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Chapter

Cover Contract Law

4. Privity  

Can a contract alter the rights and liabilities of a third party who is not privy to the contract? This chapter addresses the following questions: (1) Why is the general rule that only contract parties can sue on a contract? (2) What rights of enforcement does the Contract (Rights of Third Parties) Act 1999 confer on a third party? (3) What is the impact of the 1999 Act on the requirement that a contract claimant must have given consideration? (4) To what extent can a promisee enforce a contract for the benefit of a third party? (5) Aside from the 1999 Act, what legal avenues exist for third parties to enforce promises made for their benefit? (6) When and how does a contract bind third parties?

Chapter

Cover O'Sullivan & Hilliard's The Law of Contract

6. Privity  

Titles in the Core Text series take the reader straight to the heart of the subject, providing focused, concise, and reliable guides for students at all levels. This chapter examines the doctrine of privity in the law of contract. The doctrine of privity dictates that a person who is not a party to the contract cannot be granted contractual rights by the contract or be placed under contractual obligations by it. It explores the rationale of the principle, discusses the authorities that established it, and explores the various common law exceptions to the rule that a third party cannot acquire rights under a contract. This chapter also explores in detail the statutory exception to privity provided in the Contracts (Rights of Third Parties) Act 1999.

Chapter

Cover Contract Law

18. Privity and third parties  

Protecting the rights of non-parties

This chapter examines how English law, through a doctrine known as privity of contract, deals with the problem posed by contracts whose performance involves third parties. According to the doctrine of privity, a contract ordinarily only affects persons who are party to it. Third parties are neither bound by the contract nor entitled to claim rights under the contract. However, the courts and Parliament developed a number of exceptions to the strict rule of privity, each of which gives third parties a right to sue under the contract in a certain type of situation. For example, the Contracts (Rights of Third Parties) Act 1999 gives third party beneficiaries a right to enforce contract terms. This chapter first considers the problem of third party rights in contracting before discussing the effects of privity and the provisions of the Contracts (Rights of Third Parties) Act 1999 in more detail.

Chapter

Cover Poole's Casebook on Contract Law

7. Privity of contract and third party rights  

Robert Merkin and Séverine Saintier

Poole’s Casebook on Contract Law provides a comprehensive selection of case law that addresses all aspects of the subject encountered on undergraduate courses. This chapter examines privity of contract, its relationship with consideration, and the ability of third parties to enforce contractual provisions for their benefit. The doctrine of privity of contract provides that the benefits of a contract can be enjoyed only by the parties to that contract and only parties can suffer the burdens of the contract. At common law, third party beneficiaries could not enforce a contractual provision in their favour so various devices were employed seeking to avoid privity. Statute now allows for direct third party enforcement but in limited circumstances. This chapter examines the background to privity and the attempted statutory reform in the Contracts (Rights of Third Parties) Act 1999 as it has been interpreted in the case law. The chapter also discusses the common law means of avoiding privity as illustrated by the case law, e.g. agency, collateral contracts, and trusts of contractual obligations. Finally, it assesses the remedies available to the contracting party to recover on behalf of the third party beneficiary of the promise, including the narrow and broad grounds in Linden Gardens Trust. It concludes by briefly considering privity and burdens—and the exceptional situations where a burden can be imposed on a person who is not a party to the contract.

Chapter

Cover Poole's Casebook on Contract Law

7. Privity of contract and third party rights  

Robert Merkin KC, Séverine Saintier, and Jill Poole

Poole’s Casebook on Contract Law provides a comprehensive selection of case law that addresses all aspects of the subject encountered on undergraduate courses. This chapter examines privity of contract, its relationship with consideration, and the ability of third parties to enforce contractual provisions for their benefit. The doctrine of privity of contract provides that the benefits of a contract can be enjoyed only by the parties to that contract and only parties can suffer the burdens of the contract. At common law, third party beneficiaries could not enforce a contractual provision in their favour, so various devices were employed seeking to avoid privity. Statute now allows for direct third party enforcement, but in limited circumstances. This chapter examines the background to privity and the attempted statutory reform in the Contracts (Rights of Third Parties) Act 1999 as it has been interpreted in the case law. The chapter also discusses the common law means of avoiding privity as illustrated by the case law, e.g. agency, collateral contracts, and trusts of contractual obligations. Finally, it assesses the remedies available to the contracting party to recover on behalf of the third party beneficiary of the promise, including the narrow and broad grounds in Linden Gardens Trust. It concludes by briefly considering privity and burdens—and the exceptional situations where a burden can be imposed on a person who is not a party to the contract.

