Discuss the extent to which the contracts act 1999 has removed the problems that were previously caused by the doctrine of privity of contract

Question 1

What are the rules of privity

Answer 1

-A contract can only be enforced by and against the parties to the contract as shown in Tweddle v Atkinson

Question 2

Why can third parties not enforce contracts

Answer 2

The rule of privity comes from the fact that the parties need to have given consideration which a third party cannot do in order to enforce it

Question 3

What are the statutory exceptions to the rule of privity

Answer 3

• The contracts act 1999 (rights of third parties) which allows that someone who is not a party to the contract may enforce the contract against either or both of the actual parties to the contract if: the 3rd party is expressly identified by name, the contract expressly provides the 3rd party may enforce the contract or the contract term is an attempt to confer the benefit of the term on the third party. As shown in Nissin shipping v cleaves
• A defence which would have been available against one of the Main contracting parties would also be available against the third party
• The contracting parties may not vary or rescind the contracts rights without consent of the third party

Question 4

What are the exceptions developed by the courts in order to avoid the application of the rule

Answer 4

• Collateral contracts - where a new contract was imposed by the court between a person making a representation and the person who acted on that representation as shown in Shanklin pier v detel products
• Restrictive covenants: where a seller places a restriction on the use of land which binds subsequent purchasers as shown in Tulk v Moxhay
• The trust device: where a trust can be implied in order to give rights to a presumed beneficiary of the contract as shown in Reunis v Walford
• In personal injury cases resulting from negligence the negligent party can be sued by third parties who aren’t a party to any contract with the negligent party

Question 5

What were the problems before the 1999 act

Answer 5

• There was no general right for a third party to enforce a contract so they had to rely on fitting into one of the exceptions that had been developed by parliament or the courts
• The expeditions had developed to cover specific situations rather than a general principle of enforceability by a third party intended to benefit from the contract
• The availability of exceptions to the rule depended on the judge being willing to be creative with common law exceptions such as trust devices and collateral contracts
• however some exceptions were predictable such as agency and assignment
• The development of exceptions by the common law has retrospective effects

Question 6

To what extent has the 1999 act removed these problems

Answer 6

• Statutory exceptions are prospective and therefore receive greater publicity before coming into force
• The general rights given under the act are easier to understand and apply than a series of common law exceptions
• There is still potential for uncertainty however in identifying the third parties who are intended to benefit from a contract
• Also it may not be clear when a contract purports to give an enforceable right to a third party
• that the act doesn’t do away with the doctrine of privity and only deals with certain situations which arise

Question 7

What is special about the Jackson v horizon holidays case

Answer 7

In this case the rest of the family who were the 3rd party were entitled to recover damages for the distress and discomfort the breach of contract caused. This goes against the rules of privity and the contracts act wasn’t about during this case.