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CONTRACT – privity (lecture 8)
Doctrine of privity – a burden cannot be imposed on a third party AND to be able to claim the benefit of a contract you must be privy to it
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Common law and statute law co-exist
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The Act’s impact has been limited in that it is often excluded from contracts
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PROBLEMS

7
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A man
provides consideration but cannot enforce promise because it
was not address to him
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This means: the intention of the parties
thwarted, injustice to the third party, the person who has
suffered the loss can’t sue, the person who has no loss can sue
but has no loss to recover
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Guarantor’s right of subrogation

1
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2
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3
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4
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2
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TRUST–les affreteurs reunis sa v leopold walford ltd
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Under s 6 of the Act, certain contracts are excluded
from its ambit
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AGENCY – Dunlop v selfridge; scruttons v midland
silicones ltd – scruttons couldn’t take advantage of limitation
clause sillicones had with carriers, so sillicones were able to
sue for full amount of damage caused by scruttons
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OR third parties where a term purports to confer a
benefit on them (s1(1)(b)) may have a right of
enforcement unless…

An agency will exist if it is clear:
a)that the principal (third party) was intended to be protected
by a clause in it
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COLLATERAL CONTRACTS –Have to find
consideration like in shanklin pier v detel products, Detel’s
guarantee that the paint would last for 10 yrs and the pier told
the contractor to buy Detel’s paint
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ASSIGNMENT – contractual device where A assigns rights
from his contract with B to C
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1
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The parties did not intend the term to be enforceable
by the third party (s1(2)) – note presumption of
enforceability – Nisshin Shipping co ltd v Cleaves & co
ltd
4
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The third party gets the same rights as if they had been
a party to the contract (s1(5))
6
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JUDICIAL EXCEPTIONS (or activism) –Jackson v
horizon holidays – but it has been limited ie must be a contract
for enjoyment (Woodar v Wimpey)
Defences
Albazero principle (commercial setting):
Linden Gardens v Lenesta sludge - Assignment prohibition
meant that Albazero couldn’t apply
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Where A and B contract for goods,
knowing the goods will be transferred to C before the breach,
A will be treated as having entered into the contract for the
benefit of C and is entitled to recover
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The promisor has all the defences available to him that
he would have been able to use against the promisee (s3)

 



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