of the third party (e.g. wife of a particular person) and the claimant fits the description. Section 1(3) makes it clear that the third party need not be in existence when the contract is entered into. So if two parties to a contract confer a benefit on the children of one of the parties, even children who are not born at the date of the contract could sue to enforce the promise. Section 1(5) grants to a third party any remedy (i.e. damages, specific performance, injunction) which would have been available to a party to the contract. Section 1(6) makes it clear that the Act applies to cases where the two parties to a contract agree on an exemption or limitation clause and also agree that the clause is for the benefit of third parties, such as stevedores. Section 2 sets out the limits to the right of contracting parties to rescind or vary a contract, where to do so would affect the rights of third parties to enforce contractual terms. Section 3 indicates that defences are available to a promisor who is sued by a third party. Could the promisor set up a defence of lack of consideration against a third party? Such a defence would be available to the promisor who is sued by a party to the purported contract. It could be argued, however, that such a defence would defeat the purpose of the statute, which is to confer a right of direct action on a third party. Perhaps, lack of consideration could be pleaded by the promisor as a defence only in cases where the promisee has not provided consideration. Section 3(6) makes it clear that when a contracting party sues a third party, say in tort for negligence, and the third party attempts to rely on an exemption or limitation clause in a contract to which they are not a party, they are not allowed to rely on it as a third party where they would not have been permitted to rely on it as a contracting party (e.g. an exemption clause excluding liability for death or personal injury). Section 4 permits a promisee to retain their right to enforce a contractual term against a promisor. So where the promisee is allowed a right of action on behalf of the third party under common law or equity, the promisee would retain this right. Section 5 protects a promisor who is sued by the promisee on behalf of a third party and is subsequently sued by the third party. This section is to ensure that the promisor does not have to pay compensation twice for the same loss. Section 6 contins a list of contracts which are not affected by C(RTP)A 1999. Section 7(1) makes it clear that if a third party had a right of action under a statute (other than C(RTP)A 1999), or under common law or equity, the third party could continue to rely on such a right.
