privity

Question 1

rule in privity

Answer 1

if u give consideration as part of k formation, u have the right to enforce it, and u will be liable under it

Question 2

Provender v. Wood facts

Answer 2

• Wood agreed with Provender’s father to pay £20 to Provender after Provender and Wood’s daughter were married
• Wood did not pay, and Provender brought action

Question 3

Provender v. Wood ratio

Answer 3

The party to whom the benefit of a promise accrues may bring his action.

Question 4

Tweddle v. Atkinson facts

Answer 4

• Tweddle’s son was marrying Guy’s daughter, and Tweddle was to pay 100 pounds and Guy was to pay 200 pounds to Tweddle’s son.
• Guy died before payment and when the estate would not pay, Tweddle’s son sued Atkinson, the executor of Guy’s estate, for 200 pounds.
• There was a statement outlining “if someone doesn’t pay you, you have the ability to sue.”

Question 5

Tweddle v. Atkinson ratio

Answer 5

• Third party beneficiary (TPB) cannot sue on a contract

- Natural love and affection are not sufficient consideration in the eyes of the law

Question 6

Dunlop Pneumatic Tyre Co. Ltd. v. Selfridge & Co. Ltd finding

Answer 6

The only way that a principal not named in a contract can be sued is if he acted as an agent on behalf of one of the parties privy to the contract

Question 7

Ways in Which a Third Party May Acquire the Benefit?

Answer 7

• legislature
• trusts or agency
• torts (donoghue v stevenson)

Question 8

Beswick v. Beswick CA facts

Answer 8

Peter Beswick was a merchant. He agreed to sell his business to his nephew if he paid him a certain sum of money for as long as he lived, and then to pay his wife £5 per week for the rest of her life after he died. He died, and the nephew only paid his aunt once before stating that no contract existed between them. She was also the administratrix of her husband’s will.

Question 9

Beswick v. Beswick CA denning reasoning

Answer 9

Denning says privity rule is just a rule of procedure

- If you are getting benefit, u have the right to sue

Question 10

Beswick v. Beswick CA other judge reasonings

Answer 10

Also agree in favor of the widow, but not based on Denning reasons, but because she is acting as executor of state (as executor can bring actions of the person if they were alive)

Question 11

Beswick v. Beswick HL reasoning

Answer 11

Overturns Denning in the court of appeal – Ms. Beswick has no right to sue her nephew in her personal capacity as she was not a party to the contract (upholds the Privity rule)
- However, in her capacity as executrix of the will, she is able to sue him for specific performance of his promise that was made in the contract.

Question 12

Beswick v. Beswick HL ratio

Answer 12

Third party can get around the Privity Rule if they are an executor of the estate of a party to the contract and are able and willing to bring an action for specific performance of a promise.

Question 13

what is the reasoning behind the third party bar?

Answer 13

conclusion that there is no legal relationship between the promisor and the third-party beneficiary

Question 14

why can agency or trust go around the third party bar?

Answer 14

o Conclusion cannot be reached where the third party can prove the existence of a relationship (trust or agency)

Question 15

what does creation of a trust do for privity

Answer 15

Once a trust is created, the beneficiary is entitled to enforce the trust obligation directly

Question 16

what does agency do for privity

Answer 16

If the “promisee” is actually contracting as agent on behalf of the third party, the doctrine of privity has no application

Question 17

McCannell v. Mabee McLaren Motors Ltd facts

Answer 17

• Studebaker makes cars and sign contracts with different retailers
• The contracts possess a clause such that the retailers can only sell within their territory
• Both parties in this case are retailers of the cars made by Studebaker
• Defendant sold car to someone whose place of business was in the plaintiff’s area.

Question 18

McCannell v. Mabee McLaren Motors Ltd reasoning

Answer 18

• Studebaker is acting as an agent in this clause to create a contract between the dealers and creating privity of contract between them.
• Test for agency established.

Question 19

Test for Agency (McCannell v MaBee McLaren Motors)

Answer 19

(1) Agent brings parties together

(2) The parties recognize that agency relationship has been created

Question 20

NZ Shipping Co v AM Satterthwaite facts

Answer 20

Stevedore tried to rely on clause in a K that they were not a party to
- That they count as agent as carrier

Question 21

Test for Agency (NZ Shipping Co v AM Satterthwaite)

Answer 21

(1) Clear in the contract that the third party is intended to be protected by provisions
(2) Promisor is clearly acting as an agent for the third-party beneficiary
(3) Promisor has authority to do this from the third-party beneficiary
(4) Consideration moves from the third party to the promisee through the promisor

Question 22

Contracts under sealed

Answer 22

• When contracts signed under seal, they are enforceable regardless if consideration is present
• If this device is used and the person is named, no problem for privity

