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Contract Law - Privity (9) - Coggle Diagram
Contract Law - Privity (9)
Rationale for privity
Not a party to a contract, but not real argument -> why not allowed
No consideration by the 3rd party? But already consideration by the promisee and possibility to assign his rights to a 3rd party without that consideration
Neither party made a promise to the 3rd. The promisor has undertaken obligations towards the promisee and no one else
But ignore the intention of the contract parties where they want the 3rd to acquire rights
Cases establishing that a 3rd party cannot acquire rights under a contract
General rule in
Tweddle v Atkinson (1861)
"no stranger to the consideration can take advantage of a contract, although made for his benefit"
Dunlop Pneumatic Tyre Co Ltd v Selfridge & Co Ltd (1915)
Application of the rule
Basis of the rule distinguished from the consideration doctrine (Viscount Haldane)
Scruttons Ltd v Midland Silicones Ltd (1962) :check: confirmed general rule that prevents C relying on an exclusion clause in the main contract.
Judge-made exceptions
Exceptions giving C rights againts a party to the contract
The trust a promise
A’s contractual promise for C’s benefit is treated as a piece of property, which becomes the subject matter of a trust.
Trustee, B = use his ct rights for the benefit of C (suing A if A breach for eg). B can recover for the loss suffered by C and C will be entitled to any damages recovered. C can sue A himself, joining B as a party to the action
Limitations
Appears : only ct rights to have money paid or pty transferred can be held on trust (other have failed)
Courts today reluctant to infer an interntion to create a trust in the absence of clear words such as "trust" (Re Schebsman (1944)). Previous approach could have swallowed the doctrine of privity
Establishing an A-C 'collateral' contract
Contract between A and C, which will give C contractual rights against A
Not really an exception
ex: Shanklin Pied Ltd v Detel Products Ltd (1951)
Application in Wells (Merstham) Ltd v Buckland Sand & Silica Co Ltd (1965)
Seems that the collateral contract usually be a unilateral contract: A will promise that something is the case in return for C carrying out an act, but C is under no obligation to carry out the act
Particular form of collateral contract for carriage of goods
Need to satisfy the 4 conditions of Lord Reid in Scruttons
Himalaya clause
states that all exemption clauses and other clauses reducing liability that apply to the carrier’s liability shall also protect his servants and agents
The Eurymedon (1976) It was held that B had authority to contract on C’s behalf and that the Himalaya clause showed that C was intended to be protected by the clause laying down the one-year time limit.
it was held that C had provided consideration for A’s promise by unloading the goods and delivering them
Assumption of risk by A
Sometimes, outisde carriage goods =, the courts may sometimes allow C to rely on a clause in the A–B contract stating that A is to bear a particular risk in order to prevent A establishing that C owes a duty of care in tort to
Tort
Agency
Assignement
Exception giving B rights to enforce the contract in a manner beneficial to C
Specific remedies
Damages in respect of C's loss
Problems caused by the rule
it thwarts the intention of A and B where they both intend to give C a right to enforce the contract.
If intention, it :red_cross: C's expectations to enforce it
Creates a lacuna in the law, because where a contract intended to benefit C is breached by A, it is often C rather than B who suffers the loss
Practical difficulties sometimes
Uncertain scope, common law exceptions complex and artificial
Statutory exceptions: Contracts (Rights of 3rd Parties) Act 1999
Is the contract of a type covered by the Act
Is the s1 test satisfied
Can C's rights be removed or have they "crystallised"
Has B already made a claim against A for breach of contract
Does A have a defence to C's claim
The fate of the judge-made exceptions after the Act