Chapter

Cover Contract Law

25. Third Parties  

This chapter examines the impact of a contract on third parties. It addresses two main questions: whether or not a third party can acquire any rights under the contract, and whether or not the contract can impose upon him obligations or liabilities. The general rule adopted by English law is that the contract creates rights and imposes obligations only between the parties to the contract: the third party thus neither acquires rights under the contract nor is he subject to liabilities. This general rule is known as the doctrine of privity of contract. The Contracts (Rights of Third Parties) Act 1999, however, provides a relatively simple mechanism by which contracting parties can confer upon a third party a right to enforce a term of their contract. The dominant philosophy that underpins the 1999 Act is one of freedom of contract and, this being the case, the success of the Act in practice will depend upon contracting parties themselves. The chapter examines the individual sections of the 1999 Act, the exceptions to the doctrine of privity that existed at common law and under various statutes prior to the enactment of the 1999 Act. The chapter concludes by considering the extent to which a third party can be subject to an obligation by a contract to which he is not a party.

Chapter

Cover Contract Law Directions

13. Privity and the interests of third parties  

Without assuming prior legal knowledge, books in the Directions series introduce and guide readers through key points of law and legal debate. Questions, diagrams and exercises help readers to engage fully with each subject and check their understanding as they progress. This chapter examines the privity rule, which states that only a party to the contract can sue upon it. It discusses the development of the privity rule, distinguishing the privity rule from the consideration rule, evading the privity rule, techniques for giving a right directly to a third party or apparent third party, specific performance in favour of a third party and damages for a third party’s loss, and the Contracts (Rights of Third Parties) Act 1999.

Chapter

Cover Contract Law Directions

13. Privity and the interests of third parties  

Without assuming prior legal knowledge, books in the Directions series introduce and guide readers through key points of law and legal debate. Questions, diagrams and exercises help readers to engage fully with each subject and check their understanding as they progress. This chapter examines the privity rule, which states that only a party to the contract can sue upon it. It discusses the development of the privity rule, distinguishing the privity rule from the consideration rule, evading the privity rule, techniques for giving a right directly to a third party or apparent third party, specific performance in favour of a third party and damages for a third party’s loss, and the Contracts (Rights of Third Parties) Act 1999.

Chapter

Cover Land Law Directions

13. Covenants in freehold land  

This chapter focuses on covenants in freehold land. A covenant is a promise made by one landowner to another regarding the use of freehold land. Enforceability is not a problem when considering the original parties to a covenant. The parties have simply entered into a contract with each other. Complications are caused, however, by Law of Property Act 1925, s. 56(1), which extends the scope of persons who may be counted as original covenantees, and the Contracts (Rights of Third Parties) Act 1999, which enables the benefit of a contract to be given to those who are not parties to it. The common law and equitable rules for passing of the benefit and burden of a covenant, positive covenants, breach of covenants, modification and discharge of covenants, and proposals for reform are discussed.

Chapter

Cover Contract Law Concentrate

4. Privity and third party rights  

Each Concentrate revision guide is packed with essential information, key cases, revision tips, exam Q&As, and more. Concentrates show you what to expect in a law exam, what examiners are looking for, and how to achieve extra marks. This chapter discusses the doctrine of privity and third party rights. The doctrine of privity of contract provides that a person who is not a party to a contract (called a ‘third party’), cannot acquire rights under or enforce the provisions of that contract or rely on its protections even if the provisions were intended to benefit that third party. At common law there are complex, and sometimes artificial, ways to avoid this conclusion. More significant nowadays is the attempt to reform this principle by legislation in the Contracts (Rights of Third Parties) Act 1999, allowing some third party beneficiaries to enforce the provisions of contracts.

