Chapter 2: Privity of contract Flashcards
What does ‘privity of contract’ mean?
Only a person who is party to a contract has enforceable rights or obligations under it.
Parties not privy to the contract
Parties who have not contributed consideration to a contract cannot usually sue on it if it is breached because they are not full parties (they are not privy to the contract)
A contract cannot be enforced against a party to whom no consideration has been promised.
Tweddle v Atkinson (1861)
Facts of ‘Tweddle v Atkinson (1861)’
T was engaged to marry G.
Their respective fathers contracted they would pay a sum of money when the marriage took place.
G’s father died before making the payment.
Held by ‘Tweddle v Atkinson (1861)’
T had no right to sue G’s estate for the money since he had provided no consideration for the promise and was merely a beneficiary under a contract to which he was not a party.
3 Exceptions to ‘Privy of Contract’
The Contracts (Right of Third Parties) Act (1999)
Trust
Agency
The Contracts (Right of Third Parties) Act (1999)
This Act allows a person who is not a party to a contract to enforce it as long as the contract was for his or her benefit and he or she was identified expressly by name or description. In addition, the contract must expressly allow the third party to enforce the term.
the third party can exercise any remedy which would have been available had they been a party to the original contract.
Trust
Trust law allows a beneficiary to enforce a trust, as a third party, to enable them to enforce their rights in law.
Agency
Agency law allows an agent to enter into a contract with a third party on behalf of his or her principal and it is the principal and the third party who have enforceable rights under that contract.
