Privity

1. What does privity of contract mean?

Privity of contract means that only those who are parties to a contract are bound by it and can benefit from it (Dunlop Pneumatic Tyre Co. Ltd v Selfridge).

2. What can the rule of privity be seen to be based on and what can it cause?

The rule of privity can be seen as based on the rule that consideration must move from the promisee (Tweddle v Atkinson). However, this can cause injustice and has occasionally been ignored (Jackson v Horizon Holidays Ltd).

3. Are there any situations in which the rule of privity does not apply?

There are some exceptions when the rule of privity does not apply.

4 (OIR). What is agency?「」

Agency is when one person (the agent) is authorised to make a contract on behalf of another person (the principal) and the principal is bound by the terms of the contract even though he did not make the contract himself.

5 (OIR). What do the courts sometimes find?「」

Sometimes the courts will ‘find’ a collateral contract, a second contract alongside the main agreement (Shanklin Pier Ltd v Detel Products Ltd).

6 (OIR). What can someone not a party to the contract do under the Contracts (Rights of Third Parties) Act 1999?

Finally, under s.1 of the Contracts (Rights of Third Parties) Act 1999, someone who is not a party to a contract may enforce the contract against either or both of the actual parties to the contract if certain conditions are met.

7 (OIR). What are the conditions under s.1 Contracts (Rights of Third Parties) Act 1999?

These conditions are that the third party is expressly identified by name, or as a member of a class or as answering a particular description, and the contract expressly provides that the third party may enforce the contract, or the contract term is an attempt to confer the benefit of the term on the third party.

8 (OIR). What do parties to a contract have the right to do in regards to the Contracts (Rights of Third Parties) Act 1999?「」

However, the parties to a contract have the right to exclude the Act from benefitting a third party, but third parties can use the rules concerning unenforceability of exclusion and/or limitation clauses to challenge such clauses.