Formation Of A Contract - Privity Of Contract

Question 1

What is the original rule of privity?

Answer 1

Only those who are party to a contract are bound by it and may benefit.

Case : Dunlop v Selfridge (As Dunlop weren’t a party to contract they weren’t permitted to sue)

Case : Beswick and Beswick (If not a party to agreement with no consideration, party cannot claim)

Question 2

What are the exceptions regarding Holidays?

Answer 2

Holidays
-Where one person books on behalf of their family, the whole family may sue.

Case: Jackson v Horizon Holidays ltd (Court allowed them to claim damages for him and his family)

Question 3

What are the general exceptions to privity?

Answer 3

CARS

1. Collateral Contracts - court can avoid the rule of privity if there is a collateral contract which is a separate contract running alongside the main one.

Case : Shanklin Pier v Detel (No privity of contract but court allowed collateral contract as there was consideration for it as pier company told contractor to use detel)

2. Agency - An agent may make a contract on behalf of the principal, principal will still be bound by terms even if they didn’t make it. Both agent and principal treated as same person.
3. Restrictive Covenant - Under land law, when land is purchased the seller and purchaser may form an agreement regarding what may be done with land

Case : Tulk v Moxhay (Tulk could enforce the covenant against Moxhay even though there wasn’t a direct contract between them)

4. Statutory Exceptions - Under the Contracts (Rights of third parties) act 1999
   -modified rule of privity
   -court allows someone who is not party to contract to sue if
   S.1(1)(a) Contract stated third party will have rights
   S.1(1)(b) Attempted to confer a benefit to third party
   S.1(2) Act wont apply if parties didn’t intend for third party to have rights
   S.1(3) Third party must be expressly identified by name or group.