Privity of contract - circumventing the rule (Parties)- FS

Question 1

What is the main problem with the doctrine of privity?

Answer 1

It may lead to unfairness when a third party is clearly intended to benefit from the contract but has no enforceable rights under it.

Question 2

What are the common law methods of circumventing the doctrine of privity?

Answer 2

1. Assignment
2. Claims in tort (e.g., negligence)
3. The Albazero principle / narrow ground
4. (Statutory reform: Contracts (Rights of Third Parties) Act 1999

Question 3

What is assignment in the context of contracts?

Answer 3

Assignment is where a party transfers their rights (not obligations) under a contract to a third party. The third party can then enforce the rights as if they were the original party.

Question 4

Can obligations under a contract be assigned?

Answer 4

No. Only rights can be assigned, not obligations. The assignor remains liable for any contractual duties.

Question 5

Can a contract prohibit assignment?

Answer 5

Yes. A non-assignment clause can be included in a contract, and any attempted assignment in breach of such a clause is ineffective.

Question 6

What happens if party A contracts with party B, and B assigns their rights to party C?

Answer 6

Party C can sue party A to enforce those rights, even though C was not a party to the original contract.

Question 7

How does tort law provide a route around privity?

Answer 7

A duty of care in negligence can be owed to a third party. If that duty is breached, the third party can sue, even without a contractual relationship.

Question 8

How does the Albazero principle allow third-party enforcement

Answer 8

Where Party A contracts with Party B for the benefit of Party C, and both A and B know this, then A or B can sue on behalf of C if the contract is breached.

Question 9

What are the requirements for invoking the Albazero principle (narrow ground)?

Answer 9

1. A contract exists between Party A and Party B.
2. It is clear both parties intend the contract to benefit a third party (Party C).
3. One party sues the other on behalf of the third party.
4. Damages awarded must be held on trust for the third party.

Question 10

In what type of contracts is the Albazero principle commonly applied?

Answer 10

Often used in construction or shipping contracts where one party contracts for work to benefit a third party (e.g., landlord contracts for work benefitting tenants).