privity of contract & rights of third parties

Question 1

Define doctrine of privity of contract.

Answer 1

a contract cannot confer rights or impose obligations arising under it on any person except the parties to it.

Question 2

What are the 2 elements to check for law of privity?

Answer 2

1) who are parties to agreement
2) did claimant provide consideration?

Question 3

What are the common law exceptions (5) to doctrine of privity?

Answer 3

1) agency (as long as acted within authority)
2) assignment
3) collateral contracts
4) actions in tort
5) other judicial attempts to avoid doctrine

Question 4

Define a non-assignment clause within assignment exception to doctrine of privity.

Answer 4

party shall be entitled to assign this Agreement or sub-contract any part of this Agreement to any person,
persons or company without the prior written consent of the other party.

Question 5

What are collateral contracts?

Answer 5

contract between the promisor and the third party, to avoid the difficulties of privity.

Question 6

What is the meaning of actions in tort as an exception to the privity doctrine? + name key case for this!

Answer 6

a person, C, who is not a party to the contract between A and B, may be owed a duty of care.

Donoghue v Stevenson
- it was held that the plaintiff, as the ultimate consumer of the goods, could bring a claim in the tort of negligence directly against the manufacturer

Question 7

What does the Contracts (Rights of Third Parties) Act 1999 introduce?

Answer 7

Allows a third party, in limited circumstances, to enforce a term of a contract to which they are not a party, even if the third party has not provided any consideration.

Question 8

In what circumstances may a third party enforce a term of a
contract to which they are not a party?

Answer 8

s1 (1)
a) contract specifically states that third party may enforce it; or
b) contract ‘intended to confer a benefit’ upon third party

Question 9

In order for the third party to be entitled to enforce a term under s
1(1)(a) or s1(1)(b), how must the third party be identified?

Answer 9

Third party must be expressly identified in contract by name, as a member of a class or as answering a particular description but need not be in existence when contract is entered into.

Question 10

in what circumstances will s1(1)(b) not apply?

Answer 10

Subsection (1)(b) does not apply if on a proper construction of the contract it appears that the parties did not intend the term to be enforceable by the third party.

Question 11

What are the remedies available to the third party?

Answer 11

For purpose of exercising his right to enforce a term of contract, there’ll be available to the third party any remedy that would have been available to him in an action for breach of contract if he had been a party to the contract (and the rules relating to damages, injunctions, specific performance and other relief shall apply accordingly).

Question 12

When may parties to a contract require third party’s consent to vary a contract

Answer 12

if:
a) the third party has communicated his assent to the term to the promisor,

b) the promisor is aware that the third party has relied on the term, or

c) the promisor can reasonably be expected to have foreseen that the third party would rely on the term and the third party has in fact relied on it.

Question 13

How does section 1 affect the right of the promise to enforce the
contract?

Answer 13

= s4:
“Section 1 does not affect any right of the promisee to enforce any term of the contract.”