Question 23

London Drugs Ltd v. Kuehne & Nagel facts

Answer 23

• London Drugs delivered a transformer to Kuehne for storage
• Warehouseman’s liability was limited to $40, unless specifically stated otherwise and payment for additional insurance was paid
• With full knowledge of this clause, the appellant chose not to purchase insurance from K&N and instead arranged for its own all-risk coverage
• 2 employees of Kuehne were negligently attempting to move the machine, and dropped it, resulting in $33 955 worth of damage

Question 24

London Drugs Ltd v. Kuehne & Nagel reasoning

Answer 24

Was clearly intended to extend to employees who did the actual work
- Looks at intentions of parties, applying Privity would frustrate the clear
intentions based on the language, is against commercial reality, common sense and justice, would create uncertainty in the law, and fails to respect reasonable expectations of the parties

Question 25

Test to determine if employee can obtain benefits of the LLC between an employer and customer (London drugs)

Answer 25

1. Limitation of liability clause must explicitly or impliedly extend to employees (needs clear language to exclude)
2. Employees seeking to benefit from the clause must have been acting in the course of employment AND must have been performing the “very services” under the contract between employer/customer when the loss occurred

Question 26

what does Iacobucci point out in London drugs case

Answer 26

all of this turns on intention, that’s why we go back to language of agreement to see if intention to extend protection to employees or subcontracts

Question 27

Subrogation

Answer 27

Right of an insurance company to step into the shoes of the insured and recover compensation from a third party that caused the accident

Question 28

Fraser River Pile & Dredge Ltd. v. Can-Dive facts

Answer 28

• Fraser River owned a ship that sank while it was under charter by Can-Dive.
• Can-Dive was negligent in sinking the ship.
• Fraser River recovered from insurance company, who then sued Can-Dive.
• There was a clause in the contract between Fraser River and their insurance company stating that the insurance company could not bring actions against any characters of Fraser River; however, Fraser River made an additional agreement to waive the right to the waiver of subrogation.

Question 29

Fraser River Pile & Dredge Ltd. v. Can-Dive reasoning

Answer 29

• Iacobucci tells us that LD was not just supposed to be about employees and employers
• Actually, a broader principled exception

Question 30

Test that they present and apply in Fraser River

Answer 30

do the parties to the contract intend to extend the benefit in question to a third party and the activities performed by the third party?
- Don’t need to worry about consideration, looking @ intention of the parties

Question 31

Fraser River test

Answer 31

1. If the parties to the contract intended to benefit the third party.
2. If the third party was performing the very activities contemplated by the contractual provision.

Question 32

what does Iacobucci say about test in LD

Answer 32

Iacobucci tells us that LD was not just supposed to be about employees and employers
• Actually, a broader principled exception

Question 33

King v. Shunia Financial Services facts

Answer 33

The Minister for Indian Affairs appointed Shunia Financial Services to manage Gull Bay First Nations’ funds. The FN group is concerned with how the funds are being managed and ask for the records for an independent auditor they hired; both the minister and Shunia refuse to provide the records to the independent auditor. GB seeks a declaration from the court that they are entitled to the records because if they are not party to the agreement, then they are at the very least a third-party beneficiary

Question 34

King v. Shunia Financial Services reasoning

Answer 34

strict doctrine of privity doesn’t apply to all cases. Where third parties are the beneficiary of agreement, can enforce the terms included for its benefit

Question 35

Brown v. Canada ratio

Answer 35

In light of the fiduciary obligation, the court allows the doctrine of Privity to be avoided by finding a common law duty of care has been breached.

Question 36

argument against privity that responsibility should only be present where one has consented to it, foundation of contract law is consent. If a third party has not actually consented to an agreement, then they haven’t agreed to it and leave it. Contracts should only touch you if you have consented to it doing so

Answer 36

Response from Collins: third party has a choice, they can exercise ability to consent to choose to rely on agreement, or they can choose not to. No one is making them do it. Argument about consent and autonomy is not the reality of it. The third party isn’t having something imposed on them against their will. Can act on the benefit if they want to

Question 37

argument against privity that it’s a monstrous thing that someone could sue on an agreement but they themselves could not be sued

Answer 37

Collins side steps this, response is that consideration is only a rule about which agreements we should enforce, that’s all it tells us.

Question 38

critique of privity: if we do this, we will see a flood, floodgate will open = so much litigation. Third parties will be huge and unlimited pool of people and unlimited consequences in terms of financial liability

Answer 38

all the exceptions we have seen carved out, are about situations of reasonable foreseeably
- Its reasonable foreseeability that is going to create our limitation