Download - Privity Lecture Notes
UNIVERSITY OF THE WEST INDIES
FACULTY OF LAW
LAW 1410 – LAW OF CONTRACT I
PRIVITY
Nature of Doctrine
The Doctrine of privity means that a contract cannot, as a general rule, confer rights or
impose obligations arising under it on any person except the parties to it. [Trietel, The
Law of Contract] no one may be entitled to or bound by the terms of a contract to which
he is not an original party.
No third person can sue on a contract to which he is not a party.
Beswick v Beswick [1966] 3 ALL ER 1, 9 per Lord Denning, MR;
Peter Beswick was a coal merchant; he sold his business to his nephew John Beswick in
return for a promise to pay £6 a week to Peter Beswick for the rest of his life and
thereafter £5 a week to Peter Beswick's widow for the rest of her life. The nephew
stopped making payments to the widow shortly after Peter Beswick's death. The widow
brought an action to compel the nephew to continue making the payments. She failed in
the action in so far as it was brought in her own name because she was not a party to the
contract between her husband and her nephew
Darlington BC v Wiltshire Northern Ltd [1955] 1 WLR 68, 76 per Steyn, LJ]
PP arranged for a finance company to arrange for the construction of a building for PP's
use. The work was badly done, and in preliminary proceedings the Court of Appeal
overruled the Official Referee and held that a third party to a building contract, where it
was the parties' intention that the contract should be for the benefit of the third party, and
where the contracting party's rights against the builder were assigned to the third party,
can sue the builder for substantial damages for defects in the building work.
Locus classicus
There is the principle that consideration must move from the promisee. Only a person
who has provided consideration can enforce a promise. See:
Tweddle v Atkinson (1861) 1 B&S 393 - The fathers of a husband and wife agreed in
writing that both should pay money to the husband, adding that the husband should have
the power to sue them for the respective sums. The husband's claim against his wife's
fathers' estate was dismissed, the court justifying the decision largely because no
consideration moved from the husband.
The two principles of privity and consideration have become entwined but are still
distinct.
Tweddle v Atkinson (1861) 121 ER 762 established that: No stranger to the
consideration could sue on the promise… Only a party to contract could sue on it
See
Dutton v Poole 83 ER 156
Dunlop Tyre Co v Selfridge [1915] AC 847
Dunlop and Dew made a contract for the sale and purchase of motor tyres, with a
condition that they should not be resold below a certain price. Dew and Selfridge then
made a contract containing a similar terms. When Selfridge broke their agreement and
sold the tyres to the public at less than the agreed price, Dunlop were unable to enforce
the agreement: they had not been party to the contract with Selfridge.
Where at 853, Viscount Haldane said:
… One is that only a person who was party to a contract can sue on it. Our law knows
nothing of a jus quaesitum tertio [third party right of action] arising by way of contract.
McEvoy v Belfast Banking [1935] AC 24
A father transferred monies in his name to a deposit account in the name of himself and
his infant son. He died shortly thereafter. The monies were withdrawn from the account
by the executors and the son sued. The bank claimed the son provided no consideration
for the fathers act, but Lord Atkins held that on the face of it the contract was made with
the father and son jointly and severally and that the father provided the consideration for
the contract with the bank. They were joint promisees.
Kepong Prospecting Ltd v Schmidt [1968] AC 810
NB: While the doctrines of privity and consideration have become entwined they are
distinct.
Scope of Doctrine
There are well recognised exceptions to the doctrine, which arise both at common law
and under statute.
There are also instances where the doctrine is evaded. In these circumstances the doctrine
should strictly apply but the courts are able to find that the parties intended that the
doctrine should not govern their agreement.
There are a number of general law principles which enable a third party, such as C in our
example, to overcome the doctrine of privity.
Common Law Exceptions
Agency- The concept of agency is an exception to the doctrine of privity in that an agent
may contract on behalf of his principal with a third party and form a binding contract
between the principal and third party.
C is able to claim the benefit of a contract between A and B if C can show that B made
the contract as her agent.
The rule here is that if one of the contracting parties contracts as an agent, then either the
agent or the principal, but not both, can sue to enforce the contract.
