privity

Question 1

the rule of ‘Privity of Contract’ is that…

Answer 1

only the two parties to a contract can sue or be sued on the contract
a contract cannot confer rights nor impose obligations on someone who is not a party to a contract

Question 2

Beswick v Beswick

Answer 2

Mrs B couldn’t bring a claim for the money the nephew said he’d pay weekly because she was not a party to the contract, between Mr B and his nephew

Question 3

due to the harsh outcomes caused by this rule, the courts have developed various common law exceptions;

Answer 3

1. group bookings
2. agency
3. collateral contracts
4. restrictive covenants
   5.negligence
   6.statutory exception

Question 4

Group bookings

Answer 4

party who made the contract can claim on behalf of 3rd parties
Jackson v Horizon Holidays

Question 5

Jackson v Horizon Holidays

Answer 5

Mr Jackston booked a holiday in Sri Lanka, he provided very specific info about the families needs and dietary requirements. At the last minute they were moved to a different hotel and were disappointed.
The court allowed Mr Jackson to claim compensation for his family as well as himself - even though his wife + children were not parties to the contract

Question 6

Agency

Answer 6

when one of the parties to the contract is acting as an agent (on behalf of a 3rd party ) then the principal will be bound by and be able to enforce the contract.
Agent and principal are treated as the same person.

Question 7

Collateral contracts

Answer 7

when the court finds a secondary contract exists with the 3rd, connected to the main contract
Shanklin pier v Detel products

Question 8

Shanklin Pier v Detel Products

Answer 8

Pier company asked painting contractors to use detel paints.
Detel promised the pier company the paint would last 7 years - it only lasted 3 months
contract = between pier co and painting contractors
+ pier company and Detel - no privity of contract
The cost found a collateral contract pier co and detel
pier co - promise to instruct its contractor to use detel paint, Detel - praise that the paint would last 7 yrs

Question 9

Restrictive covenants

Answer 9

an agreement between 2 landowners in which one of them promises they will not do something on their land
Anyone who buys the land will also be bound by that promise
Covenants run with the land

Question 10

Tulk v Moxhay

Answer 10

Talk sold gardens to Elms who promised not to build. Elms later sold the land to Moxhay who wanted to build.
Tulk could enforce the covenant against Moxhay even though he was a 3rd party to the original contract.
Binding on future owners not just the person who made the promise

Question 11

negligence

Answer 11

A 3rd party may be able to bring a claim in negligence, like Ms Donoghue in Donoghue v Stevenson
friend brought the drink she got ill from

Question 12

statutory exception

Answer 12

The Contracts (rights of 3rd parties) Act 1999, this is now the main exception to the rules of privacy
Most 3rd parties who want to sue will use this exception.

Question 13

The Contracts (rights of 3rd parties) Act 1999 allows a 3rd party to enforce a contract against either of the parties if the following conditions apply:

Answer 13

1. the 3rd party is identified in the contract by name, class or description
2. AND the contract states that the 3rd party can enforce the contract
3. the contract gives a benefit to the 3rd party

Question 14

However, the Act may not always be useful

Answer 14

the Act also allows the parties to a contract to exclude the Act if they don’t want 3rd parties to have the right to enforce the contract - most commercial contracts now exclude 3rd party rights