contract assignment

Index

No. Item Page No.

1. List of Cases …………………………………………………………………… 2

2. List of Statutes ………………………………………………………………… 3

3. Question for Contract Law Coursework Assignment

…………………………. 4

4. Answer for Contract Law Coursework Assignment

…………………………... 6

5. Bibliography ………………………………………………………………….. 19

6. Appendices ……………………………………………………………………. 22

7. Turnitin Report ………………………………………………………………… 23

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List of Cases

No. Cases

1. Beswick v Beswick ………………………………………………….... [1968] AC 58

2. Dunlop Pneumatic Tyre Co. Ltd. V Selfridge & Co. Ltd.

…………… [1915] AC 847

3. New Zealand Shipping Co. Ltd. v A M Satterthwaite & Co.

Ltd. (The Eurymedon)

……………………………………….............................................

...... [1974] AC 154

4. Nisshin Shipping Co. Ltd. V Cleaves & Co. Ltd. ……….

[2004] 1 Lloyd’s Rep 38

5. Price v Easton …………………………………………………… [1833] 110 ER 518

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6. Tweddle v Atkinson …………………………………………… [1861] 121 ER 762

List of Statutes

No. Statutes

1. Contract (Rights of Third Parties) Act 1999.

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Question4

Question for

Contract Law Coursework Assignment

Critically evaluate how The Contract (Right of Third Parties)

Act 1999 has altered the common law doctrine of privity of

contract and whether the Act has provided adequate protection

to the right of the third parties.

General Expectation

The assignment requires of the students to understand the

scope and the full effect of the Contract (Right of Third

Parties) Act 1999. In presenting this assignment the students

are required to the following:

Examine the development of the doctrine of privity of

contract;

Analyse the justification, scope and the objective of the

Contracts (Rights of Third Parties) Act;

Evaluate how effective the Act has been in enabling a third

party to enforce its rights and to what extend the third

parties are still dependant on the common law exception to

enforce their rights.

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Answer

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Answer for

Contract Law Coursework Assignment

The question that is frequently asked - does a third

party be allowed to enforce a promise or promises in a

contract? This question had been proven to have been very

problematic and argumentative. In order to answer this

question, the history which led to the current development

will be briefly stated, which start back from the seventeenth

century. During that period of time, a third party beneficiary

was allowed to enforce a promise, but as the doctrine of

consideration began to develop, a third party’s right in a

contract had been widely restricted and this was illustrated

in the case of Price v Easton1, which was the very first time

that the issue of a third party’s right be brought to the

court during the nineteenth century, where it was held that a

third party was not allowed to claim because he had given no

consideration for the arrangement and was therefore not a

party to the contract, gaining no enforceable rights under it.

1 Price v Easton [1968] AC 58.7

After the case of Price v Easton2, another case had

established the privity rule in its modern form and eventually

became the starting point of the development of the doctrine

of privity. The case that was mentioned earlier was Tweddle v

Atkinson3. In this case, the court held that the plaintiff could

not recover the money because he was neither a party to a

contract nor had he provided consideration for his father-in-

law’s promise. He could neither sue on the contract nor be

sued under it. Later on, this had become the general principle

for the doctrine of privity. Subsequently, this principle was

reaffirmed by the House of Lords in the case of Dunlop Pneumatic

Tyre Co. Ltd. V Selfridge & Co. Ltd.4 According to this case, the

plaintiff sold tyres to Y on the basis that Y would not resell

them at a lesser price than the plaintiff’s list price, and

that if Y resold the tyres to trade buyers, Y would extract a

similar undertaking from them. Y sold tyres to the defendant

who agreed to the undertakings, and also agreed to pay the

plaintiff £5 for each tyre sold in breach. Later on, the

2 Ibid.3 Tweddle v Atkinson [1861] 121 ER 762.4 Dunlop Pneumatic Tyre Co. Ltd. V Selfridge & Co. Ltd. [1915] AC 847.

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defendant had sold two tyres in breach of the undertaking. The

plaintiff sued for two sums of £5 for liquidated damages. It

must be noted that, the plaintiff (Dunlop Pneumatic) was not a

party to the contract between Y and the defendant (Selfridge).

