Privity

Question 1

Define privity

Answer 1

A relationship between two parties recognised in law

Question 2

Rule of privity

Answer 2

Only those who are parties to a contract are bound by it

Question 3

Cases for rule of privity.

Answer 3

1. Dunlop Pneumatic Tyre Co. Ltd v Selfridge (1915)
2. Tweddle v Atkinson (1816)

Question 4

Facts of Dunlop Pneumatic Tyre Co. Ltd v Selfridge (1915).

Answer 4

Dunlop sells tyres to Dew who cant sell to consumers for less than a certain price on an agreement.
Sell them to Selfridges who sell them for less than the price.
Dunlop sued Selfridges but S were not liable as they were not party to the original contract and had not provided consideration.

Question 5

Facts of Tweddle v Atkinson (1816).

Answer 5

Couple getting married.
Father of bride and groom entered agreement that each would pay a sum of money to couple.
Groom’s father dies.
Payment not made as part of will.
Groom sued dead father’s estate.
No compensation as he was not party to the original agreement and had not provided consideration.

Question 6

5 exceptions to the rule of privity.

Answer 6

1. Agents
2. Collateral contracts
3. Restrictive covenants
4. Unfair to adhere to the rule (e.g., family members)
5. Contracts (Rights of Third Parties) Act 1999

Question 7

Exception for agents.

Answer 7

Where the principle party hires an agent to make the contract on their behalf, the principal will be bound to the contract made by his agent.

Question 8

Exception for collateral contracts.

Answer 8

Where the court avoids the rule by saying there is a second (collateral) contract alongside the main contract.

Question 9

Case for collateral contracts.

Answer 9

Shanklin Pier Ltd v Detel Products Ltd (1951)

Question 10

Exception for restrictive covenants.

Answer 10

Where contracts concern land, a contract can bind the purchaser of the land and anyone he sells the land on to, even though they were not party to the original contract.

Question 11

Case for restrictive covenants.

Answer 11

Tulk v Moxhay (1848)

Question 12

Facts of Tulk v Moxhay (1848).

Answer 12

Tulk had sold land to Elms on the provision that he did not build on it. Elm sold it onto Moxhay who intended to build on it. The court said he could not.

Question 13

Case for where it would seem unfair to adhere to the rule (e.g., family members)

Answer 13

Jackson v Horizon Holidays (1975)

Question 14

Which act introduced 2 sets of circumstances in which third party may enforce a contract?

Answer 14

Contracts (Rights of Third Parties) Act 1999

Question 15

What 2 sets of circumstances did the Contracts (Rights of Third Parties) Act 1999 introduce?

Answer 15

1. The third party is identified in the contract by name, or as a member of a class, or as answering a particular description.
2. The contract purports (intends) to benefit the third party.

Question 16

How is “the contract intends to benefit the third party” tested and what case?

Answer 16

Objectively
As confirmed in Nisshin Shipping Co. v Cleaves (2003)