Privity of Contract Flashcards
D Ibbetson, A Historical Introduction to the Law of Obligations (OUP, 1999) at 241:
“[the] rule that a third party could not enforce rights arising under a contract has been a feature of English law since at least the thirteenth century.”
Dunlop Pneumatic Tyre Co Ltd v Selfridge & Co [1915] AC 847 (HL) per Viscount Haldane LC at 853:
“Only a person who is a party to a contract can sue on it. Our law knows nothing of a jus quaesitum tertio arising by way of contract.”
May exist in property (under a trust) but cannot enforce a right in personam on a stranger.
To enforce the contract must have given consideration to the promisor or some other person at promisor’s request
Tweddle v Atkinson (1861) 1 B & S 93 per Wightman J:
“it is now established that no stranger to the consideration can take advantage of a contract, although made for his benefit.”
R Stevens, “The Contracts (Rights of Third Parties) Act 1999” (2004) 120 LQR 292 at 322:
“Third parties have not been promised anything and have provided no consideration. No further justification as to why third parties do not acquire rights under a contract needs to be given.”
X owns a canal. X makes a contractual promise to allow B an exclusive right to put pleasure boats on the canal. A then also starts to hire out boats on the canal. Can B claim against A?
No
Rule 2: The B-X contract does not give B a right against A: A is not subject to the burden of it
See eg Hill v Tupper (1863) per Pollock CB at 126: “The whole question depends on whether a new species of property can be created, or whether the alleged right merely exists in covenant.”
Contracts for the benefit of a third party: promisor’s rights
Specific performance
X agrees to sell his business to A. A agrees to employ X during X’s life, and then to pay a weekly sum to B, X’s wife. X dies and A ceases to pay B.
Beswick v Beswick [1968]:
X’s personal representative can sue A and the court will order A to pay the agreed sum to B – see eg per Lord Pearce at 88-89: “It is argued that since the widow personally had no rights which she personally could enforce the court will not make an order which will have the effect of enforcing those rights. I can find no principle to this effect. The condition as to payment of an annuity to the widow personally was valid. The estate (though not the widow personally) can enforce it. Why should the estate be barred from exercising its full contract rights merely because in doing so it secures justice for the widow who, by a mechanical defect of our law, is unable to assert her own rights?”
Beswick v Beswick [1968]:
Denning
House of Lords did not accept Denning’s view that B could sue in her own right
Lord Denning MR at 557: “The general rule undoubtedly is that ‘no third person can sue, or be sued, on a contract to which he is not a party’: but at bottom that is only a rule of procedure. It goes to the form of remedy, not to the underlying right. Where a contract is made for the benefit of a third person who has a legitimate interest to enforce it, it can be enforced by the third person in the name of the contracting party or jointly with him or, if he refuses to join, by adding him as a defendant. In that sense, and it is a very real sense, the third person has a right arising by way of contract. He has an interest which will be protected by law.”