The agent who makes the contract must profess at the time of making it to be acting on
behalf of, or intending to bind the person who subsequently ratifies the contract. The
principal need not be named but be capable of being identified at the Time of the
Contract. If the agent makes no allusion to agency but gives the appearance of
contracting in his own right, the contract cannot be later adopted by another whom in
truth he intended to act.
Keighly Maxted & Co v Durant [1901] AC 240 –
Here A authorized P to buy wheat st 44s 3d. a quarter on a joint account for himself and
P. wheat was unobtainable at that price and in excess of his authority he agreed to buy the
wheat from X at 44s.6d a quarter. He intended to purchase it on the joint account;
however A contracted in his own name and did not disclose the agency to X. The next
day P ratified the purchase at the unauthorized price but ultimately he and A failed to take
delivery. Action brought against P by X was unsuccessful
NB: Scruttons Ltd v Midland Silicones Ltd [1962] AC 446 - A contract between the
owner of goods- a chemical manufacturer and a carrier- a shipping company. Purported
to limit the liability of the carrier's subcontractor. , a bill of lading limited the liability of a
shipping company to $500 per package. The defendant stevedores had contracted with
the shipping company to unload the plaintiff's goods on the basis that they were to be
covered by the exclusion clause in the bill of lading. The plaintiffs were ignorant of the
contract between the shipping company and the stevedores. Owing to the stevedores’
negligence, the cargo was damaged and, when sued, they pleaded the limitation clause in
the bill of lading. The House of Lords held that the stevedores could not rely on the
clause as there was no privity of contract between the plaintiffs and defendants.
Lord Reid said that there might be a contract between owner and subcontractor, making
this limitation effective, if four conditions were satisfied. The clause must clearly extend
to the subcontractor, the carrier must clearly be acting as agent for the subcontractor (in
making the contract) as well as on his own account, such agency must be authorized or
ratified by the subcontractor, and the subcontractor must have provided some
consideration for a contract between himself and the owner. In the instant case the fourth
condition was not satisfied and the contract could not be shown to exist, so the clause was
ineffective.
Third party stevedores could not benefit under a bill of lading; however, Lord Reid
suggested that they could if:
The bill of lading made it clear that the stevedores were intended to be protected by the
exclusion clauses therein;
The bill of lading made it clear that the carrier had contracted as agent for the stevedores;
The carrier had prior authority from the stevedores to act as agent or if there act was later
ratified by the stevedores;
Consideration had moved from the stevedores.
See also
New Zealand Shipping v Satterwaite, The Eurymedon [1975] AC 154
the stevedore were able to rely on the limitation clause between the cargo owner and the
shipping company brought into existence a bargain between the stevedores and the
shipper/ owner of the goods made through the agency of the shipping company. The
performance of the services by the stevedore was for the benefit of the cargo owner and
the consideration was the benefit of the exemption clause in the bill of lading.
The essential conditions established in Scruttons were met in The Eurymedon; therefore,
third party was able to benefit.
Assignment
B may assign the benefit [never an obligation] of her contract with A to C and C can then
enforce the contract against A.
A party to a contract may assign to a third party his right to enforce the contract and so
obtain the benefits there under: the right thereby transferred is known as a "chose in
action". Assignment takes place automatically when a person dies - the contracts to
which he is party can (with a few exceptions) be enforced by or against his personal
representatives - or when he becomes bankrupt and most of his contractual rights devolve
upon his trustee in bankruptcy.
Tolhurst v Associated Portland Cement Co. [1903] AC 414
Tolhurst, the owner of land, contracted with the Imperial Portland Cement Company
("Imperial") to supply them with 750 tonnes of chalk per week for 50 years at 1s a tonne.
Imperial went into voluntary liquidation and all the land, goodwill, and pending trade
contracts including the contract with Tolhurst were assigned to an associated company
("Portland"). Imperial gave notice to Tolhurst that they were in liquidation and their land
and business would be transferred to Portland.
