Privity Flashcards
What are the basic rules of privity R4P1
Only the parties to a contract can enforce it.
Only the parties to a contract can have it enforced against them.
A party can only sue to recover their own losses.
What case illustrates the basic rules of privity R4P1
Privity comes from consideration
Tweddle V Atkinson - Father and father in law made a contract with each other.
They agreed to give money to the son when he married, the contract specified that the son could sue to enforce the contract.
The father paid but the father in law died before he could pay. The son sued the Father in Law’s Estate.
He failed because he gave no consideration and was not privy to the contract.
Was Tweddle V Atkinson a fair decision and what are the problems it causes R4P1
The Father and Father in Law’s explicit wishes (written in the contract) were defeated by a technical rule of contract law.
BUT why should the son be able to enforce a contract when he hasn’t given any consideration.
The problems with privity are:
A party may not be able to enforce a benefit which is intended for them (Tweddle).
If one party makes a contract for themselves and others (family holiday) they can’t claim damages for the others if something goes wrong.
What has happened since Tweddle R4P1
Privity causes problems so there has been lots of exceptions developed since then.
Some laws have been developed by judges (common law exceptions), also parliament passed a statute which reformed the law in 1999.
What are the three common law exceptions of privity R4P1
Collateral contracts, Restrictive covenants and Special cases.
What are collateral contracts R4P1
collateral contracts are used where one person has made a promise and the other side has acted on this.
Shanklin Pier V Detel Products
Paint manufactures told pier owners that their paint was suitable for a pier.
The pier owners told the painters to buy and use that paint.
The painters used the paint on the pier, but after 6 months it fell off.
The pier owners wanted to sue the paint manufacturers for breach of their promise.
The pier owners didn’t have a contract with the paint manufacturers, so could they sue them?
There was a Collateral contract between the paint makers and the pier owners because each side gave consideration.
Paint manufacturers- the promise that the paint would last 7 years and the pier owners telling painters to use that paint.
What are restrictive covenants R4P1
Restrictions on the use of land are not subject to the rule of privity. Only relates to restrictions on land.
Tulk V Moxhay (1848)
Tulk owned land in Leicester Square, he sold some to X who agreed not to build on it. The land was sold several more times before it was sold to Moxhay.
Moxhay knew about the restrictions but said he didn’t have a contract with Tulk so Tulk couldn’t bring a contract case against him.
Tulk was able to get a court order to stop Moxhay building as the court would not allow Maxhay to ignore a restriction which he was fully aware of when he bought the land.
What are Special cases R4P1
Special cases - there are some cases where a party to a contract can sue for another party’s looses.
Jackson V Horizon Holidays (1974)
Mr Jackson booked a holiday for himself, his wife and their two children. The hotel they booked was not finished and they were transferred to another that turned out to be dirty and mouldy.
Mr Jackson sued for damaged; the question was whether he could claim damages on behalf of his family as well as himself. The COA said that he could.
Holidays are part of a special category of cases where contracts are arranged by one person for a whole group.
Can Special Cases be used in property deals R4P1
it is quite common in property deals for a developer to have a property built and then sell it on to an eventual user. In this case there is no contract between the final user and the builders.
In Linden Garden Lenesta Sludge the court extended special cases to property contracts. The Developer could sue the Builders on behalf of the final users.
Given Tweddle was so unfair why didn’t the Supreme Court just overrule it R4P1
The SC has a Practice Statement therefore they can overrule any previous case they consider unjust or out of date.
However, contract lawyers require certainty in the law to make important contracts.
Reforms by common law are retrospective (backward looking) like the martial rape case. Therefore, if the Supreme Court just got rid of privity this would cause chaos in the business world. This is why they created exceptions to Tweddle rather than overruling it
By contrast law reform by statute is prospective (it only affects contracts made in the future, not contracts which have already been made).
What did Parliament do after considering all the problems with privity R4P2
After a Law Commission report in 1996, Parliament passed the Contracts (Rights of Third Parties) Act 1999.
This act gave new rights to third parties but it did not change the common law, all the old exceptions such as collateral contracts are still good law.
Contract (Rights of Third Parties) Act 1999 R4P2
Filler
What does S.1(1)(a) say R4P2
C can enforce the contract if it expressly says they can like in Tweddle V Atkinson.
What does S.1(1)(b) says R4P2
C can enforce the contract if it purports to give them a benefit (Nisshin Shipping V Cleaves).
Nisshin Shipping V Cleaves R4P2
Cleaves were ship brokers who had negotiated contracts for the charter of ships between Nisshin (ship owners) and charterers.
There was a term saying that 1% commission was payable by Nisshin to Cleaves, because of a dispute, Nisshin refused to pay the commission.
Cleaves sued under 1(1)(b).
The judge said that the contract can be taken as ‘purporting to benefit’ a third party unless it specifically excludes their rights.
In this case there was no exclusion so Cleaves was able to enforce the 1%.
