Contract Law: Privity of Contract

Question 1

Doctrine of privity of contract

Answer 1

A third party is not under the obligations of a contract.

Question 2

Three parts to privity of contract

Answer 2

• A third party cannot benefit from a contract they’re not in
• A third party cannot be sued for a contract they are not in
• A third party cannot enforce any contract they are not in.

Question 3

Why do third parties have no obligations

Answer 3

• They have made no agreement
• They have not provided consideration

Question 4

Privity of contract case

Answer 4

Beswick v Beswick
* After the death of his uncle, the nephew refused to pay t he weekly payments to his aunt, the aunt then sued (no privity of contract).

Question 5

Two excpetions

Answer 5

• Statutory
• Common law

Question 6

Statutory exceptions

Answer 6

Seen in The Contracts (Rights of 3rd parties) Act 1999.
* S.1 (1)(a): states that the 3rd party can enforce it (Colwill: parties must acknowledge a third party and state they can enforce the contract).
* S.1(1)(b): the contract appears to benefit the third party (Dolphin: does not apply)
* S.1(3): Third party is identified in the contract by name. (Colwill: third party must be named or the court will not acknowledge the existence of a third party).

Question 7

Common Law exceptions:

Answer 7

• Agency
• Collateral contracts
• Special cases
• Assignment

Question 8

CL Exceptions: agency

Answer 8

• one person, the agent, is authorized to make a contract on behalf of another person.
• Both treated as being the same person
• Lockett v Charles: Agents can bind the principal legally.

Question 9

CL Exceptions: Collateral contracts

Answer 9

Finding a second contract alongside the main agreement:
* Detel case: There was a collateral contract as the paint should’ve lasted 7 years.

Question 10

CL Exceptions: Special cases

Answer 10

The contracting party might sue on behalf of another who was intended to benefit form the contract
Jackson v Horizon Holidays: the family benefited form the compensation.

Question 11

CL Exceptions: Assignment

Answer 11

A contracting party can assign his obligation under the contract to a third person.

Question 12

Remedies for third parties

Answer 12

• “any remedy that would have been available to him if he had been in a party to the contract”
• Remedies available to third parties are the same to parties in the contract.
• Parties do not need to provide consideration (Dunlop v Selfridge: third parties do not need to prove consideration).