Tolhurst then wrote to Portland offering to supply them with chalk at 2s a tonne. Portland
refused to pay that amount and claimed they were entitled to the benefit of the contract
between Tolhurst and Imperial and to pay 1s tonne for the chalk. They claimed the
contract with Imperial was assignable and no personal element of individual skill or
competency was present. They argued no additional burden was thrown upon Tolhurst
which would entitle him to repudiate the contract.
Tolhurst argued that when the contract was made, there was no intention express or
implied on the part of Tolhurst to contract except with Imperial, or to incur any liability
to a company which was not even in existence at that time. They argued that Imperial had
rendered itself powerless to perform the contract by entering into voluntary liquidation as
it had no assets, and Tolhurst was entitled to treat that as a repudiation of the contract.
In the first instance Tolhurst was successful. The decision was appealed by Portland and
Imperial to the King's Bench. The question before the Court was whether the contract
made between Tolhurst and Imperial could be enforced against Tolhurst when Imperial
had assigned the contract to Portland without the consent of Tolhurst. Collins M.R. held:
It is, I think, quite clear that neither at law nor in equity could the burden of a contract be
shifted off the shoulders of a contractor on to those of another without the consent of the
contractee. A debtor cannot relieve himself of his liability to his creditor by assigning the
burden of the obligation to someone else; this can only be brought about by the consent
of all three, and involves the release of the original debtor............
This is the reason why contracts involving special personal qualifications in the contract
are said, perhaps somewhat loosely, not to be assignable. What is meant is, not that
contracts involving obligations not special and personal can be assigned in the full sense
of shifting the burden of the obligation onto a substituted contractor any more than where
it is special and personal, but that in the first case the assignor may rely upon the act of
another as performance by himself, whereas in the second case he can not.
Collins M.R. held that Tolhurst was entitled to have a choice in the matter of person or
company with whom he contracted, but stated that the case must be considered solely on
the ground that the assignor brought the action against Tolhurst and the contractual
relationship still existed between Imperial and Tolhurst. It was held that it was clear from
the terms of the assignment that there was no intention to renounce the contract, rather on
the contrary, it was part of the bargain that it should be kept in force. Finally, it was held
that the contract was not intended to exclude performance by any person other than the
old company, and held that the appeal must be allowed.
Tolhurst appealed the decision of the Kings Bench to the House of Lords. The appeal was
dismissed and the House of Lords upheld the enforceability of the contract. Lord
MacNaghten stated13:
There are contracts, of course, which are not to be performed vicariously, to use an
expression of Knight Bruce LJ. There may be an element of personal skill or an element
of personal confidence to which, for the purposes of the contract, a stranger cannot make
any pretensions. But no one, I suppose, would seriously argue that a contract for delivery
of chalk from particular quarries for the use of particular cement works cannot be
performed by any person for the time being possessed of the quarries, or that it can make
the slightest difference to anybody who the proprietors of the cement works or the actual
manufacturers may be, provided they are in a position to carry out the terms of the
original contract.
This issue came before the High Court of New Zealand in the HEB Contractors case,
where as set out above, Bexley as vendor had assigned its legal interest in the land, and
interest in the agreements to HEB without the knowledge (at the time of assignment) or
consent of the purchaser, Verrissimo.
Williamson J held that HEB, as assignee was entitled to pursue specific performance
against the purchaser Verrissimo, provided the assignment was not prohibited by the
terms of the agreements, and that HEB has assumed the position of Bexley and fulfilled
its liabilities under the agreements.
Williamson J did not accept that by assigning the agreements Bexley demonstrated an
intention not to perform the agreements, rather to the contrary, by entering into the
assignments Bexley was taking steps to bring about the completion of the sales not vice
versa.
In his conclusion Williamson J considered the following comments of the author of a
Canadian text:
The question of whether or not a vendor, without the consent of the purchaser, can
convey or transfer his legal estate in the land is not free from difficulty and is inextricably
entwined with that venerable proposition in the law of vendor and purchaser that, in the
time between contract and conveyance, a vendor under an enforceable agreement for the
sale of land is a constructive trustee for his purchaser . . . Where there is and can be no
prejudice to the purchaser it would seem that a disposition by the vendor is permitted and
stated there was considerable merit in this rule.
