Privity of contract

Question 1

General rule - Dunlop v Selfridge

Answer 1

Only parties to a contract can acquire rights and liberties under that contract. If you are not a party to a contract then you cannot sue or be sued under it

Question 2

Exceptions collateral contracts

Answer 2

A contract between two parties may be accompanied by a collateral contract between one of those parties and a third party relating to the same subject matter. It’s a side agreement that’s made to provide additional protection or incentives for one of the parties involved in the main contract

Question 3

Exceptions - agency

Answer 3

The principal is bound by the contractual relationship with the third party entered into by the agent. The agent must have authority

Question 4

Actual authority

Answer 4

Express appointment from principal

Question 5

Apparent authority

Answer 5

Principal has given false impression that the agent has actual authority. 3 conditions:
- at some stage the principal must have represented that agent has authority
- 3rd party must rely on this
- 3rd party must enter into the contract
REPRESENTATION MUST COME FROM THE PRINCIPAL

Question 6

Effect of agency - no authority

Answer 6

If the agent did not have any authority the principal cannot sue the 3rd party or be sued by the 3rd party. Where the agent doesn’t have authority he cannot bind the principal to a deal and the agent will not be personally liable on the deal

Question 7

Effect of agency - apparent authority

Answer 7

If the agent has some form of authority they are in a position to bind principal to a contract with a 3rd party

Question 8

Effect of agency - where the agent knew they didn’t have authority

Answer 8

3rd party may sue the agent where the agent knew they had no authority - the third party can only sue the agent in deceit or for breach of implied warranty or authority but the agent cannot be sued for breach of contract - only the principal can

Question 9

The right to claim damages

Answer 9

Unless one of the exceptions applies the 3rd party has no means of enforcing the contract unless one of the parties to the contract sued in their own right. If an award of damages is made it will be to compensate the party who brings the claim. Dunlop v Lambert - let’s a third party sue but only in holiday and property contracts.

Question 10

Contracts (rights of third parties act) - Statutory rights

Answer 10

Allows provisions to be enforced by a non-contracting party in 2 circumstances:
- S. 1(1)(a) - where the contract expressly provides they can
- S.1(1)(b) - where contract term purports to confer a benefit to them.
The third party must be identified by name, as a member of class or answer to a particular description

Question 11

Contracts (Rights of third parties act) - Exceptions

Answer 11

Will not apply to:
- Bills of exchange, promissory notes and negotiable instruments
- statutory contracts
- any incorporation document of an LLP
- contracts of employment
- contracts for the carriage of goods by sea

Question 12

Contracts (right of third parties act) - variation of the contract

Answer 12

The promised benefit to the 3rd party may not be removed by a variation of the contract if:
- the third party has communicated his assent
- promisor is aware the 3rd party has relied on term
-promisor can reasonably be expected to have foreseen that the 3rd party would rely on the term and the 3rd party has relied on it

Question 13

Contract (rights of third parties) act - remedies

Answer 13

S. 1(5) the third party has available to him any remedy that would have been available to him in action for breach of contract if he had been a party