Using the relevant case law where appropriate,
1. The parties to the contract in this instance are Lifestyle and Archibald McPennine Construction Ltd. The general regulation under contract jurisprudence is that merely the parties to a contract can implement it. This regulation was clearly stated in Tweddle V Atkinson. [ 1 ] In that instance, the male parents of a bride and groom agreed before the nuptials to pay the groom an sum of money upon his matrimony. The male parent of the bride died before he could pay and the groom tried to action his estate to retrieve the amount. The tribunals would non let him to retrieve since he had provided no consideration and was non a party to the original contract – despite the fact that it had been made for his benefit.
The regulation is farther demonstrated in the instance of Dunlop Pneumatic Tyre Co. V Selfridge & A ; Co. Ltd. [ 2 ] Here, Dunlop sold Surs to a distributer with an understanding that they would non offer them for sale below the list monetary value. The parties besides agreed that if the distributer was to sell them to a trade purchaser, they besides had to acquire an understanding from the purchaser that the Surs would non be sold below Dunlop’s list monetary value. The distributer so sold the Surs onto Selfridge who did sell them cheaper than the list monetary value. Dunlop tried to action Selfridge, nevertheless, the action failed as there was no privity of contract between them.
Turning to the facts of this instance, there is no uncertainty that Sarah Jones Developments have suffered a loss as the composite that they own is faulty and they require ?30 million amendss in compensation. Under the general regulation, nevertheless, it appears that despite their loss, as they were non a party to the contract between Lifestyle and McPennine, they have no cause of action for breach of contract. To retrieve compensation for their loss, Sarah Jones Developments can seek to claim that the facts of the instance either give rise to an action in civil wrong or convey it under one of the exclusions to the general regulation.
First, the inquiry arises as to whether Sarah Jones Developments has a cause of action in civil wrong against McPennine. Any such action is improbable to win, nevertheless, on the footing that it would be on the evidences of pure economic loss, which is by and large irrecoverable.
Sarah Jones developments could seek to claim that there was a collateral contract between them and McPennine but this is improbable to win since McPennine had no direct covering with Sarah Jones Developments or any other company in the group apart from Lifestyle and there is no grounds to propose the being of such a contract.
The facts of the instance do non convey it under any of the statutory exclusions and so the philosophy of privity can non be avoided in this manner. Sarah Jones Developments may seek to set up that Lifestyle made the contract as Sarah Jones’ agent. There is no grounds of this and as this would intend that there was no contractual relationship between Lifestyle and McPennine the tribunals are improbable to accept that this was the instance since the facts province that the contract was made between those parties.
Sarah Jones Developments may seek to turn out that the benefits of the contract between Lifestyle and McPennine have been assigned to them. For this to use, Lifestyle must hold made a statement of purpose to delegate clear rights to Sarah Jones Developments. There is no grounds that this is the instance so it would look improbable that the tribunals would accept such an statement.
Finally, Sarah Jones Developments could seek to take action under the jurisprudence of trusts. To set up this, nevertheless, the tribunals would anticipate certainty of purpose to make a trust. Since there is no evident grounds for this, it is improbable that the tribunals will keep that this applies.
In decision, it is my sentiment that since Sarah Jones Developments were non a party to the contract between Lifestyle and McPennine, unless they can convert the tribunal that the facts of the instance conveying it under one of the exclusions to the philosophy of privity so they are improbable to win in an action against McPennine for breach of contract. In sing the exclusions to the philosophy of privity, it does non look as if the facts of the instance conveying it under any of them and so it is my position that Sarah Jones Developments would non be able to claim amendss from Archibald McPennine.
2. In reply to the inquiry of whether Lifestyle can claim amendss from McPennine, the general regulation is that Lifestyle can merely claim for losingss that they have suffered themselves. Lifestyle do non have the land or the completed composite as both are owned by Sarah Jones Developments. Lifestyle, hence, have non suffered a loss so would non look to look to be entitled to anything more than nominal compensation for breach of contract.
Under the regulation in Dunlop V Lambert, [ 3 ] nevertheless, Lifestyle may be able to besiege the philosophy of privity. This exclusion to the general regulation developed in relation to contracts that were entered into for the transit of goods by sea. The regulation was more late confirmed in The Albazero. [ 4 ]
The job in such instances was that commercial pattern could take to a legal ‘black hole.’ Contracts for transporting were made between the provider of the goods and the bearer, nevertheless, ownership passed to the individual who was to have the cargo when the provider delivered the goods to the bearer. This meant that if the goods were damaged or lost at sea, the provider of the goods could non claim amendss for breach of contract, as they had suffered no loss. In add-on, the individual who had been due to have the goods had no action for breach of contract against the bearer as they had non entered into a contract with them and were therefore prevented from claiming by the philosophy of privity.
It appeared to be the instance that bearers who breached their contracts in such fortunes would non confront any legal countenances. The being of the regulation in Dunlop V Lambert, nevertheless, means that a redress is available. For the regulation to use, there must be no alternate redress for breach of contract. Additionally, the parties to the contract, Lifestyle and McPennine, would hold to hold contemplated that a breach by either of them would do loss to a known or identifiable 3rd party – viz. Sarah Jones Developments.
