Lecture 6 Privity
General Rule Only the parties to a contract are bound by it, and entitled to enforce it.
‘Exceptions’? ‘If a third party is entitled to rights and subject to obligations in relation to a contract to which he is a stranger, those rights and obligations must have some basis, either in statutory provision or in common law principle, beyond the mere contract … [And] if they arise by reason of the operation of some other principle of some statutory provision, the rule of privity will have nothing to say to them. It is in that context that it would seem accurate to say … that there are no true exceptions at common law to the rule of privity.’ Per Deane J in Trident General Insurance Co v McNiece Bros, at 143.
The Eurymedon4 Point Test adopted from Lord Reid in Scruttons v Midland Silicone 1. bill of lading must make it clear stevedore is intended to be protected 2. bill of lading must also make it clear carrier is contracting not only on its own behalf but also as agent for stevedore in relation to the exemption 3. carrier was authorised (or later ratified) to act as stevedore’s agent in this respect 4. requirement for consideration moving from stevedores must be met
Reform? Third party rights in contracts should be recognised : • only where the third party right is created by express terms of the contract; • the promisor can raise the same defences against the third party as they can against the promisee; and • the promisor and promisee can cancel the contract at any time unless the third party has adopted the contract. From Law Revision Committee (UK) Report, 1937
Legislation • Property law • Insurance contracts • Consumer contracts