privity

Question 1

what is the rule of privity?

Answer 1

only those who are parties to a contract are bound by it, can benefit from it and can sue on it

Question 2

what is the rule of privity based on?

-link to other topic

Answer 2

a third party hasn’t given consideration so can’t benefit from it

Question 3

dunlop v selfridge

Question 4

Beswick v Beswick (1967)

Answer 4

• Mr Beswick made a contract with his nephew to sell his coal merchant’s business in exchange for weekly payments to the uncle for life and, after his death, to his wife, the nephew’s aunt. After the death of the uncle the nephew refused to pay the weekly payments to his aunt.
• Held: the aunt was NOT a party to the contract and so there was no privity of contract
• The Contracts (Rights of Third Parties) Act (1999) would now allow her claim as she was expressly identified and the contract clearly attempted to confer the benefit of the term on her.

Question 5

tweddle v atkinson

(privity)

Answer 5

Both fathers of a young couple who intended to marry agreed in writing to each give a sum of money to the couple. The woman’s father died before giving over the money and the husband then sued the executors of the estate when they refused to pay the money.

Held: Even though the husband was named in the agreement, his claim failed because he had given no consideration and was not a party to the agreement himself

Question 6

what act of parliament has modified the rule of privity?

exception to privity

Answer 6

Contracts (Rights of Third Parties) Act (1999)

Question 7

Contracts (Rights of Third Parties) Act (1999)

Answer 7

The Act allows that someone who is not party to a contract (a ‘third party’)
may enforce the contract against either or both of the actual parties to the
contract if:

• The third party is expressly identified by name, or as a member of a class of as answering a particular description, and
• The contract expressly provides the third party may enforce the contract, or
• The contract term is an attempt to confer the benefit of the term on the third party

Question 8

what do the parties have the right to exclude (privity)?

Answer 8

the parties to the contract have the right to exclude the Act from benefitting
a third party.
most commercial contracts now include such a term so the
Act is not as useful as might be hoped.

Question 9

Jackson v Horizon Holidays Ltd (1975)

Answer 9

Mr Jackson booked a holiday for himself and his family. The holiday was very disappointing. He sued for damages for himself and his family.

The court decided that it would be unfair to limit the award of damages to Mr Jackson alone. Damages awarded reflected all members of the holiday party.

contracts made on behalf of others

Question 10

general exceptions to privity

Answer 10

• agency
• collateral contracts
• restrictive covenants

Question 11

agency

(privity)

Answer 11

• an agency arises when one person, the agent, is authorised to make a contract on behalf of another person, the principal.
• the effect is that the principal will be bound by the terms of the contract even though he or she did not make the contract him/herself.
• the principal and the agent are treated as being the same person so the principal is a party to the contract. e.g. when an employee makes a contract on behalf of a company.

Question 12

collateral contracts

Answer 12

• the court may be able to avoid the strict rule of privity by finding a second contract alongside the main agreement.
• this happened in Shanklin Pier Ltd v Detel Products Ltd (1951)

Question 13

Shanklin Pier Ltd v Detel Products Ltd (1951)

Answer 13

Contractors employed to paint the pier were told by the pier company to use paint manufactured by Detel. The paint was bought by the contractors from Detel. Detel made a representation to the pier company that the paint would last for seven years. The paint only lasted three months.

Held: as there was no privity of contract between the pier company and Detel, there was a collateral contract between them to the effect that the paint would last for 7 years, the consideration for which was the instruction given by the pier company to its contractors to order the paint from the defendants Detel

Question 14

restrictive covenants

Answer 14

In English Land Law, if a purchaser of land promises the seller in their contract for the purchase of land that they will not do something on the land, then this is a restrictive covenant. This becomes part of the title to land that an owner has. That promise then ‘runs’ with the land which means that all subsequent purchasers of that land are legally bound by that promise even though they were not parties to the initial contract.

this can be seen in Tulk v Moxhay (1848)

Question 15

tulk v moxhay

Answer 15

• Tulk sold the garden in Leicester Square, London to Elms. The contract for sale of this land contained a restrictive covenant that Elms would not build on this land. Elms sold the land to Moxhay who intended to build on the land.
• Held: Tulk could enforce the covenant against Moxhay even though there was no direct contract between them. This was because the covenant had run with the land and Moxhay was therefore bound by it.