(BLUE) Privity Flashcards
What is the basic rule of privity and which case shows this?
Tweddle v Atkinson- only a person who has given consideration and is party to a contract can sue on it.
What are some problems with the general rule of privity?
- Even if a contract is made for a third party’s benefit, they can’t sue on it
- With contractors and subcontractors, the client only has a contract and could sue the contractor, not the subcontractor
- A person buying a good from a ‘middle man’ has no contract with the manufacturer
What are the common law exceptions to privity?
- Agency
- Restrictive covenants
- Damages on behalf of another
- Collateral contracts
What is the exception of agency?
Where an agent is involved (e.g. real estate, managers) technically the contract is between the agent and the other party. However, the agent is seen as invisible i.e. the principle and agent are seen as the same person meaning the principle could sue the other party (but the agent can’t).
What is a restricted covenant?
Promises not to do something on land.
What is the exception of restricted covenants?
Tulk v Moxhay. Covenants run with the land not the original parties to the agreement. Therefore, anyone who owns the land becomes party to the covenant.
What is the exception of damages on behalf of another?
Jackson v Horizon Holidays. Although the agreement was between Mr Jackson and Horizon Holidays, the court said that because the contract was made for the whole family, damages could be claimed for the whole family, even though only Mr Jackson had given consideration. (This exception is barely ever used anymore because the situation is now covered by statute).
What is a collateral contract?
It is when Person A enters a contract with Person B, then Person B enters into a contract with Person C specifically because of the agreement with Person A. Person A technically does not have a contract with Person C but can sue Person C if Person C made a guarantee or assurance of quality to Person A.
What must be proved in a collateral contract and which case used this test?
Shanklin Pier v Detel Products.
- There must be 2 contracts in existence
- The second contract must be made because of the first contract
- The second contract involved a guarantee of quality to the person trying to sue
What was introduced in 1999 and why?
The Contracts (Rights of Third Parties) Act. The number of common law exceptions suggested that the rule of privity was unsatisfactory and could produce unfair consequences and uncertainty. The new law allows third parties to enforce rights in 2 situations.
What does Section 1(1)(a) say?
Where the contract expressly states that a third party can enforce it, the third party named can sue. The contract must literally identify the people who can sue under it.
What does section 1(1)(b) say?
A third party can enforce the contract where a contract purports (suggests) to confer a benefit on a third party. This is when the contract does not specifically say a third party can sue but the contract suggests that a third party should have rights under it.
What does section 1(2) say?
Third party rights can be excluded if this is specifically put in the contract.
Which case is an example of one that has used the Act?
Nisshin Shipping v Cleaves. The contract suggested that the broker should be able to sue as he was meant to get commission. Therefore s1(1)(b) applied.
