Privity of a Contract

Question 1

What is the doctrine of privity?

Answer 1

• • The doctrine of privity means that a contract cannot confer rights or impose obligations to any person except those party to it
• A person cannot sue or be sued unless privy to the contract

Question 2

Which case established privity?

Answer 2

• This rule is confirmed in Dunlop Pneumatic Tyre v Selfridge

Question 3

What rule of consideration is privity based on?

Answer 3

• Privity is based on the rule that consideration must move from the promiser as shown in Tweddle v Atkinson.

Question 4

Can privity create an injustice?

Answer 4

• Sometimes this can lead to an injustice as shown in Jackson v Horizon Holidays

Question 5

What are the three exceptions to privity of the contract?

Answer 5

1. Agency
2. Collateral Contract
3. Statutory Exception

Question 6

What is the agency exception?

Answer 6

• An agent is authorized to make a contract on behalf of another person who is the principal
• The principal will be bound by the terms in the contract and are treated as being the same person

Question 7

What is a collateral contract and how is it an exception?

Answer 7

• A secondary contract is formed based off the main contract
• Seen in Shanklin Pier v Detel Products

Question 8

What is a statutory exception?

Answer 8

• Rights of a Third Party Act 1999
• A third party can enforce the contract if:
  1. The third party is identified by name or answering to a description in the contract and
  2. The contract expressly provides that the third party can enforce the contract or
  3. The contract term is an attempt to confer the benefit of the term of a third party
• The claimant must establish that they can either enforce the contract or confer a benefit