Aveneu Park, Starling, Australia

In Dew then went and sold some tyres to

In this assignment I will
be critically analysing difficulties of the doctrine of privity of contract in
the English law. It will outline the main issues caused to third parties such
as cases that did have third parties involved, and cases that did not have them
involved. I will also be discussing whether the Third Parties Act 1999, had
resolved any of these issues. To conclude I will evaluate whether or not the
Third Parties Act 1999, has made a difference or not against the flawed
doctrine of privity. Doctrine of Privity of contract is defined as a contract,
which cannot as a ‘general rule confer any rights or impose obligations on any
person except the parties who are under it.’1

 

The Doctrine of Privity of
contract was enforced to create rights and obligations between the parties in
the contract, and to not let third parties get involved. The alliance that the
privity rule has with the rules of consideration are that, below the doctrine
of consideration, ‘ Each party to a contract must be both a promisor and a promisee’.
They must each receive a benefit and each suffer a detriment. This is referred
to as consideration.’2.
Where It is referred that only a promisee may enforce the promise meaning that
if the third party is not a promisee he is not privity to the contract. For
example, in the case of ‘Dunlop Tyre Co v Selfridge (1915) AC 847, the
plaintiffs had sold tyres to Dew and Co, who were wholesale distributors. In
which they had agreed that Dew and Co would not sell the goods under the
plaintiffs retail price. Dew then went and sold some tyres to the defendants
under the retail price, because of this the plaintiffs incurred injunction and
damages. When this was taken to court it had failed, even though there was a
contract that was active between the defendants and Dew. The plaintiffs were
not part of the contract.   

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This is very similar to
the Doctrine of Privity of Contract, as they have the same rule where only the
parties who are part of the contract can benefit from the right. A example of a
case where the Doctrine of privity of contract who did not allow a third party
to get involved was in ‘Tweddle v Atkinson (1861)’. It has been stated
that ‘consideration must move from a promisee’. In this case both fathers
of a wife and husband had agreed in writing to pay the husband $100 and $200 in
consideration for his marriage. The paintiff then went and sued his father in
law for the unpaid sum. However the court had held that the plaintiff ws unable
to sue the defendants because he was not part of the contract. This is beause
consideration must move from the party which entitles them to sue.

 

 

Under the English Common
Law, there are a few principles that will enable the third party to
overcome the doctrine of privity. One of the principles
are collateral contracts, this is when a contract between two people may
be accompanied by a collateral contract between one of them and a third
person relating to the same subject-manner3.
For example, in the case of ‘Shanklin Pier v Detel Products (1951)’, the
plaintiffs were owners of a pier in Shanklin. The plaintiffs had entered into a
contract with contracters who would repair their pier and painted. Under the
contract the plaintiff had the rights to alter the contract when needed. On
approach the defendants had offered the Plaintiffs with a new painting product
for the pier. Once the Plaintiffs had agreed to amend the contract for the
paint to be changed and renovated, several months later the paint had flaked
off and did not last. Therefore because of this the Plaintiffs had put a claim
in.

 

It was held in court that
the defendant was held liable as he had provided the warranty of the paint to
the plaintiffs. It was also held that if the contract for the sale and purchase
of the paint was between the defendant and plaintiff, then the same warranty
for the paint would be implied. Therefore because of this the plaintiff was
entitiled to recover damages.

  

Another principle
under the Common Law is – ‘Trust’, this is defined as a ‘Contracting party
can clearly state that the benefit of the contract is held by him or her in
trust for a third party which means the third party will have rights to the
benefits’4.
For example, this rule was used in the case of ‘Les Affreteurs Reunis v Leopold
Walford (1919)’ where a broker (C) negotiated a charterparty by which the
shipowner (A) promised the charterer (B) to pay the broker a commission. It was
held that B was trustee of this promise for C, who could thus enforce it
against A5.
Agency is also another principle which helps a Third Party Act to overcome
doctrine of privity. Agency is defined as an exception to the doctrine of
privity. An agent may be able to contract on behalf of his principle with a
third party and form a contract between themselves. An example could be that a
third party, may be able to take the benfit of an exclusion clause by proving
that the party imposing the clause was acting as the agent of the third party,
into a relationship with the plaintiff.

 

Statutes is another principle
in the English Common Law which helps to overcome the contract of doctrine and
privity.There are certain exceptions that have been created for the contract,
like price maintenance agreements.

 

Following on the Doctrine
of Privity of contract can be dismissed in a number of ways. To start
with there Is the Third Parties Act 1999. This Act was put into place so
that it gives third parties the right to enforce a term into the contract. One
of the two ways that the Third Party Act 1999 can sue is when, the contract act
allows a person the right to sue on a contract, even though they were
originally not part of the case. For example if the contract states that the
third party can enforce a certain warranty. Secondly, when there is a benefit
which is professed in the contract which could be claimed by third parties for
example, when a supplier contract between the dealer and manufacuturers state
that they are protected by a product garuntee.

 

A case example for
the Third prties Act 1999 is Nisshin
Shipping Co Ltd V Cleaves & Co Ltd & Ors 2003 Ewhc 2602. The contract
that was created between both the partiesthat Cleaves had neogotiated nine time
charters on behalf of Nisshin. The contract had stated that Cleaves was to receive
commission as a broker and contained an arbitration clause which was wide
enough to entitle a claim by the charterers against the owners for failing to
pay the promised commission6.
Nisshan has refused to pay the comminsion to Cleaves therefore because of this
it went into arbitration. Nisshan had claimed that Cleaves has dismissed the
contract by having an interest in one of Nisshans competitiors, and because of
this it had been taken to court. The issue that was held between both the
parties was that whether the commission had conferred a benefit to the brokers.
Also whether they had intended for the commission clause to be enforceable to
the brokers under the Third Parties Act 1999. It was held in court that, the application
that Nisshin submitted was dismissed. The commission clauses was a purpose for
Cleaves to benefit from. It was also held that it was clear both the parties
had the intention to benefit from the commission to be enforceable by a third
party. However Cleaves was able to claim a commission in its own right under s1
of the Act.

 

In conclusion, this essay
analysed the doctrine of privity of contract as well as the contract Act of
1999 in the English Law. I have also explained how the flaws from the privity
act reformed to the Third Parties Act 1999. The doctrine of privity act had
flaws which it did not allow third parties to get involed but, in a few cases
that are stated above it did allow the third parties to get involved. In the case
that I have presented after 1999 which was Nisshin Shipping Co Ltd V Cleaves & Co Ltd, it allowed the third party
to get involved to resolve the case that was held in court. It overcame the
doctrive of privity by having the Act there. If the act of 1999 had be introduced
before the cases stated which had denied the third party getting involved such
as ‘Dunlop Tyre Co v Selfridge (1915) AC 847 and Tweddle v Atkinson
(1861), only then the third parties would have been able to get involved and
sue. Overall, the Third Parties Act 1999 did help to resolve the issues that occurred,
because the outcome of the cases showed that the third person was able to
benefit and sue.

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