In this case, Lord Haldane from the House of Lords stated that

– “…in the law of England certain principles are fundamental. One is that only a

person who is a party to a contract can sue on it…”5 and he further add on

that – “A second principle is that if a person with whom a contract not under seal

has been made is to be enforce it, consideration must have given by him to the

promisor or to some other person at the promisor’s request.”6 In other words,

which is one of the principle in the doctrine of consideration

– consideration must move from the promisee.

During that period of time, the doctrine had stood tough

and no further approach had been taken by the judges in

changing the law. To be noted here, I am not criticizing the

judges but previously decided cases and later cases have

illustrated that judges continued to comply with the principle

5 Stone, Richard, The Modern Law of Contract, (7th ed., 2008), Routledge – Cavendish, p. 174.

6 Ibid.9

despite being strongly criticized. There is another case –

Beswick v Beswick,7 where the doctrine was, again, reaffirmed by

the House of Lords. In this case, the plaintiff’s husband was

a coal merchant and had transferred his business to his

nephew, who was the defendant. In return for this transfer,

the defendant agreed to pay his uncle £6.50 per week, and when

his uncle died, he was obliged to pay his uncle’s wife, who

was the plaintiff, an annuity of £5 per week. However, after

his uncle died, the defendant only paid the plaintiff £5 once.

The plaintiff sued for arrears and for specific performance of

the agreement. The plaintiff had sued in two capacities which

are as widow and as administrator of her husband’s estate.

House of Lords had held that the plaintiff could not succeed

as “widow”, because she was a third party to the contract.

However, she could succeed as “administrator”, which in place

of deceased husband. An order of specific performance was

granted. Although this case has further reaffirmed the

doctrine of privity, nevertheless, while affirming the

doctrine, the House of Lords found a way to achieve what was7 Beswick v Beswick [1968] AC 58.

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clearly a just result,8 which was a rare occasion.

All the examples that I have mentioned above have

restricted the rights of a third parties in a contract, which

has created unjust result for the third parties relying on

the doctrine. The question that remains is what kind of unjust

that had been strongly criticized against the old law?

According to Ewan Mckendrick,9 he had stated four principal

criticisms. The very first one was that the doctrine or the

general principle failed to give effect to the expressed

intentions of the parties, which can be seen in the case of

Tweddle v Atkinson,10 where the contract expressly stated that she

would get a sum of money, and her claim failed because the she

was a third party. The second was that the law was excessively

complex. There are also number of exceptions for the doctrine

and some of it was extremely artificial. As following was the

exceptions that involve in the case with the trust of the

8 Stone, Richard, The Modern Law of Contract, (7th ed., 2008), Routledge – Cavendish, p. 176.

9 Mckendrick, Ewan, Contract Law, (7th ed., 2007), Palgrave Macmillan, p. 143.10 Tweddle v Atkinson [1861] 121 ER 762.

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promise device and the use made of the collateral contract.

The reasoning from the Privy Council in The Eurymedon11 case also

illustrated the unnecessary complexities which could arise in

seeking to give effect to the intention of the contracting

parties. Thirdly, the doctrine was commercially inconvenient,

which can be seen in The Eurymedon12 case as well. In this case,

a third party to a contract can rely on an exclusion clause in

a contract made between A and B which protects third parties

where A purports to act as agent for the third party. The

final principal criticism of the doctrine was that the

application of the doctrine could sometimes direct to results

which was regarded as fundamentally unjust, which also

illustrated in the case of Tweddle v Atkinson.13 With all the

principal criticism that had stated by Ewan Mckendrick14 which I

am agreed with, it makes the point of the purpose and the

objective to the creation of the Contract (Right of Third Parties) Act

11 New Zealand Shipping Co. Ltd. v A M Satterthwaite & Co. Ltd. (The Eurymedon) [1974] AC 154.

12 Ibid.13 Tweddle v Atkinson [1861] 121 ER 762.14 Mckendrick, Ewan, Contract Law, (7th ed., 2007), Palgrave Macmillan, p. 143.

