Further exceptions to the doctrine of privity-FS Flashcards
(14 cards)
Can contracting parties exclude the application of the Contracts (Rights of Third Parties) Act 1999?
Yes, by including an express term stating that the agreement is not intended to give enforceable rights to any person who is not a party to it.
Guarantor’s Right of Subrogation
Where a guarantor pays a debt owed by the principal debtor, the guarantor is subrogated to the rights of the creditor and may enforce those rights against the debtor.
What principle allows a guarantor to enforce a debt against the original debtor?
The right of subrogation.
Trust Exception to Privity
A promisee may declare a trust of a contractual benefit in favour of a third party, allowing that third party to enforce the contract under trust law rather than contract law.
What must be shown for a third party to enforce a contract via a trust exception?
A clear intention by the contracting parties to create a trust of the contractual benefit.
Requirements for a Collateral Contract to Exist:
- A clear promise or assurance made to the third party.
- Consideration provided by the third party (e.g., instructions that led to reliance).
- The collateral promise relates to the main contract’s subject matter.
What is a collateral contract in the context of privity?
A separate contract between a third party and a promisor that relates to the performance of the main contract, allowing enforcement despite the third party not being part of the main contract.
Why would the court allow a claim under a collateral contract rather than under the Contracts (Rights of Third Parties) Act 1999?
Because the 1999 Act does not allow third parties to be subject to contractual obligations, only to claim rights. Collateral contracts offer a separate enforceable route.
What is the legal purpose of including an express exclusion clause in a contract with regard to third-party rights?
To prevent the application of the Contracts (Rights of Third Parties) Act 1999 by stating explicitly that no third party shall have any right to enforce the contract.
What is the definition of a “chose in action” in the context of trusts?
A chose in action is an intangible property right, such as a contractual right, which can be the subject of a trust.
An intangible right is a legal right or privilege that doesn’t have a physical form but still holds value. I
Under what condition will a court reject the argument that a trust was created over a contractual benefit for a third party?
Where there is no clear intention by the contracting parties to create a trust for the benefit of the third party.
Why is the doctrine of privity not applicable to trusts?
Because trust law allows a beneficiary (a third party) to enforce the terms of a trust, even though they are not a party to the original contract.
What does the case example involving Fleur, Pierre, and Mike illustrate about the trust exception to privity?
That courts will not infer a trust where there is no evidence of an intention to create one, even if the benefit was meant for a third party.
Why was the collateral contract upheld in the paint case example (Shanklin Pier)?
Because:
1. The manufacturer gave a clear warranty about the paint.
- The claimant acted on that assurance by specifying the paint to a contractor.
- This formed a distinct contract between the claimant and manufacturer.
