Privity Flashcards
Paper 3 Section B:Contract Law
Definition
A common law rule that only those who are party to a contract are able to benefit or enforce the terms of the contract
Problems
This rule can sometimes be unfair (Beswick v Beswick)
CRTPA 1999
The Contracts (Rights of Third Parties) Act 1999 was put in force to ensure the protection of third parties
S1 enforcing terms
A person who is not a party to a contract may enforce the term if:
S1(1)(a) The contract expressly provides that a third party may
OR
S1(1)(b) The term of the contract confers a benefit onto the third party e.g. payment of money, transfer of property or a rendering of service
S1(2) states that S1(1)(b) will not apply if on a proper construction of the contract, the parties did not intend the term to be enforceable for third parties (Nisshin Shipping)
S1(2) If there is something in the contract that restricts or limits the third party from being able to make a claim, then the courts must implement it
S1(3) The third party who is making the claim must be named through either name, class or description
S2 effects
Where a benefit has been conferred onto third parties, the contracting parties may not rescind the contract, vary the contract in such a way that will extinguish or alter the third parties rights if;
- third party has accepted the benefit is given to them
- contracting parties are aware the third party enforced the term
- contracting parties can reasonably foresee the third party will enforce the term
Special cases
The court will award damages on behalf of a third party which will cover any losses due to a breach of the contract, however, this only applies in social and domestic situations (Jackson v Horizon Holidays)
Collateral contracts
A side contract alongside the main contract which has separate consideration and is sometimes provided by a different person to that in the main contract, only applies if the third party recommends or promotes a product (Shanklin Pier v Detel)
Restrictive covenants
A contract between two landowners where one landowner promises the other not to carry out certain acts on their land, the obligation to comply with the covenant remains no matter how often the land changes hands or how out of date they may be (Tulk v Moxhay)
