UNIVERSITY OF THE WEST INDIES

FACULTY OF LAW

LAW 1410 – LAW OF CONTRACT I

PRIVITY

Nature of Doctrine

The Doctrine of privity means that a contract cannot, as a general rule, confer rights or

impose obligations arising under it on any person except the parties to it. [Trietel, The

Law of Contract] no one may be entitled to or bound by the terms of a contract to which

he is not an original party.

No third person can sue on a contract to which he is not a party.

Beswick v Beswick [1966] 3 ALL ER 1, 9 per Lord Denning, MR;

Peter Beswick was a coal merchant; he sold his business to his nephew John Beswick in

return for a promise to pay £6 a week to Peter Beswick for the rest of his life and

thereafter £5 a week to Peter Beswick's widow for the rest of her life. The nephew

stopped making payments to the widow shortly after Peter Beswick's death. The widow

brought an action to compel the nephew to continue making the payments. She failed in

the action in so far as it was brought in her own name because she was not a party to the

contract between her husband and her nephew

Darlington BC v Wiltshire Northern Ltd [1955] 1 WLR 68, 76 per Steyn, LJ]

PP arranged for a finance company to arrange for the construction of a building for PP's

use. The work was badly done, and in preliminary proceedings the Court of Appeal

overruled the Official Referee and held that a third party to a building contract, where it

was the parties' intention that the contract should be for the benefit of the third party, and

where the contracting party's rights against the builder were assigned to the third party,

can sue the builder for substantial damages for defects in the building work.

Locus classicus

There is the principle that consideration must move from the promisee. Only a person

who has provided consideration can enforce a promise. See:

Tweddle v Atkinson (1861) 1 B&S 393 - The fathers of a husband and wife agreed in

writing that both should pay money to the husband, adding that the husband should have

the power to sue them for the respective sums. The husband's claim against his wife's

fathers' estate was dismissed, the court justifying the decision largely because no

consideration moved from the husband.

The two principles of privity and consideration have become entwined but are still

distinct.

Tweddle v Atkinson (1861) 121 ER 762 established that: No stranger to the

consideration could sue on the promise… Only a party to contract could sue on it

See

Dutton v Poole 83 ER 156

Dunlop Tyre Co v Selfridge [1915] AC 847

Dunlop and Dew made a contract for the sale and purchase of motor tyres, with a

condition that they should not be resold below a certain price. Dew and Selfridge then

made a contract containing a similar terms. When Selfridge broke their agreement and

sold the tyres to the public at less than the agreed price, Dunlop were unable to enforce

the agreement: they had not been party to the contract with Selfridge.

Where at 853, Viscount Haldane said:

… One is that only a person who was party to a contract can sue on it. Our law knows

nothing of a jus quaesitum tertio [third party right of action] arising by way of contract.

McEvoy v Belfast Banking [1935] AC 24

A father transferred monies in his name to a deposit account in the name of himself and

his infant son. He died shortly thereafter. The monies were withdrawn from the account

by the executors and the son sued. The bank claimed the son provided no consideration

for the fathers act, but Lord Atkins held that on the face of it the contract was made with

the father and son jointly and severally and that the father provided the consideration for

the contract with the bank. They were joint promisees.

Kepong Prospecting Ltd v Schmidt [1968] AC 810

NB: While the doctrines of privity and consideration have become entwined they are

distinct.

Scope of Doctrine

There are well recognised exceptions to the doctrine, which arise both at common law

and under statute.

There are also instances where the doctrine is evaded. In these circumstances the doctrine

should strictly apply but the courts are able to find that the parties intended that the

doctrine should not govern their agreement.

There are a number of general law principles which enable a third party, such as C in our

example, to overcome the doctrine of privity.

Common Law Exceptions

Agency- The concept of agency is an exception to the doctrine of privity in that an agent

may contract on behalf of his principal with a third party and form a binding contract

between the principal and third party.

C is able to claim the benefit of a contract between A and B if C can show that B made

the contract as her agent.

The rule here is that if one of the contracting parties contracts as an agent, then either the

agent or the principal, but not both, can sue to enforce the contract.

The agent who makes the contract must profess at the time of making it to be acting on

behalf of, or intending to bind the person who subsequently ratifies the contract. The

principal need not be named but be capable of being identified at the Time of the

Contract. If the agent makes no allusion to agency but gives the appearance of

contracting in his own right, the contract cannot be later adopted by another whom in

truth he intended to act.