Restrictive Covenants
The benefits of covenants concerning land may, if certain conditions are met, run with the
land and bind a third party purchaser or lessee even though she was not a party to the
original agreement.
Tulk v Moxhay 41 ER 1143 - covenant can be enforced in equity where there has been
notice.
P sold to X a piece of land in Leicester Square, taking covenants that (inter alia) the land
would not be built upon. After several conveyances the land was conveyed to D, who
knew of the original covenants even though they were not included in his conveyance. P
brought an action to restrain D from building on the land, and the Lord Chancellor upheld
the Master of the Rolls' order to this effect. A purchaser of land, he said, can be bound by
a restrictive covenant to which he was not an original party, so long as he has notice of
the covenant and the original promisee still has some interest to be protected.
The plaintiff who owned several houses in Leicester Square sold the garden in the centre
to Elms, who covenanted that he would keep the gardens and railings in their present
condition and continue to allow individuals to use the gardens. The land was sold to the
defendants who knew of the restriction contained in the contract between the plaintiff and
Elms. The defendant announced that he was going to build on the land, and the plaintiff,
who still owned several adjacent houses, sought an injunction to restrain him from doing
so. It was held that the covenant would be enforced in equity against all subsequent
purchasers with notice.
Lord Strathcona SS Co v Dominion Coal Co [1926] AC 108
B the owner of Lord Strathcona, chartered her to A on the terms that for a period of years,
A should be free to use her on the St. Lawrence river for the summer and should
surrender her to B in November of each year. During the currency of the charter-party,
but while the ship was in B. possession, B sold the ship and delivered it to C, who in turn
re-sold it to D. D, though he knew of the charter-party, refused to deliver the ship to A
for the summer season. Held A could get an injunction against D as he had bought the
ship with notice that’s she was affected by a restrictive covenant in favour of the plaintiff
and therefore in the same position as if he had bought the estate in land with notice of a
similar restriction.
But it is felt that this decision should be confined to very special cases of a ship under a
charter-party.
Cf: Port Line Ltd. v Ben Line Streamers [1958] 2 QB 146 in March 1955 the plaintiff
chartered a ship from X the owner for a period of 30 months. The shop was to remain in
X’s possession but to be at the complete disposal of the plaintiffs. In Feb. 1956 X sold
the ship to the defendants. The defendants at once chartered it back to X so that it never
ceased to be in X’s possession. The plaintiff knew of the sale and acquiesced in it since
the ship was to remain available under their own charter. The Charter between X and the
defendants contained a clause that: if the ship is requisitioned, the charter shall thereupon
cease”. No such clause was in the plaintiffs’ charter. The defendant however when they
bought the ship knew of the charter but not of its terms. In august 1956, the Ministry of
Transport requisitioned ship and paid compensation to the defendants as owners. In
November 1956 the requisition ended. The plaintiff sued the owners to obtain his
compensation money and relied on the decision in Strathcoma. Diplock held that
Strathcoma was not good law as there needed to be some proprietary interest to support
the claim based on Tulk and Moxhay. There was an absence of such interest in
Strathcoma. Further in this case the defendant did not know of the plaintiff’s rights. No
damages or money compensation could be obtained.
See also
Law Debenture Trust Corp v Ural Caspian Oil Corp [1993] 2 ALL ER 355 - principle
enforces a negative injunction and cannot require a positive duty by the third party.
And See
Smith and Snipes Hall Farm Ltd. v River Douglas Catchment Board [1949] 2 KB 500
By a contract under seal made in 1938 the def agreed with 11 owners of land joining a
stream to improve the banks and to’ maintain for all time he work when completed.”
The landowners agreed to pay a proportion of the cost. In 1940 one of the landowners
conveyed her land to Smith, the first plaintiff, and in 1944 Smith lease it to Snipes Hall
farm Ltd, the 2nd plaintiff. In 1946 owing to the defendant’s negligence the banks burst
and the land flooded.
Though both plaintiffs were strangers to the contract the Court of Appeal held that the
covenants undertaken by the defendants affected the use and value of the land, that they
were intended from the outset to benefit anyone whom the land might be transferred and
that the defendant was liable.
