Contract Lecture Eleven 27/11/19 Privity of contract and third-party effects + Agency or Vicarious Immunity? Scruttons v Midland Silicones Seller of goods: original cargo- owner Contract for carriage of goods by sea (bill of lading) including limitation clause Export sale contract Buyer of goods: Midland Silicones Cargo-owner (Plaintiff) Claim in negligence? Carrier of goods by sea Services contract purporting to rely on bill of lading limitation Stevedores - Scruttons (defendant) In this case Lord Reid put forward a 4 stage test to overcome the problems that come with privity: 4:1 - Lord Denning dissenting. Stevedores could not rely on the limitation clause contained in the bill of lading - not a party to the contract. BUT in future cases - 1. Bill of lading needs to make clear that the protection extends to contractors/subcontractors - protections in limitation clauses need to extend to contractors and subcontractors 2. Bill of lading needs to make clear that the carrier is acting as agent for the third party 3. The carrier would need to have actual authority to contract as agent - or at least the contract would have to be ratified 4. Needs to be demonstrated that there was consideration involved in that contract New Zealand Shipping v Satterthwaite The Eurymedon (1975) Seller of goods: original cargo-owner Export sale contract Buyer of goods: cargo-owner Bill of lading, including 'Himalaya clause' Implied contract Carrier of goods by sea Services contract purporting to rely on bill of lading information Stevedores This time - bill of lading contained a 'Himalaya clause'
. Made clear that: Limitation clause contained in bill of lading extends to contractors and subcontractors Carriers were acting as agents of contractors and subcontractors Stevedores have given authority to carriers to contract on their behalf Consideration? This was artificial - picking up the cargo PC held 3-2 majority; in this case they created an implied contract between the buyers and the Stevedores; thus creating a direct contract between these two parties and so showing a contract existed Satisfied Lord Reid's test See also: New York Star [1981]; the Mahkutai [1996] Privy council took a very artificial approach to establishing that consideration did exist; said the buyers had made an offer to the Stevedores through the bill of lading because they were a party to that bill of lading initially and that by doing their job, the Stevedores had accepted that offer; thus meaning there was consideration + Norwich City Council v Harvey (1989) Norwich CC: owners of leisure centre Building contract: NCC agreed to insure against fire Main building contractors Claim in negligence? Sub-contractors who caused fire
Bailment Morris v CW Martin & Sons (1966) Mrs Morris - owner of fur coat (bailor) Bailment: express or implied consent? Beder - coat shop (bailee) Sub-bailment: exclusion of liability CW Martin & Sons (sub-bailee) Bailment is a rule of property law and is a situation where you have one party, who is known as a bailee, who voluntarily takes possessions of another person's goods under