Keighly Maxted & Co v Durant [1901] AC 240 –

Here A authorized P to buy wheat st 44s 3d. a quarter on a joint account for himself and

P. wheat was unobtainable at that price and in excess of his authority he agreed to buy the

wheat from X at 44s.6d a quarter. He intended to purchase it on the joint account;

however A contracted in his own name and did not disclose the agency to X. The next

day P ratified the purchase at the unauthorized price but ultimately he and A failed to take

delivery. Action brought against P by X was unsuccessful

NB: Scruttons Ltd v Midland Silicones Ltd [1962] AC 446 - A contract between the

owner of goods- a chemical manufacturer and a carrier- a shipping company. Purported

to limit the liability of the carrier's subcontractor. , a bill of lading limited the liability of a

shipping company to $500 per package. The defendant stevedores had contracted with

the shipping company to unload the plaintiff's goods on the basis that they were to be

covered by the exclusion clause in the bill of lading. The plaintiffs were ignorant of the

contract between the shipping company and the stevedores. Owing to the stevedores’

negligence, the cargo was damaged and, when sued, they pleaded the limitation clause in

the bill of lading. The House of Lords held that the stevedores could not rely on the

clause as there was no privity of contract between the plaintiffs and defendants.

Lord Reid said that there might be a contract between owner and subcontractor, making

this limitation effective, if four conditions were satisfied. The clause must clearly extend

to the subcontractor, the carrier must clearly be acting as agent for the subcontractor (in

making the contract) as well as on his own account, such agency must be authorized or

ratified by the subcontractor, and the subcontractor must have provided some

consideration for a contract between himself and the owner. In the instant case the fourth

condition was not satisfied and the contract could not be shown to exist, so the clause was

ineffective.

Third party stevedores could not benefit under a bill of lading; however, Lord Reid

suggested that they could if:

The bill of lading made it clear that the stevedores were intended to be protected by the

exclusion clauses therein;

The bill of lading made it clear that the carrier had contracted as agent for the stevedores;

The carrier had prior authority from the stevedores to act as agent or if there act was later

ratified by the stevedores;

Consideration had moved from the stevedores.

See also

New Zealand Shipping v Satterwaite, The Eurymedon [1975] AC 154

the stevedore were able to rely on the limitation clause between the cargo owner and the

shipping company brought into existence a bargain between the stevedores and the

shipper/ owner of the goods made through the agency of the shipping company. The

performance of the services by the stevedore was for the benefit of the cargo owner and

the consideration was the benefit of the exemption clause in the bill of lading.

The essential conditions established in Scruttons were met in The Eurymedon; therefore,

third party was able to benefit.

Assignment

B may assign the benefit [never an obligation] of her contract with A to C and C can then

enforce the contract against A.

A party to a contract may assign to a third party his right to enforce the contract and so

obtain the benefits there under: the right thereby transferred is known as a "chose in

action". Assignment takes place automatically when a person dies - the contracts to

which he is party can (with a few exceptions) be enforced by or against his personal

representatives - or when he becomes bankrupt and most of his contractual rights devolve

upon his trustee in bankruptcy.

Tolhurst v Associated Portland Cement Co. [1903] AC 414

 Tolhurst, the owner of land, contracted with the Imperial Portland Cement Company

("Imperial") to supply them with 750 tonnes of chalk per week for 50 years at 1s a tonne.

Imperial went into voluntary liquidation and all the land, goodwill, and pending trade

contracts including the contract with Tolhurst were assigned to an associated company

("Portland"). Imperial gave notice to Tolhurst that they were in liquidation and their land

and business would be transferred to Portland.

Tolhurst then wrote to Portland offering to supply them with chalk at 2s a tonne. Portland

refused to pay that amount and claimed they were entitled to the benefit of the contract

between Tolhurst and Imperial and to pay 1s tonne for the chalk. They claimed the

contract with Imperial was assignable and no personal element of individual skill or

competency was present. They argued no additional burden was thrown upon Tolhurst

which would entitle him to repudiate the contract.

Tolhurst argued that when the contract was made, there was no intention express or

implied on the part of Tolhurst to contract except with Imperial, or to incur any liability

to a company which was not even in existence at that time. They argued that Imperial had

rendered itself powerless to perform the contract by entering into voluntary liquidation as

it had no assets, and Tolhurst was entitled to treat that as a repudiation of the contract.

In the first instance Tolhurst was successful. The decision was appealed by Portland and

Imperial to the King's Bench. The question before the Court was whether the contract

made between Tolhurst and Imperial could be enforced against Tolhurst when Imperial

had assigned the contract to Portland without the consent of Tolhurst. Collins M.R. held:

It is, I think, quite clear that neither at law nor in equity could the burden of a contract be

shifted off the shoulders of a contractor on to those of another without the consent of the

contractee. A debtor cannot relieve himself of his liability to his creditor by assigning the

burden of the obligation to someone else; this can only be brought about by the consent

of all three, and involves the release of the original debtor............

This is the reason why contracts involving special personal qualifications in the contract

are said, perhaps somewhat loosely, not to be assignable. What is meant is, not that

contracts involving obligations not special and personal can be assigned in the full sense

of shifting the burden of the obligation onto a substituted contractor any more than where

it is special and personal, but that in the first case the assignor may rely upon the act of

another as performance by himself, whereas in the second case he can not.

Collins M.R. held that Tolhurst was entitled to have a choice in the matter of person or

company with whom he contracted, but stated that the case must be considered solely on

the ground that the assignor brought the action against Tolhurst and the contractual

relationship still existed between Imperial and Tolhurst. It was held that it was clear from

the terms of the assignment that there was no intention to renounce the contract, rather on

the contrary, it was part of the bargain that it should be kept in force. Finally, it was held

that the contract was not intended to exclude performance by any person other than the

old company, and held that the appeal must be allowed.