Collateral Contracts
Contract between A and B may be accompanied by a collateral contract between one of
them and a third party C concerning the same subject matter, which may entitle C to
benefits under main contract. A contract between two parties may be accompanied by a
collateral contract between one of them and a third person relating to the same subject-
matter.
Shanklin Pier v Detel Products [1951] 2 KB 854 - The owners PP engaged contractors
CC to paint the pier and specified DD's paint; the paint (bought by CC) did not wear as
well as DD had promised, and the court found a collateral contract under which PP could
recover damages. PP had given consideration by instructing the contractors to use DD's
paint, and that was sufficient consideration.
The plaintiffs had employed contractors to paint a pier. They told them to buy paint made
by the defendants. The defendants had told them that the paint would last for seven years.
It only lasted for three months. The court decided that the plaintiffs could sue the
defendants on a collateral contract. They had provided consideration for the defendants'
promise by entering into an agreement with the contractors, which entailed the purchase
of the defendants' paint.
There must, however, be an intention to create a collateral contract before that contract
can be formed
C must be able to establish that:
There was an intention to create the collateral contract before the main contract was
formed.
Consideration must have moved from C.
Statutory Exceptions
Certain statutes have created exceptions to the doctrine, including:
Married Women’s Property Act
Road Traffic Act
Conveyancing Act
Evasion
Suit by Promisee
Beswick v Beswick [1966] 3 ALL ER 1
Lloyds v Harper (1860) 16 Ch D 290 where a contract is made with A for the benefit of
B, A can sue on the contract for the benefit of B, and recovery all that B could have
recovered if the contract had been made with B himself.
Linden Gardens Trust v Lenesta Sludge Disposals Ltd [1994] 1 AC 85
MH removed the asbestos from a building under a contract with SC, who then sold the
building to PP. The work was defective and PP suffered financial loss as a result. The
House of Lords held that where the original contractor was aware that the building was to
be sold on, so that defective work could lead a third party to suffer loss of essentially the
same nature as the original buyer would suffer if the building were not sold, such loss
was damage for which the original buyer (if he had not assigned his rights to the
purchaser) could sue on the purchaser's behalf.
Woodar Investment v Wimpey Construction Ltd [1980] 1 ALL ER 571 the House of
Lords rejected the basis on which Lord Denning had arrived at his decision, and
reaffirmed the view that a contracting party cannot recover damages for the loss sustained
by the third party. Their Lordships did not dissent from the actual decision in Jackson,
which they felt could be supported either because the damages were awarded for the
plaintiff's own loss; or because booking family holidays or ordering meals in restaurants
calls for special treatment.
C) TRUSTS
Equity developed a general exception to the doctrine of privity by use of the concept of
trust. A trust is an equitable obligation to hold property on behalf of another.
The device was approved by the House of Lords in Les Affreteurs Reunis v Leopold
Walford [1919] AC 801, where a broker (C) negotiated a charter party by which the ship
owner (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 A.
However, the trust device has fallen into disuse because of the strict requirements of
constituting a trust and most particularly that there should be a specific intention on the
part of the person declaring the trust that it should be a trust.
See also
Barclays Bank v Quistclose Investments [1968] 3 ALL ER 651 - A company,
Rolls Razor Ltd (RR), declared a dividend that it did not have sufficient funds to pay.
Quistclose Investments Ltd (Quistclose) was willing to lend RR £1m so that RR could
pay that dividend. The advance was made on the condition that it would be deposited in a
separate bank account with Barclays Bank Ltd (Barclays) and that it would only be used
to pay the dividend. Notice of that arrangement was given to Barclays. RR went into
voluntary liquidation before the dividend was paid. As a result, Quistclose sought to
recover the funds in the dividend account from Barclays. However, Barclays claimed that
it was entitled to set off the credit balance in the dividend account against part of the
debit balance on RR’s other accounts held at Barclays. This dispute lead to the
subsequent legal proceedings, which ultimately ended in the House of Lords (HL).
