Privity of contract

Question 1

What is privity of contract?

Answer 1

It’s a fundamental principle of common law that no person can sue or be sued on a contract unless they are a party to it, this is privity of contract

Application

Doctrine privity means you can’t bring a claim against a manufacturer UNLESS IT CONCERNS DEFECT. THEN IT INVOLVED PRODUCT LIABILITY.
SO IF THE QUESTION IS CONCERNED WITH BREACH OF CONTRACT THEN YOU CANT BRING IT AGAINST THE MANUFACTURER.

Combined with consideration - no party can sue unless a party and given consideration

Question 2

Common law method of circumventing doctrine of privity?

Answer 2

Agency
Where one party is authorised expressly or impliedly to contract on behalf of principle
Consideration has moved from principal

Assignment
- Where a party assigns its rights to another party and that party can sue against the original party.
CAN ASSIGN RIGHTS NOT OBLIGATIONS. The new party could sue the original for the rights but the original could sue the original rights recipient for obligations.

Collateral contract
- Court may find a collateral contract between promisor and third party to provide an exception to privity.
Shanklin pier and painter and detel - the paint will last 7 years.

Actions in tort - sue manufacturer - tort of negligence available

Question 3

What is the contracts rights of third parties act?

Answer 3

This allows a third party in limited circumstances to enforce a term of a contract to which they are not a party. Even if they haven’t provided consideration. DOES NOT ALLOW A CONTRACT TO BE ENFROCED AGAINST A THIRD PARTY.
- Contract can specifically provide for a third-party enforcement,
- OR
- may not be stated specifically that it can be enforced however it must be established that –
1. the agreement purported to confer a benefit to the third party
2. and the parties did intend the term to be enforceable by the third party

Rebuttable presumption that if a contract purports a benefit, then there is a right to enforce the term and its difficult to rebut that.

Question 4

What remedies available to third parties?

Answer 4

• Where third party has a right parties cannot contract out to extinguish or alter their entitlement without his consent if:
• The third party has communicated assent to the term to promisor
• The promisor is aware third party has relied on term
• The promisor can reasonably be expected to have foreseen that the third party would rely on the term.