LAW OF CONTRACT Holly Powley, February 2018 Third Party Effects: Privity of Contract and the Contracts (Rights of Third Parties) Act 1999 Introduction This set of lectures will deal with the law that applies with regards to third party rights that might, or might not, arise under a contract. Traditionally, the courts have utilised a simple rule - contracts can only afford rights to the parties to the contract and can only impose duties on the parties to the contract. This has also meant that only the parties to the contract can sue, or be sued, upon that contract. However, this principle has also resulted in unfair outcomes for third parties. The courts have attempted to negate the impact of this rule through the development of 'exceptions', and, in 1999, the introduction of the Contracts (Rights of Third Parties) Act introduced a further inroad. These lectures will focus on the development of the doctrine of privity of contract, the development of the common law in this area and the impact of the Contract (Rights of Third Parties) Act 1999. The essential background to the Contracts (Rights of Third Parties) Act 1999 is contained in: Law Commission, Privity of Contract: Contracts for the Benefit of Third Parties (Law Commission, Report No 242) (July 1996) (the 'Law Commission Report') This report also provides a very useful overview of the common law background. The relevant pages within the report will be indicated on this lecture handout. 1. PRIVITY OF CONTRACT Academic works - optional reading . Adams & Brownsword, 'Privity and the concept of a network contract' (1990) 10 Legal Studies 12 . Kincaid, 'Privity and the Essence of Contract', [1989] Cambridge Law Journal 454 . Flannigan, 'Privity - the end of an era (error)', (1987) Law Quarterly Review 103(Oct), 564-593 · Burrows, 'Reforming privity of contract; Law Commission Report No.242', (1996) Lloyds Maritime and Commercial Law Quarterly 4(Nov), 467-486 . Trietel, Some Landmarks of Twentieth Century Contract Law (2002) 47-103 See: Law Commission Report, pages 6-9 GENERAL PRINCIPLES Law Commission Report (No. 242) at p.6: "A contract or its performance can affect a third party. However, the doctrine of privity means that, as a general rule, a contract cannot confer rights or impose obligations arising under it on any person except the parties to it."
A and B agree, under the contract, to pay C, or confer some other benefit on C. Can C sue? A person who is not a party to a contract cannot acquire any rights (benefits) under that contract or be subject to any of the burdens of that contract. Privity of contract: C cannot sue. Case law: Tweddle v Atkinson (1861) 121 E.R. 672 (QB: Crompton J) The father of the bride and the father of the groom agree to pay the bridegroom £200. When they do not pay, the bridegroom is unable to sue. He is the beneficiary of the promise but is not a party to the contract and so does not have any rights