Two questions arose for the HL to consider which, if answered in the affirmative, would
allow Quistclose to recover the loan:
The first question was whether, as between Quistclose and RR, the terms on which the
loan was made were such as to impress a trust in Quistclose’s favour in the event of the
dividend not being paid.
The second was whether, in that event, Barclays had such notice of the trust or of the
circumstances giving rise to it as to make the trust binding on it.
The Decision of the Court & the Legal Issues Raised:
Was a trust created in Quistclose’s favour?
HL held that, because of the exclusive purpose for which the loan was made, RR received
the money in the fiduciary character of a trust to repay the dividend. Since that purpose
had failed, there was a resulting trust in favour of Quistclose.
Avoidance of Fraud
Snelling v John G Snelling Ltd [1973] 1 QB 87 the plaintiff and his 2 brothers were all
directors of the defendant company. The company was financed by substantial loans
from all 3 brothers. As part of the arrangement to borrow money from a finance
company, the 3 brothers agreed to a contract not to demand payment of their loans during
the currency of the loan from the finance company. The company was not a party of this
contract.
If any resigned as directors they would forfeit their rights to the money owning on the
loan. One retired and claimed that as the company was as not a party to the contact, that
agreement didn’t affect his rights against the company. The Company in defence relied
on the Agreement. Because the company has an independent personality, it was not a
party to the agreement. In principle the plaintiff could succeed, however the other
brothers could gain a declaration saying the promise not to sue the company was binding:
This can occur even though the benefit is intended for the company (a third party).
Effectively prevented the brother from suing the company.
Norwich CC v Harvey [1989] 1 ALL ER 1180
A contract for a major shopping development provided that the owner (not the contractor)
was to bear all fire risks, and a sub-contractor had dealt with the main contractor on that
basis. When fire damage was caused through the sub-contractor's negligence and the
owner sued in tort, the court said it would not be just and reasonable to exclude the sub-
contractor from the protection of the clause, even though he was not party to the contract
in which it was contained.
New Zealand Shipping v Satterwaite, The Eurymedon [1975] AC 154
in this case the subcontractors had performed their part of the agreement and unloaded
the ship. Although they were already under a contractual obligation, this obligation was
to the carrier and not to the owner, and so could form new consideration in respect of a
"third party".
the stevedore were able to rely on the limitation clause between the cargo owner and the
shipping company brought into existence a bargain between the stevedores and the
shipper/ owner of the goods made through the agency of the shipping company. The
performance of the services by the stevedore was for the benefit of the cargo owner and
the consideration was the benefit of the exemption clause in the bill of lading.
American Solution –
A third party, who, is intended, by the terms of the contract between Y and Z, to benefit
from Y’s and Z’s performance of the contract can enforce the contract.
The Second Restatement of Contracts Law S. 133 distinguishes between intended and
incidental beneficiaries:
[A] beneficiary ... is an intended beneficiary if recognition of a right to performance in
the beneficiary is appropriate to effectuate the intention of the parties and ... the promise
manifests an intention to give the benefit of he promised performance.
Intended Beneficiary: A third party for whose benefit a contract is formed.
An incidental beneficiary is a beneficiary who is not an intended beneficiary.... A third
party who benefits from the performance of a contract, but whose benefit was not the
reason the contract was formed.
Beaston, ‘Reform the Law of Contracts for the Benefit of Third Parties: A Second Bite at
the Cherry’ (1992) 45 Current Legal Problems 1
Is the American ‘solution’ desirable?
Extra-Contractual Relief
A remedy may be available outside of contract, for example, through an action in tort for
breach of duty.
A third party may also be able to pursue a concurrent action in tort. Donoghue v
Stevenson [1932] AC 562, HL P went to a café with a friend, who bought her a bottle of
ginger beer. After drinking most of it, P found a decomposed snail in the bottle and
became ill. P had no contract with the café, so she sued the manufacturers in delict (the
Scottish equivalent of tort). The House of Lords said the manufacturers had a duty of care
to the consumer of their product.
