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Law Notes Contract Law Notes

Privity Of Contract Notes

Updated Privity Of Contract 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...

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Privity Of Contract

1. Passing a Benefit to a Third Party

(i) The Privity Doctrine

  • Tweddle v Atkinson (1861) 1 B&S 393: Before the wedding took place, Father of the bride made an agreement with the father of the groom that they would pay the husband sums of money after marriage. Further agreed that the husband should have right to enforce the agreement against them in the event of default.

    • No stranger to the consideration can take advantage of the contract; husband cannot enforce.

  • Dunlop Pneumatic Tyre Co Ltd v Selfridge [1915] AC 847: Contract for D to sell P’s tyres at no less than the list price. However, did stipulate that could sell for less to a third party trade customer if they undertook to sell the tyres at no less than the agreed list price. Issue as to whether P could enforce agreement of the third party.

    • Fundamental principle that only a party to a contract can sue on it.

    • If a person with whom a contract has been made is able to enforce it consideration must have been given by him to the promisor or to some other person at the promisor’s request,

    • A principal not named in the contract may sue upon it if the promisee really contracted as his agent. But again, in order to entitle him to sue he must have given consideration, either personally or via the agent.

    • Although some of the judges were entitled to treat the intermediary as the agent there was still no consideration.

    • Note that privity and consideration treated as separate requirements (as compared to the above case), although it is clear that they are closely interlinked.

  • Smith & Snipes Hall Farm Ltd v River Douglas Catchment Bd [1949] 2 KB 500: Agreement that if homeowners contributed towards the cost then would put in place flood defences. Land was conveyed with the benefit of the covenant to S who later tried to sue upon it.

    • Language of the deed satisfies the test of ‘touching and concerning the land’ and being a benefit which was intended to attach to the land and pass thereupon.

    • If such a covenant runs with the land it is binding on the covenantor notwithstanding that a stranger benefits.

    • Operation of s78 Law of Property Act means that S can sue.

    • Lord Denning tries to suggest that Dunlop confined to its facts relating to maintenance of prices at public disadvantage although this was not followed by the rest of the court and seems to have been ignored further since.

  • Scruttons v Midland Silicones [1962] AC 446: Bill of lading had a clause which limited liability. Stevedores were negligent and later sought to rely on the clause in the contract to limit their liability to the lesser sum.

    • There was nothing in the bill of lading which stated or even implied that the parties intended the exemption to cover the stevedores as they used the word ‘carrier’ only which they are strictly speaking, not.

    • Did not think that contracted as agents.

    • Not an appropriate case to imply a term as there was no need to do so to give business efficacy to the agreement.

    • Affirmed the fundamental principle.

    • Could be that a stranger could be protected in a roundabout way as follows: A gives X enforceable indemnity, and contracts with B that B will not sue X, informing B of the indemnity, and then B does sue X in breach it may be that A can recover from B as damages the sum which he has o pay X under the indemnity.

    • Lord Denning dissented saying that fundamental principle hadn’t been around that long and was only designed to deal with the problem that there was no separate tort of negligence; had been used to extend liability rather than restrict it and hence the irony in its application in recent years. Disapproves of the doctrine but in any even thought that it was right to analyse the case as one of agency.

  • Beswick v Beswick [1968] AC 58: B agreed to sell property and business to nephew subject to agreement that N would pay B’s wife certain sums each week after his death. W brought action in personal capacity (s56(1) Law of Property Act claim) and as administratrix when N refused to pay. Issue as to whether could have SP because no loss caused to estate of B.

    • Appreciated that the Law Commission and Lord Denning have expressed concern with the privity rule but thought that not appropriate to overrule it. Lord Reid indicated that if things remained as they were the House might be forced to intervene in future cases.

    • If there were a trust 3P would have an equitable right against A who would have the legal right against B for the sum.

    • Order for specific performance was made, although their Lordships disagreed with proposition that only nominal damages would be payable to A in a case like this because that result would be grossly unjust; substantial damages would therefore be available.

(ii) The Promisee’s Remedies in Contract for the Benefit of a Third Party

  • Gore v Van der Lann [1967] 2 QB 31: Bus passes were distributed on the understanding that passengers would not have a claim for any injuries, however caused, against the employee’s of the company. P suffered personal injury and brought a claim against the conductor alleging negligence. Company tired to prevent her bringing an action.

    • In order to obtain a stay of proceedings the promisee must demonstrate that the promisor had promised not to sue the third party and that the promisee has as sufficient interest in the enforcement of the promise to justify the grant of stay.

    • Not entitled to stay in this case because:

      • On construction of the clause P had not promised not to sue the conductor;

      • Corporation did not have a sufficient interest in the enforcement of the promise as it was not obliged to indemnify its employee against liability to the plaintiff in negligence.

    • Clause was also invalid by operation of s151 Road Traffic Act 1960.

  • Snelling v Snelling [1973] QB 87: Application for stay of action. Differences arose between brothers in business; they agreed that of one of them resigned he should forfeit all monies due from the company. P resigned and brought...

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