Chapter

Cover Poole's Textbook on Contract Law

7. Privity of contract and third party rights  

Robert Merkin, Séverine Saintier, and Jill Poole

Course-focused and comprehensive, Poole’s Textbook on Contract Law provides an accessible overview of the key areas on the law curriculum. According to the doctrine of privity of contract, only the parties to the contract are bound by, or can enforce, the obligations under the contract. A person who is not a party to a contract does not have any rights under that contract and is not subject to any of its obligations (or burdens). This chapter considers the rules of contract law, and related rules, that are applicable to contracts which stipulate third party rights. It considers the relevant provisions of the Contracts (Rights of Third Parties) Act 1999, the scope of the legislative reform, the test for third party enforceability and how the doctrine of privity of contract is related to the consideration requirement. It also looks at means of circumventing the privity doctrine such as assignment, and exceptions to the privity doctrine such as agency principles as employed in The Eurymedon. The chapter then examines remedies available to the promisee which have the effect of enforcing any promise in favour of a third party beneficiary or enabling substantial damages to be recovered to cover the third party’s loss. Finally, the means by which contractual burdens may bind third parties are examined.

Chapter

Cover Poole's Textbook on Contract Law

7. Privity of contract and third party rights  

Robert Merkin KC, Séverine Saintier, and Jill Poole

Course-focused and comprehensive, Poole’s Textbook on Contract Law provides an accessible overview of the key areas of the law curriculum. According to the doctrine of privity of contract, only the parties to the contract are bound by, or can enforce, the obligations under the contract. A person who is not a party to a contract does not have any rights under that contract and is not subject to any of its obligations (or burdens). This chapter considers the rules of contract law, and related rules, that are applicable to contracts which stipulate third party rights. It considers the relevant provisions of the Contracts (Rights of Third Parties) Act 1999, the scope of the legislative reform, the test for third party enforceability and how the doctrine of privity of contract is related to the consideration requirement. It also looks at means of circumventing the privity doctrine such as assignment, and exceptions to the privity doctrine such as agency principles as employed in The Eurymedon. The chapter then examines remedies available to the promisee which have the effect of enforcing any promise in favour of a third party beneficiary or enabling substantial damages to be recovered to cover the third party’s loss. Finally, the means by which contractual burdens may bind third parties are examined.

Chapter

Cover Trusts & Equity

4. Effective disposition of benefit: constitution of trusts  

This chapter explains the reasons why a trust must be completely constituted in order to be valid and discusses the steps that must be taken in order to constitute a trust. Constitution matters because the beneficiaries of an incompletely constituted trust are ‘mere volunteers’ and therefore will not be assisted by equity. In other words, they do not have any rights in the trust property and thus cannot enforce the trust in court. Following the law, equity ‘will not assist a volunteer’ and ‘will not perfect an imperfected gift’. In order to have a ‘perfect’ gift, the donor must actually complete the disposition of the subject matter in favour of the intended donee or execute a formal ‘deed of gift’. The chapter also considers various modes of constitution of trusts, the court ruling in Strong v. Bird, and gifts made in contemplation of death.

Chapter

Cover Trusts & Equity

4. Effective disposition of benefit: constitution of trusts  

This chapter explains the reasons why a trust must be completely constituted in order to be valid and discusses the steps that must be taken in order to constitute a trust. Constitution matters because the beneficiaries of an incompletely constituted trust are ‘mere volunteers’ and therefore will not be assisted by equity. In other words, they do not have any rights in the trust property and thus cannot enforce the trust in court. Following the law, equity ‘will not assist a volunteer’ and ‘will not perfect an imperfected gift’. In order to have a ‘perfect’ gift, the donor must actually complete the disposition of the subject matter in favour of the intended donee or execute a formal ‘deed of gift’. The chapter also considers various modes of constitution of trusts, the court ruling in Strong v. Bird, and gifts made in contemplation of death.