Contract Law W7: Privity and Assignment

Privity- Understand the doctrine of privity:
- Only parties to a contract can acquire rights or liabilities under it.
- Identify and explain the requirements of evasion of privity:
- Exceptions like agency, trust, and statutory exceptions.
- Apply the principles to a problem-based scenario.
Assignment- Understand the principles of assignment:
- Transferring contractual rights to a third party.
- Apply the principles to a problem-based scenario.

Only parties to a contract can acquire rights or liabilities under it.- Case: Tweddle v Atkinson [1861]:
- Established that a third party cannot enforce a contract, even if it was made for their benefit.
- Case: Trident General Insurance Co Ltd v McNiece Bros Pty Ltd (1988):
- An exception to the privity rule where insurance policies covered third parties.

Scenario: A promises B, for consideration moving from B, to pay C $100$ .
A and B are parties to the contract and privy to it; they can sue each other if there is a breach.
C is not a party to the contract and cannot sue A if A fails to pay C the $100$ .
The doctrine of privity precludes C from bringing an action to enforce a contract, but it does not prevent C from obtaining declaratory relief.

Dew (Agent? HL UK-No) is an intermediary.
Dunlop has a contract with Dew; Dew has a contract with Selfridge.
Issue: Can Dunlop enforce the contract against Selfridge?
Held: No, because of lack of consideration, privity, or agency between Dunlop and Selfridge.
Lord Haldane LC explains the principles.

Facts:
- Blue Circle (construction company) had an insurance contract with Trident Insurance regarding construction site works, public liability, and maintenance/defects liability.
- The insurance covered all workers, including McNiece Bros (Blue Circle’s principal contractor).
- Coverage began on the date of commencement of works.
Issue:
- H was injured and successfully sued McNiece Bros, who sought indemnification from Trident.
- Trident denied liability to McNiece Bros, claiming they could not enforce a claim under an insurance policy to which it was not a party.
Held:
- The majority favored McNiece Bros, allowing them to claim under the insurance policy despite not being a direct party to it.

Statutory Law:
- Property law: All States’ and Territories’ provisions enable persons to enforce interests/other rights in land in their own name.
  - Queensland: Property Law Act 1974 s 55.
  - Western Australia: Property Law Act 1969 ss 11(2) and (3).
  - Northern Territory: Law of Property Act 2000 s 56.
- Insurance Contracts Act 1984 (Cth) s 48.
- Contracts Review Act 1980 (NSW) s 12: Court can make an order in favor of a person who is not a party to the contract.
- Certain consumer protection laws (e.g., Australian Consumer Law) impose obligations on manufacturers even if the contract is with an intervening distributor.
Common Law:
- Agency: A company (A) appoints an agent (B) to do their work. B is a ‘third party’ but acts/works for the principal, A, so can bind that principal in a contract with ‘C’. B signs, but it’s really between A and C.
- Trust: Where a trustee holds property or rights for the benefit of a beneficiary, the beneficiary, though not a party to the trust agreement, can enforce their rights.
- Assignment: Where a third party is, in effect, a party to the contract. You (A) assign your rights against B to another party C and allow them to take up your debt, legal right, etc. (e.g., selling a debt to a collection agency).

An assignment is an arrangement under which the assignor transfers some or all of his or her rights or benefits under a contract to an assignee.
Obligations under a contract cannot be assigned.
However, certain exceptions exist where obligations may be delegated, provided the original party retains liability for performance.
Additionally, it is essential to note that the rights assigned must be clear and specific, as any ambiguity can lead to disputes regarding the enforceability of the contract.
In practice, this means that both parties need to ensure that the assignment process is properly documented and that the intent to transfer rights is explicitly stated to avoid potential legal conflicts.

As a general rule, only the parties to the contract can acquire rights and incur liabilities under it (cf. Trident General Insurance Co Ltd v McNiece Bros Pty Ltd [1988] HCA 44).
Common law and statutory provisions can enable a third party to overcome the doctrine of privity:
- Common law example: leases and restrictive covenants.
- Statute law example: negotiable instruments; property contracts.
No right of action in contract exists against a person who is not a party to a contract, but a third party:
- who knowingly and intentionally induces a breach of contract,
- thereby maybe committing a tort (Lumley v Gye (1853) 118 ER 749).

Formation of a Contract: Do we have a contract?
- Offer
- Acceptance
- Intention
- Consideration
- Estoppel
- Formal Requirements
- Privity & Assignment
Vitiating Factors: Can the contract be avoided?
- Misinformation
- Abuse of Powers
- Illegality
Terms of a Contract: What have the parties agreed upon?
- Express Terms
- Implied Terms
- Statutory Guarantees
End of a Contract: What happens at the end?
- Performance
- Assignment
- Remedies
- Frustration