Privity of Contract Flashcards
What is the doctrine of privity of contract?
No person can sue or be sued on a contract unless they are a party to it
Through which five methods has the doctrine of privity been circumvented?
Agency
Assignment
Tort
Collateral contract
Other
What are the requirements of an agency relationship?
Principal should be named by the agent and the relationship between agent and principal should be clear
Agent must be authorised
Consideration has moved from the principal
How does assignment circumvent privity?
If someone contracts with someone and they assign their rights to someone else, the assignee can sue on their obligations.
What caveat is there to the assignment of rights?
They can never exceed the original rights agreed.
Assignment often banned in contracts via non-assignment clause
What is a collateral contract and how does it circumvent privity?
When a contract can be established between a third party and original party by communication and consideration
How do actions in tort circumvent privity?
Injured person can open up a direct claim to manufacturer e.g. - new relationship forged
How do courts treat the doctrine of privity?
Very flexibly with the awareness that it has the potential to operate very harshly
What key feature did CROTPA introduce?
A third party can enforce a term of a contract to which they are not a party but not against them.
Under what circumstances can a 3rd party enforce under CROTPA?
Two ways;
1(1)a: If they have been named in the contract
1(1)b: If the agreement purported to confer a benefit on a third party
AND: it was NOT the case that the parties did not intend the term to be enforceable by the third party
How must a third party be identified under S1(1)a?
Don’t need to exist when contract made: e.g. unborn child, member of a class, etc.
How do courts treat contracts with 3rd parties?
Once it is held that a contract purports to confer a benefit on a third party, there will be a rebuttable presumption in favour of the third party
How would you exclude CROTPA from a contract?
Include a boilerplate exclusion of third party rights
Can third parties rely on exemption / limitation clauses via CROTPA?
Yes, in the same fashion as a standard contractual term
Can the contracting parties vary a third parties rights without their consent e.g. extinguishing the contract?
Cannot be varied / extinguished as long as:
3rd party has communicated assent to the term to the promisor
Promisor is aware that the third party has relied on the term
Promisor can reasonably be expected to have foreseen that the 3rd party would rely on the term and they have in fact relied upon it.
How should the assent of a third party be communicated?
Words or conduct - if by post, only effective when received by promisor
When can the courts dispense with 3rd party consent?
Can’t be reasonably ascertained
Mentally incapable
Reliance on term can’t be reasonably ascertained
Court can apply conditions if it sees fit
Can a third party ever be placed in a better position than a contracting party?
No
How is the promisor protected from double liability of promisee and 3rd party?
Any award to a 3rd party is reduced to the extent considered appropriate if money has already been awarded in contarct
