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Law Notes Contract Law Notes

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Updated Privity Notes

Contract Law Notes

Contract Law

Approximately 1511 pages

Contract law notes fully updated for recent exams at Oxford and Cambridge. These notes cover all the LLB contract law cases and so are perfect for anyone doing an LLB in the UK or a great supplement for those doing LLBs abroad, whether that be in Ireland, Hong Kong or Malaysia (University of London).

These were the best Contract Law notes the director of Oxbridge Notes (an Oxford law graduate) could find after combing through dozens of LLB samples from outstanding law students with the highest...

The following is a more accessible plain text extract of the PDF sample above, taken from our Contract Law Notes. Due to the challenges of extracting text from PDFs, it will have odd formatting:


At common law, A and B cannot confer on T, a third party, a direct right of action against A. Nor could parties A and B give T the benefit an exclusion clause.

Cases establishing that a third party cannot acquire rights under a contract -> Absence of consideration supplied by 3rd party bars 3rd party from suing – Tweddle v Atkinson (1861) where A and B made contract that A will pay C 200 quid. Held C could not sue A for the 200 quid as consideration did not flow from C ie C was not a party to the contract so could not enforce it

  • Followed in Dunlop Pneumatic Tyre Co Ltd v Selfridge [1915] where C could not sue as not part of contract. Judges here said C cannot sue as “consideration must flow from promisor” while in Tweddle v Atkinson judges said “consideration must move from the claimant”. Though these 2 are usually taken to mean the same thing

  • Emphasis that B was that B was not a non-party

  • Now we have 2 reasons why a third party cannot sue

  1. Tweddle v Atkinson because of consideration did not flow from promise

  2. Dunlop Pneumatic Tyre Co Ltd v Selfridge because B was not a party to the contract

  • Privity of contract reaffirmed by HL in Scruttons v Midland Silicones [1962], (which was an exemption clause case) which extends this to exemption clauses

  • In this case, the HL applied the Dunlop Pneumatic Tyre Co Ltd v Selfridge reasoning the stevedores were not parties to the contract

Freedom of contract demands that A and B cannot impose a burden on T without his consent. And so T cannot be subjected to a duty to pay money to A or B, nor can A and B impose on T the burden of an exclusion clause, preventing T from being able to sue A or B, or restricting his capacity to obtain compensation.

In Re Schebsman [1944] (only an express trust of a promise will be recognised. Here, 3rd party cannot sue as there was no express trust created) the court held that the third party could not sue for breach of promise because:

  • In the past, there will be an equitable remedy that there was an implied trust between B and T with B as the trustee and T as the beneficiary

  • Therefore B must sue on T’s behalf

  • But after Re Schebsman there must be (i) express language and (ii) A and B must intend to give T the right

  1. He had not provided consideration for the promise.

    1. However, we can argue that it should not matter that only B has provided consideration. The function of consideration is to render the contract binding between A and B. It is an unconvincing extension of the role of consideration to require a third party to have earned or bought the right to sue given him by the contracting parties.

    2. Further, immediately after the contract’s formation, B can assign the benefit of the contract to T. The fact that T has not given anything to earn this right does not preclude him from acquiring a right to assignment. Upon assignment, T will acquire a direct right against A.

  2. He was not an addressee of the promise made by A to B. A was committing himself only to an obligation towards B but not to an obligation towards the third party.

    1. However, it is arguable that A intends to commit himself to an obligation towards the third party

  3. If T was granted a direct right of action, such a right would be ‘irrevocable’. It could not be altered or extinguished by A unilaterally, nor even consensually, by A and B. As the third party’s right arises gratuitously, he should not have initial ‘sovereignty’ over A and B’s agreement, although the position might change once he has acted on it, or assented to it.

For this reason, under s2 the Contracts (Rights of Third Parties), A and B can vary or extinguish their contract until:

  • T notifies A that he accepts the contract or

  • T has relied on the contract


Firstly, it thwarts the intention of A and B where they both intend to give T a right to enforce the contract.

Secondly, it is arguable that in situations where the contract suggests that the intention of A and B is to give T rights under the contract, T has a reasonable expectation of having a legal right to enforce the contract. These expectations are ignored by the rule. However, Smith (1997) queries why T’s expectation of gaining rights under the contract is reasonable, as T has not provided any consideration.

Thirdly, it creates a lacuna in the law, because where a contract intended to benefit T is breached by A, it is often T rather than B who suffers the loss, though T has no right to sue on the contract. The consequence is that A is not held to account for his breach of contract, as even if B sues A, B would most likely be awarded a token sum as B has not suffered any significant loss.

Fourth, the rule causes practical difficulties in commercial life. A life insurance policy taken out for the benefit of a cohabitee will not be enforceable by the cohabitee


The express trust of a promise – Re Schebsman (1944)

Creation of a collateral contract ie A-C contracts – eg Wells (Merstham) Ltd v Buckland Sand (1965) where it was held in return for A’s promise to pay C, C caused B to enter into a contract with A. Therefore there was an A-C contract so C could sue A

  • Used in The Eurymedon (1975) where PC analysed A-C contract as A making a unilateral offer to C and C accepted the offer (and thus covered by exemption clause) by conduct in unloading the goods. Though it was later suggested in The Mahkutai (1996) that the offer was a bilateral one


The benefit of A’s promise to pay money to T, or to transfer property to T (‘choses in action’), can be held by B on trust for T, B thereupon becoming obliged in equity to sue A for T’s benefit. This is based on the notion that the promise to pay money or to transfer property is itself a valuable asset, an intangible chose in action (right to sue somebody). This equitable concept...

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