BWIA v Bart [1965] 9 WIR 220
In Bart v British West Indian Airways Ltd, 325 the plaintiff claimed damages from the
airline on the basis of delay in delivering what was a winning football coupon sent them
by the plaintiff’s agent in Georgetown, to the UK from Guyana. By a majority the
Guyana Court of Appeal, allowing an appeal by the air carrier, held that the plaintiff was
not a party to the contract and so not entitled to damages. Bollers CJ argued (at 275) that
in the absence of a fixed time there would be an implied agreement between the shipper
and carrier that the goods would be conveyed by air within a reasonable time but that
under the air consignment note issued by the defendants, it was agreed that no time was
fixed for completion of the carriage and no obligation was assumed by the carrier to carry
the goods by any specific aircraft or over any particular route or to make any connection
at any point according to any particular schedule. Further, Bollers CJ observed that under
the general conditions of carriage for cargo no time was fixed for the commencement or
completion of the carriage; time tables were to be regarded as approximate only, were not
guaranteed and formed no part of the contract of carriage:
…it would be surprising to me to find an airline company willing to bind itself to deliver
goods within a fixed time when weather conditions, aircraft worthiness and expected or
unexpected eventualities may intervene to render futile their most earnest intention.
The majority (Stoby C dissenting) held there was no privity of contract between the
plaintiff and the carrier, the plaintiff was not an undisclosed principal and there was no
agency relationship between plaintiff and person who had contract with carrier.
White v Jones [1995] 2 WLR 187 - HL holds that a solicitor retained to draw up a will,
but who fails to do so before the testator's sudden death, may owe a duty in tort to
disappointed beneficiaries, with the result that they can claim the value of their lost
legacies from the solicitor if they can establish fault. There was no contractual duty
between the beneficiaries and the solicitor but a duty existed in tort.
Charnock v Liverpool Corporation [1968] WIR 1498
There is a contract between the insurance company and the garage to repair the car. It is
said that the car owner did not make any contract: he was merely a bystander and in the
hands of the insurance company. The garage took eight weeks to repair the car when in
normal time, it would have done the repairs in four or five.
Whittingham v Crease (1979) DLR (3d) 353 - a solicitor was instructed by his client to
draw up a will in which the plaintiff was identified as the “residuary beneficiary”. For
some reason, the will failed and the beneficiary lost his interest in the estate. The B.C.
Court of Appeal held that the solicitor owed a duty of care toward the third party.
Because that third party was so closely and directly affected by the lawyer’s acts or
omissions, the lawyer could have reasonably foreseen that the third party was likely to be
injured by his acts and omissions. The lawyer was liable to the beneficiary even though
there was no contractual relationship between them.
Cf: Balsamo v Medici [1984] 2 ALL ER 201
See also
Jackson v Horizon Holidays [1975] 1 WLR 1468 – the contracting party was able to
recover loss sustained by an intended beneficiary
The question of the extent to which a contracting party may recover for loss sustained by
a third party who is intended to benefit from the contract was raised in:
The plaintiff entered into a contract for himself and his family. The holiday provided
failed to comply with the description given by the defendants in a number of respects.
The plaintiff recovered damages and the defendants appealed against the amount. Lord
Denning MR thought the amount awarded was excessive compensation for the plaintiff
himself, but he upheld the award on the ground that the plaintiff had made a contract for
the benefit of himself and his family, and that he could recover for their loss as well as
for his own.
However, in Woodar Investment Development v Wimpey Construction [1980] 1 WLR
277, a contract for the sale of land provided that on completion the purchaser would pay
850,000 pounds to the vendor and also 150,000 lbs to a third party. The vendor claimed
damages for wrongful repudiation. In fact there was found no wrongful repudiation, but
the House of Lords expressed that a contracting party cannot recover damages for the loss
suffered by another/ 3rd party.
The House of Lords rejected the basis on which Lord Denning had arrived at his
decision, and reaffirmed the view that a contracting party cannot recover damages for the
loss sustained by the third party. Their Lordships did not dissent from the actual decision
in Jackson, which they felt could be supported either because the damages were awarded
for the plaintiff's own loss; or because booking family holidays or ordering meals in
restaurants calls for special treatment.
Cf: Woodar Investment v Wimpey Construction Ltd [1980] 1 ALL ER 571