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199915 is necessary.

There is one phrase that was mentioned in the article

written by Neil Andrews – “For almost a century and a half, each time a

contractual third party attempted to board the train, the Common Law guards

would close the carriage door smartly in his face. But now the Contract (Rights of

Third Parties) Act 1999 gives a third party to ride.”16 In other words, now

rights were given to the third parties in Contract Law, even

they are not the contracting party. However, it must be noted

that the creation of this Act is not a sign for the

abolishment of the common law doctrine, which is the doctrine

of privity, but to reform and develop it in certain

circumstances.

In the Contract (Rights of Third Parties) Act 1999,17 it had stated

various rights for the third parties and had expressly

contrasted the position of third party in the Contract Law.

15 Contract (Right of Third Parties) Act 1999.16 Andrews, Neil, “Strangers to Justice No Longer: Reversal of the Privity Rule Under the Contract (Rights of Third Parties) Act 1999”, (2001) CLJ p. 353.

17 Contract (Right of Third Parties) Act 1999.13

Was it a good news or bad news to have the reforms against the

old law? In the article that written by Neil Andrews18 he had

mentioned that some responded to the Law Commission’s

consultation paper and gave comment that legislation was

undesirable. Four ground of opposition had emerged that few

current general rules caused few problems in practice, because

their defects could circumvented by various legal devices;

that no reform can be adequate to deal with the diverse

situation where the third party rule is relevant; the existing

rule had as well as already achieved certainty and further

reform will only produce uncertainty and litigation; and

finally, some expressed anxiety that the courts might ascribe

rights to third parties situations where the contracting

parties had not intended to confer such rights. However, the

Law Commission had met these doubts by repeating its view that

a reform is necessary and needed because of the unjust

existing law, which produces needless complexity.

18 Andrews, Neil, “Strangers to Justice No Longer: Reversal of the Privity Rule Under the Contract (Rights of Third Parties) Act 1999”, (2001) CLJ p. 355.

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The Law Commission’s proposal for this reform was that

nothing short of a detailed legislative scheme would be

sufficient to guarantee the rights third parties. In this

regard the Act19 appears to have fulfilled the Law Commission’s

plea. On the main issue of the test of an enforceable benefit,

which come under section 1 of the Act20 stated that a third party

will be entitled to enforce a contractual term in his own

right if either the contract ‘expressly’ so provides that he

may, which is on section 1(1)(a)21 or the term ‘purports to confer a

benefit’ on the third party which is on section 1(1)(b).22 As

regards the latter possibility, the Act,23 in effect, set up a

rebuttable presumption that if the parties confer a benefit on

a third party, they intend that the third party is empowered

to enforce the term that creates the benefit, by refer to

section 1(2) of the Act,24 the latter possibility depends on whether,

in construing the contract, indeed the contracting parties

intended the particular term to be enforceable by the third19 Contract (Right of Third Parties) Act 1999.20 Id, s.1.21 Contract (Right of Third Parties) Act 1999, s. 1(1)(a).22 Id., s. 1 (1)(b).23 Contract (Right of Third Parties) Act 1999.24 Id., s. 1(2).

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party. However, on this test, requirement is needed as in the

case of Nisshin Shipping Co. Ltd. V Cleaves & Co. Ltd.25 had stated that

clearly expected positive proof before the presumption could

be rebutted. Without doubt, judicial clarification is needed

for such words as ‘purports to confer benefits, which stated

in section 1(1)(b),26 but clearly there is room for litigious

dispute. One can only be assuming that such intentions cannot

be easily inferred and that, before any rebuttable presumption

has been established, the necessary objective legal intent has

been ascertained. However, the analysis of section 1(1)(b)27 above

have been partially avoided as the following section 1(3),28 which

any third party is require to be expressly indentified in the

contract.

