Privity AO3
Introduction/
Privity is the principle that only parties to a contract can claim on the contract
Fairness of the rule of privity
Privity is the principle that only parties to a contract can claim on the contract → gives 3rd parties no rights
This was seen in Beswick V Beswick- an uncle left his nephew his business but wanted payments to be made to his wife, the nephew inherited the business but did not make payments to the wife, but she wasn’t able to claim as she was not a party to the contract
→ This rule deprived parties from getting what they were owed and was unfair
→ However, it could be argued that you shouldn’t be able to claim a contract you were not apart off, this also prevents floodgates
Contracts (Rights of Third parties) Act 1999
An Act was passed to create exceptions to the privity rule, but there were requirements to be met:
e.g. When parties were expressly stated in the contract
This could have changed the outcome of Tweedle V Atkinson- Fathers of a married couple promised each other that they would pay money to the couple but the bride’s father died without paying and the son-in-law, but couldn’t as he wasn’t a party to the contract
→ This Act allows third parties to benefit from a contract they were meant to benefit from
However, just the term “who can benefit from it” can be seen as too vague e.g. a new road being built would benefit many
→ Furthermore, this act can be seen as ineffective because parties can exclude it if they want to, making it pointless in commercial contracts where most of the time the rights of third parties are excluded
Collateral contracts
An exception to the privity rule is collateral contracts, where the contract includes an implied secondary contract between parties that are indirectly involved in the contract
This was seen in Shanklin Pier V Detel- An indirect contract with Shanklin and detel products since the painting contractors told Shanklin that the paint would last 2 years, but it didn’t
→ This exception is good as it makes parties liable in contracts that they aren’t necessarily involved in
→ In contrast, it is quite difficult to understand and it also is too imaginative as seeing a secondary contract could be seen as going too far
Group Bookings
There is an exception in group bookings where 3rd parties can claim on behalf of the claimant
This was seen in Jackson V Horizon Holidays- C and his family had a poor holiday and wanted to claim compensation
→ This is beneficial as it allows for families of claimants to claim the benefit for the same suffering endured, which is fair
However, third parties are only able to claim on behalf of the claimant and are unable to claim themselves, even though they endured the same loss of amenities, which could be seen as unfair
Restrictive Covenants
A restrictive covenant is a promise in a deed saying the land must not be used in a certain way (e.g. no building or no businesses).
This was seen in Tulk V Moxhay- Tulk owned land, he sold part of the land but made the buyer promise to keep it as a garden (not build on it), that land was later sold again to Moxhay, who built on the land, but the restrictive covenant from Tulk said he couldn’t and the court agreed
This is good as it shows flexibility in law and gives as much opportunity to claim as possible for third parties
However this exception is very limited as it can only be used in certain situations
Conclusion
The Privity rule can be seen as unfair in some situations but it can be amended by the Contract (Rights of third parties) Act 1999 as well as the court exceptions, however it can be said all these exceptions remove the purpose of the original privity rule