Notesale: Turn your study into money

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Privity and 3rd Party Rights
The doctrine of privity of contract which is the general rule in England provides that a person who is
not party to a contract (called a third party) cannot acquire rights under or enforce the provisions of
the contract, or rely on its protection even if the provisions were intended for the benefit of the
third party
...

At common law there are complex and artificial mechanisms to avoid this conclusion such as the use
of agency to allow a third party to enforce an exemption clause in a contract which the third party is
not a party
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Where this is satisfied, it will not matter that the third party
did not provide consideration for the promise it is seeking to enforce, as long as the promise is
supported by the consideration of another
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The doctrine of privity of contract provides that only contracting parties are able to enjoy the
benefits of a contract: only the parties can enforce contractual obligations of rely on its protection
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The groom was
unable to enforce this promise as he had not provided consideration, and he was a third party to the
contract
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v Selfridge & Co Ltd 1915
Du lop o tra t to sell tyres to De & Co to re ei e dis ou t so lo g as they did t sell the tyres o
for less than the list price
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Dunlop were unable to enforce the provisions of the contract as they
were not party to it – they had not provided consideration as they were not the promisee
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They are however acknowledged to have
introduced artificiality and complexity in to the law
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e
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The statutory reform is contained in the Contract (Rights of Third Parties) Acts 1999
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S1(2)
Subsections 1b does not apply if on a proper construction of the contract appears that the parties of
the contract did not intend the term to be enforceable by the third party
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The third party in
this case was therefore una le to e for e the o tra t as the o tra t did ot purport a
benefit to the third party
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Avraamides v Colwill 2006 (CA)
A employed C to refurbish As bathroom
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However, A is not a third party to the contract between B/C and thus was unable to enforce the
agreement made between A and B as A was not expressly identified in the contract between B and
C
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Does the third party need to provide consideration?
No, so long as the promisee has provided consideration, the third party does not need to under
s1(1)(a) of the Act
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Variation of contact and cancellation of third party rights
S2(1) of the act provides that the parties cannot alter or rescind the agreement in such a way as to
extinguish or alter the third parties entitlement without consent if:
A- The third party has communicated his assent to the term to the promisor
B- The promisor is aware that the third party relied on the terms, or
C- The promisor can reasonably be expected to have foreseen that the third party would and
has in fact relied on the term

S4 reser es to pro isee s right to sue – states that s1 does ot affe t the pro isee s right to e for e
contract provisions
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Common law devices to avoid privity
S7(1) – section 1 does not affect any right or remedy of a third party that exists or is available apart
from this act

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