In section 1(5),29 the section has also provided the third

party any remedy, for example, damages, injunction relief,

etc. that will be available to him for a breach of contract if

25 Nisshin Shipping Co. Ltd. V Cleaves & Co. Ltd. [2004] 1 Lloyd’s Rep 38.26 Contract (Right of Third Parties) Act 1999, s. 1(1)(b).27 Contract (Right of Third Parties) Act 1999, s. 1(1)(b)28 Id., s. 1(3).29 Contract (Right of Third Parties) Act 1999, s. 1(5).

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he haa been a party to the agreement, while in exercising the

rights as third party. Furthermore, section 1(6)30 also makes it

clear that a third party should have the benefit of any

exclusion clause, provided that the third party is referred to

in the clause, in this manner circumventing the rather

artificial devices employed by the common law to secure this

results that had illustrated in The Eurymedon31 case earlier of

the essay, which the decision was base on common law and now,

it had provided by the legislation and this also creates

certainty to the law.

Another important part of the legislation was in section 2

of the Act,32 which limits the power of the contracting parties to

change the terms of the contract unless such power has been

expressly stated in the contract. In other words, the

contracting parties cannot and will not allowed to change the

terms of the contract without the consent of the third party

30 Id., s. 1(6).31 New Zealand Shipping Co. Ltd. v A M Satterthwaite & Co. Ltd. (The Eurymedon) [1974] AC 154.

32 Contract (Right of Third Parties) Act 1999, s. 2.17

if that term has already communicated his assent, or it is

known that the third party is relying on that term, or it is

reasonably foreseeable that the third party might rely on the

term in question. There are still other sections in this

legislation provide a third party a door to justice, for

example, section 333 the availability of defences, section 434 double

liability, section 635 exempted contracts and section 736 the

compatibility of other legislation. This is 1999 Act37 had

created much remedies, but cannot be said to fully protect

third parties’ rights. However, this does not mean that the

1999 Act38 prejudice other rights of the promise or third party

against the promisor, which stated in Neil Andrews’s article39. The

contracting parties still have a common law right to sue the

third party for the breach of contract, as well as stated in

section 4 of the Act,40 “section 1 does not affect any right of the promise to enforce

33 Contract (Right of Third Parties) Act 1999, s. 3.34 Id., s. 4.35 Id., s. 6.36 Id., s. 7.37 Contract (Right of Third Parties) Act 1999.38 Ibid.39 Andrews, Neil, “Strangers to Justice No Longer: Reversal of the Privity Rule Under the Contract (Rights of Third Parties) Act 1999”, (2001) CLJ p. 376.

40 Contract (Right of Third Parties) Act 1999, s. 4.18

any term of the contract.” The Law Commission had also made this

clearly that the legislation did not want to obstruct

development of the promisee’s common law rights.

In 1999 Act,41 it did not mention the issue of

consideration, which had been very problematic. Does this mean

Tweddle v Atkinson42 decision is preserved? Indeed not, because the

Law Commission43 had re-interpreted this case by distinguishing

promises that supported by consideration and promises that are

completely unnecessary. The interpretation of the 1999 Act44 will

focus on the right to enforce a promise supported by

consideration, even though the third party himself conferred

no benefit.

After praising the master creation of the Contract (Rights of

Third Parties) Act 199945, here comes a question - is the common law

for privity of contract necessary? Or it is superfluous? In my

41 Contract (Right of Third Parties) Act 1999.42 Tweddle v Atkinson [1861] 121 ER 762.43 Chandler, Adrian and Ian Brown, Question and Answer: Law of Contract, (6th ed., 2007), Oxford University Press, p. 254.

44 Contract (Right of Third Parties) Act 1999.45 Ibid.

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opinion, yes, it is still necessary, but of course it is still

argumentative. In 1997, Lord Steyn46 suggested that the House of

Lord could re-open the common law rule in Dunlop Pneumatic Tyre Co.

Ltd. v Selfridge & Co. Ltd.47 even the privity bill became law. He

further contemplated the need for common law for certain cases

where the legislation might not apply due to the reason that a

third party has not been clearly identified or described. The

Law Commission also in accord with this suggestion as well as

me, myself. However, this suggestion is debatable due to the

flexibility of the common law, which sometimes may not be an

advantage as it will reduce the law’s clarity and stability.

