Privity

Question 1

Tweddle

Answer 1

A and B cannot confer upon T a direct right of action or the benefit of a shield against A or impose upon T a burden through a contract between themselves

Question 2

What is the scope and effect of the Dunlop/Albazero exception?

Answer 2

It operates in a commercial contract between A and B where the parties contemplate that the proprietary interests in the goods may be transferred from B to T in the course of performance of the contract (i.e. the bill of lading context), provided that T has no direct claim against A. B is to be treated as having entered into the contract for the benefit of all persons who may acquire an interest in the goods before they are lost or damaged and can recover damages for loss sustained by those for whose benefit the contract was entered into

Question 3

What is the ratio of Panatown?

Answer 3

It simply confirms the restriction on Dunlop noted in Albazero; i.e. the exception in Dunlop does not apply if T has a direct claim against A. Thus the deed by which A undertook to T to exercise reasonable care precluded the Albazero exception from applying here.

Question 4

Andrews’ criticism of the Panatown ratio?

Answer 4

The Albazero restriction on Dunlop is intended to protect A against double jeopardy, but since B and T were corporate relatives in this case there was no prospect of double jeopardy in this case. The decision eviscerated the contractual relations between A/B on the basis of the A/T deed.

Question 5

Why was SP granted in Beswick?

Answer 5

B’s common law remedies were inadequate - no action in debt as B cannot sue for a benefit intended for T on T’s behalf/claim for damages nominal because her personal loss on these facts was 0 and normally B can only sue for his personal loss, not T’s loss (Woodar)

Question 6

The “narrow view” in Panatown. Why is this the correct view?

Answer 6

Lords Clyde and Jauncey - when T is both owner of the building site and financier of the project, B’s damages claim against A must be for compensation to remedy T’s loss, and the damages are thus claimed and held in T’s name. This is consistent with the logic of the Dunlop exception which provides that B is suing on T’S BEHALF.

Question 7

The broad view in Panatown.

Answer 7

Lords Goff and Millett - B should receive in his own name the cost of cure but be obliged to hand money to T (Millett thought B would hold the damages on trust; Goff thought B would be obliged under an implied term to hand the damages to T)

Question 8

What is Andrews’ preferred solution to the question of damages in Panatown/the Lord Goff village hall exception? Any authority?

Answer 8

B should be able to recover damages on T’s behalf, but should be regarded as suing in his own name.
 If B has already taken remedial steps he has sustained personal loss.
 If B has not yet taken remedial steps the court must be satisfied B is intending on using the cost of cure fund to remedy the defects; otherwise B is over-compensated, A penalised and T under-protected
This view is consistent with Ove Arup - “the court has to be satisfied that Cs are seeking compensation for a genuine and quantifiable loss and not seeking an uncovenanted profit.’

Question 9

Gore

Answer 9

If the promise was that A will not sue T, B may be able to obtain a stay of proceedings to protect T provided B can show he has a legitimate interest in protection.

Question 10

Snelling

Answer 10

T and B were co-defendants (otherwise T would have lacked a good defence, not being a party to the shield agreement and thus “not entitled to rely directly on the terms of the contract) so B + T could rely on shield agreement between A and B

Question 11

Two requirements for the 1999 Act to apply?

Answer 11

i. The 3rd party must be expressly identified in the contract as a member of a class or answering a particular description but it need not be in existence at the time of contracting (S.1(3)).
ii. Either A and B expressly confer this right on T OR purports to confer a benefit on T (S.1(1)) AND S.1(2) is not satisfied

Question 12

Avraamides

Answer 12

The requirement in S.1(3) that T should be “expressly identified” does NOT permit a process of construction or implication.

Question 13

Dolphin Maritime

Answer 13

The requirement that the contract should “purport to confer a benefit on T” connotes that the parties should use language showing one of the purposes of their bargain, rather than one of its incidental effects if performed, was to benefit T

Question 14

Nisshin Shipping

Answer 14

It does not suffice for purposes of S.1(2) to prove that the contract is neutral; A and B must prove they positively did not intend 3rd party enforcement which is not satisfied merely because T has an existing, limited right of action (e.g. a right under a trust of a promise)

Question 15

Does the 1999 Act represent a substantial restriction on freedom of contract?

Answer 15

The effect of S.1(2) and S.1(4) is that a contract draftsman who wants nothing to do w/ the Act can simply contract out of the Act’s scope by stipulating the act shall not apply

Question 16

What are the three situations under the 1999 Act in which A and B will be unable to vary or rescind the contract?

Answer 16

a) T has communicated his ASSENT to the term to A (actual communication is required, so postal rule does not apply; S.2(2))
b) A is AWARE T has RELIED on the term
c) A can reasonably be expected to have FORESEEN that the third party would rely on the term and T has in fact relied on it

Question 17

The Law Comm thinks a term purporting to confer an irrevocable benefit on T should not be enforced under the 1999 Act. 3 points.

Answer 17

 Burrows suggests that a term purporting to confer an irrevocable benefit will preclude S.2(1) from applying via S.2(3)b, which allows A and B to expressly give T absolute security.
 Andrews points out that the Law Comm’s view might create a trap for T, who faced w/ a provision that his rights are irrevocable might wrongly suppose his rights are absolute
 McK suggests that if A and B wish to confer an irrevocable right they should create a trust of the promise.

Question 18

Andrews discusses four situations which, not constituting, “rescission/variation by agreement”, do not engage the protection of S.2(1)

Answer 18

i. A terminates following B’s breach (the Lord Chancellor specifically stated in HoC debate that the 1999 Act should not preclude A from accepting a repudiation)
ii. The contract is set aside following B’s misrep, undue influence, non-disclosure
iii. The contract is terminated by operation of law following frustration
iv. The contract, or a part of it, ceases to operate or is suspended in accordance with a force majeure clause

Question 19

If a contract provides that A promises B to pay T1 or any other T that B decides, what is the relevance of S.2(1)?

Answer 19

Treitel suggests that in such a case S.2(1) is not engaged at all since there is no “variation”; if and when B makes his decision he does so in accordance with the original terms of the contract. T1 or T2 or any other T cannot acquire an irrevocable right by “assenting” or “relying” on the promise.