Privity of Contract Flashcards
An individual who is not a party to a contract cannot benefit from it or be compelled by its contractual obligations.
CASE LAW!!!
Price v. Easton
Mackey v. Jones
Tweddle v. Atkison
Exceptions to the well-established doctrine of privity:
Agency
Statutory Exceptions
Assignment
Tort
Trust
Free Covenants
A Principled Approach
Agency (DELEGATION OF AUTHORITY FROM ONE PARTY TO ANOTHER TO ACT ON THEIR BEHALF IN DEALINGS WITH THIRD PARTIES)
Eurymoden - Leading Case on Agency as Exception to the Doctrine of Privity!
Midlands Silicones Ltd v. Scruttons Ltd - Test for Implied Agency!!! TEST!!! 4 pre-requisites for one party to be considered the agent of another:
1) Intention that third party benefit
2) One party contracting as agency for third party
3) Authority
4) Consideration
Hearn and Matchroom Boxing v. Collins - Irish case which cited Eurymedon with approval.
Assignment (PARTY TRANSFER HIS RIGHTS UNDER THE CONTRACT TO ANOTHER EXTERNAL PARTY)
What are the problems with “Assignment”?
What is “novation”?
1) Many COMMERCIAL CONTRACTS contain a clear prohibition on assignment.
2) Contracts in which the parties are DEPENDENT UPON the skill and reputation of another are not ASSIGNABLE.
3) One cannot transfer contractual obligations without the consent of all of the parties involved. This is called NOVATION.
NOVATION =
TORT
A duty of care in tort can be recognized even when the parties have a contractual obligation.
Finlay v. Murtagh
Collateral Contract
A way around the doctrine!
Shanklin Pier v. Detel Products Limited
Trust
The parties must have intended that a trust relationship would be created!
Swain v. Law Society
Cadbury Ireland Ltd v. Kerry Co and Bord Bainne
Freehold Covenants
Covenants = Promises (therefore, it refers to a promise related to one’s own land)
Move with the ownership of the land!!
Matter is now greatly simplified by Section 48 of the Land and Conveyancing Law Reform Act, 2009 which provides that’s the BENEFIT and BURDEN of the covenants must move with the ownership of the land.
A Principled Approach
Canadian Supreme Court decisions have favored the parties’ intentions at the time of entrance into the contract and the overall aspect of fairness in the particular circumstances of the case over the overly strict rules of the doctrine of privity. This could be seen in cases such as:
London Drugs Ltd v. Kuehne & Nagel International Ltd
REFORM???
As discussed under the “A Principled Approach”, the Irish law has not yet developed a similarly flexible approach to the doctrine of privity as the Canadian courts have previously done. However, reform has been PROPOSED by the Law Commission in its “Report on Privity of Contract and Third Party Rights”, which highlighted/emphasized a number of issues with the doctrine.
a) The doctrine goes against the intention of the parties when they contract for a third party;
b) It can be unfair to the third party;
c) The strict doctrine/rule is SUBJECT to various common law exceptions, making it difficult to state the law with a high degree of certainty.