Neil Andrews48 has given some examples to show the uncertainty of

common law. In 1861, the case of Tweddle v Atkinson49 crystallised

the general principle of privity, and in 1915, Dunlop Pneumatic

Tyre Co. Ltd. v Selfridge & Co. Ltd.50 reaffirmed the rule and cast it in


47 Dunlop Pneumatic Tyre Co. Ltd. V Selfridge & Co. Ltd. [1915] AC 847.48 Andrews, Neil, “Strangers to Justice No Longer: Reversal of the Privity Rule Under the Contract (Rights of Third Parties) Act 1999”, (2001) CLJ p. 378 – p. 379.

49 Tweddle v Atkinson [1861] 121 ER 762.50 Dunlop Pneumatic Tyre Co. Ltd. V Selfridge & Co. Ltd. [1915] AC 847.

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bronze. The court has sufficient opportunity to resile and

allow third parties to have direct rights of action at common

law without the need to find or give effect to trusts of

promise. Sadly, at this moment of time, the Practice Statement

196651 came into place to restore the House of Lords power of

tergiversation. After then, the hope of changes has been

restricted due to the doctrine of precedent. For now, it would

be odd for the House of Lords to create a doctrine of privity

which will operate parallel to the statutory scheme as

mentioned in Neil Andrews’s article,52 which I am agree with, because

the result would be untidy and even chaotic. This would create

a profound tension in the law and uncertainty. The nature of

common law system is the judicial doctrine as the flesh, and

legislative scheme as the skeleton, whereby the judicial

doctrine is to fill in the gap of the legislative scheme to

create a perfect system or body.


52 Id., p. 379.21

In conclusion, many of the artificial and argumentative

exceptions that created by the common law to circumvent the

unfairness of the privity general rule can now be laid to rest

for the moment. However, common law rule of privity still

needed for to fill in the gap of a very new legislation, which

is the Contract (Right of Third Parties) Act 1999.53 The attention no

longer focus on direct contractual relationship embodied in

the bargained for exchange of promises, but rather to the

intention of the contracting parties and the legitimate

expectations of named third parties, and raising a different

set of complex issues. Indeed, the statutory provision will

require explanation and elaboration by the courts regarding

some fundamental points.

(2672) words

53 Contract (Right of Third Parties) Act 1999.22

Bibliography

Bibliography

Books

Beatson, J, Anson’s Law of Contract, (28th ed., 2002), OxfordUniversity Press, New York.

Chandler, Adrian and Ian Brown, Question and Answer: Law ofContract, (6th ed., 2007), Oxford University Press, New York.

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Furmston, M. P., Cheshire, Fifoot and Furmston’s Law ofContract, (5nd ed., 2007), Oxford University Press, New York.

Mckendrick, Ewan, Contract Law, (7th ed., 2007), PalgraveMacmillan, New York.

Poole, Jill, Casebook on Contract Law, (8th ed., 2006), OxfordUniversity Press, New York.

Rose, Francis, Blackstone’s Statutes on Contract, Tort andRestitution 2006 – 2007, (17th ed., 2006), Oxford UniversityPress, New York.

Stone, Richard, The Modern Law of Contract, (7th ed., 2008),Routledge – Cavendish, USA and Canada.

Turner, Chris, Unlocking Contract Law, (2nd ed., 2007), HodderArnold, London.

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Ariticles

Andrews, Neil, “Strangers to Justice No Longer: The Reversal of The Privity Rule Under The Contracts (Rights of Third Parties) Act 1999”, (2001), C.L.J. p. 353.

MacMillan, Catharine, “A Birthday Present for Lord Denning: The Contracts (Rights of Third Parties) Act 1999”, (2000), 63 M.L.R. p. 721.

“Privity of Contract: Contracts for the Benefit of Third Parties” (1996), Law Commission Report, No. 242.

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Appendix

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Turnitin Report

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contract assignment

Documents