The regulation was applied in the united building instances of Linden Gardens Trust Ltd V Lenesta Sludge Disposals Ltd ; St Martin’s Property Corporation Ltd V Sir Robert McAlpine & A ; Sons Ltd. [ 5 ] Here, McAlpine was contracted to finish a development for St Martin’s. When the development was completed, St Martin’s passed it on to a sister company called Investings. When they passed on the development, they besides assigned the benefits of their contract with McAlpine to Investments. This was to guarantee that Investments could action McAlpine for any breach of contract subsequently discovered. After the development had been passed on, defects appeared and Investments had to pay to rectify them. They so tried to action McAlpine for breach of contract. Investings were unable to retrieve compensation as the House of Lords held that the assignment of the contract benefits was non valid because McAlpine had non given consent. Investings are in a similar place to Sarah Jones Developments in that privity of contract prevents them from retrieving their losingss.
As Investings were prevented from retrieving, St Martin’s tried to action McAlpine. As with Lifestyle, the general regulation stipulated that they had non suffered any loss so were non entitled to significant amendss. The House of Lords, nevertheless, decided that as McAlpine knew that Investments instead than St Martin’s were traveling to busy the edifice, so it was moderately foreseeable that any breach of contract would impact them instead than St Martin’s. It was held that because of this, St Martin’s could claim amendss for the loss suffered by Investings on their behalf. This exclusion was besides applied in Darlington BC V Wiltshier Northern Ltd. [ 6 ]
Similarly, in Alfred McAlpine Construction Ltd v Panatown Ltd, [ 7 ] Panatown employed McAlpine to construct on land owned by Unex Investment Properties. When McAlpine and Panatown agreed to the contract, McAlpine agreed to a ‘duty of care’ title. This meant that if any defects occurred, Unex had a class of action against McAlpine. It was held in this instance that McAlpine did non hold to pay amendss to Panatown because under a provision in The Albazero, the exclusion to the philosophy of privity merely applies when no alternate action is available. This was non applicable here because an action could be based on the responsibility of attention title. Panatown was hence merely entitled to nominal amendss.
In decision, it is my position that Lifestyle can surely claim nominal amendss. Additionally, Lifestyle can likely claim significant amendss under the regulation in Dunlop V Lambert on the footing that Sarah Jones Developments have suffered loss and do non look to hold a direct redress against McPennine.
3 ) The philosophy of privity of contract has been capable to much unfavorable judgment. This is mostly because it can take to unjust state of affairss in which person who breaches a contract suffers no reverberations if the contract was intended to profit a 3rd party.
It is non surprising, hence that a figure of exclusions to the regulation have been developed over the old ages. Critics have systematically called for the abolishment of the regulation and the Law Commission considered its usage and suggested reform in its 1996 study ‘Privity of Contract: Contracts for the Benefit of Third Parties.’ [ 8 ] This led to the passing of the Contracts ( Rights of 3rd Parties ) Act 1999.
This legislative act creates an exclusion to the general regulation but does non get rid of it or reform it in any broader sense. Additionally, it applies alongside the bing exclusions to the philosophy of privity developed at common jurisprudence.
Section 1 ( 1 ) of the Act states that:
“Subject to the commissariats of this Act, a individual who is non a party to a contract ( a “ 3rd party ” ) may in his ain right enforce a term of the contract if-
( a ) the contract expressly provides that he may, or
( B ) topic to subdivision ( 2 ) , the term purports to confabulate a benefit on him.”
Sub-section 2 provinces that subdivision 1 ( 1 ) ( B ) will non use if the parties to the contract didn’t intend the 3rd party to be able to implement the term.
Under subdivision ( 1 ) ( 3 ) of the Act, Sarah Jones Developments must either be expressly identified in the contract by name, category or description or instead, have a benefit conferred upon them that it was intended that they could implement.
If the contract between Lifestyle and McPennine provinces that Lifestyle entered into the contract on behalf of or for the benefit of Sarah Jones Developments so Sarah Jones Developments will be able to trust on the Act. This will besides be the instance if they were non named specifically in the contract but can be identified as belonging to a peculiar category or if they meet a specified description of person intended to profit. Sarah Jones Developments would be entitled to all redresss given for breach of contract including the amendss sought.
In decision, every bit long as it is clear that Lifestyle were undertaking with McPennine for the benefit of a 3rd party and Sarah Jones Developments can be identified as such, so, despite being a 3rd party to the contract, Sarah Jones Developments can claim amendss from McPennine under the Act.
Poole, Jill. Textbook on Contract Law. 8th edition. OUP, 2006
Richards, Paul. Law of Contract. 7th Edition. Pearson Education, 2006
Law Commission Report No 242. Privity of Contract: Contracts for the Benefit of Third Parties, Law Commission, 1996
“Panatown Ltd V McAlpine Construction Ltd –
No Panacea for Third Party Loss” from
hypertext transfer protocol: //www.lawgazette.com.sg/2001-7/July01-feature.htm
Accessed on 16th April 2007
Darlington Borough Council v Wiltshier Northern Ltd [ 1995 ] 1 WLR 68
Dunlop V Lambert [ 1839 ] 6 Cl & A ; F 600
Dunlop Pneumatic Tyre Co v Selfridge & A ; Co Ltd [ 1915 ] AC 847
Linden Gardens Trust Ltd V Lenesta Sludge Disposals Ltd ; St Martin’s Property Corp Ltd V Sir Robert McAlpine & A ; Sons Ltd [ 1993 ] 3 All ER 417
Panatown Ltd v McAlpine Construction Ltd [ 2000 ] 4 All ER 97
The Albazero [ 1977 ] AC 774
Tweddle V Atkinson ( 1861 ) 1 B & A ; S 393
Contracts ( Rights of Third Parties ) Act 1999