Tolhurst appealed the decision of the Kings Bench to the House of Lords. The appeal was

dismissed and the House of Lords upheld the enforceability of the contract. Lord

MacNaghten stated13:

There are contracts, of course, which are not to be performed vicariously, to use an

expression of Knight Bruce LJ. There may be an element of personal skill or an element

of personal confidence to which, for the purposes of the contract, a stranger cannot make

any pretensions. But no one, I suppose, would seriously argue that a contract for delivery

of chalk from particular quarries for the use of particular cement works cannot be

performed by any person for the time being possessed of the quarries, or that it can make

the slightest difference to anybody who the proprietors of the cement works or the actual

manufacturers may be, provided they are in a position to carry out the terms of the

original contract.

This issue came before the High Court of New Zealand in the HEB Contractors case,

where as set out above, Bexley as vendor had assigned its legal interest in the land, and

interest in the agreements to HEB without the knowledge (at the time of assignment) or

consent of the purchaser, Verrissimo.

Williamson J held that HEB, as assignee was entitled to pursue specific performance

against the purchaser Verrissimo, provided the assignment was not prohibited by the

terms of the agreements, and that HEB has assumed the position of Bexley and fulfilled

its liabilities under the agreements.

 

Williamson J did not accept that by assigning the agreements Bexley demonstrated an

intention not to perform the agreements, rather to the contrary, by entering into the

assignments Bexley was taking steps to bring about the completion of the sales not vice

versa.

In his conclusion Williamson J considered the following comments of the author of a

Canadian text:

The question of whether or not a vendor, without the consent of the purchaser, can

convey or transfer his legal estate in the land is not free from difficulty and is inextricably

entwined with that venerable proposition in the law of vendor and purchaser that, in the

time between contract and conveyance, a vendor under an enforceable agreement for the

sale of land is a constructive trustee for his purchaser . . . Where there is and can be no

prejudice to the purchaser it would seem that a disposition by the vendor is permitted and

stated there was considerable merit in this rule.

Restrictive Covenants

The benefits of covenants concerning land may, if certain conditions are met, run with the

land and bind a third party purchaser or lessee even though she was not a party to the

original agreement.

Tulk v Moxhay 41 ER 1143 - covenant can be enforced in equity where there has been

notice.

P sold to X a piece of land in Leicester Square, taking covenants that (inter alia) the land

would not be built upon. After several conveyances the land was conveyed to D, who

knew of the original covenants even though they were not included in his conveyance. P

brought an action to restrain D from building on the land, and the Lord Chancellor upheld

the Master of the Rolls' order to this effect. A purchaser of land, he said, can be bound by

a restrictive covenant to which he was not an original party, so long as he has notice of

the covenant and the original promisee still has some interest to be protected.

The plaintiff who owned several houses in Leicester Square sold the garden in the centre

to Elms, who covenanted that he would keep the gardens and railings in their present

condition and continue to allow individuals to use the gardens. The land was sold to the

defendants who knew of the restriction contained in the contract between the plaintiff and

Elms. The defendant announced that he was going to build on the land, and the plaintiff,

who still owned several adjacent houses, sought an injunction to restrain him from doing

so. It was held that the covenant would be enforced in equity against all subsequent

purchasers with notice.

Lord Strathcona SS Co v Dominion Coal Co [1926] AC 108

B the owner of Lord Strathcona, chartered her to A on the terms that for a period of years,

A should be free to use her on the St. Lawrence river for the summer and should

surrender her to B in November of each year. During the currency of the charter-party,

but while the ship was in B. possession, B sold the ship and delivered it to C, who in turn

re-sold it to D. D, though he knew of the charter-party, refused to deliver the ship to A

for the summer season. Held A could get an injunction against D as he had bought the

ship with notice that’s she was affected by a restrictive covenant in favour of the plaintiff

and therefore in the same position as if he had bought the estate in land with notice of a

similar restriction.

But it is felt that this decision should be confined to very special cases of a ship under a

charter-party.

Cf: Port Line Ltd. v Ben Line Streamers [1958] 2 QB 146 in March 1955 the plaintiff

chartered a ship from X the owner for a period of 30 months. The shop was to remain in

X’s possession but to be at the complete disposal of the plaintiffs. In Feb. 1956 X sold

the ship to the defendants. The defendants at once chartered it back to X so that it never

ceased to be in X’s possession. The plaintiff knew of the sale and acquiesced in it since

the ship was to remain available under their own charter. The Charter between X and the

defendants contained a clause that: if the ship is requisitioned, the charter shall thereupon

cease”. No such clause was in the plaintiffs’ charter. The defendant however when they

bought the ship knew of the charter but not of its terms. In august 1956, the Ministry of

Transport requisitioned ship and paid compensation to the defendants as owners. In

November 1956 the requisition ended. The plaintiff sued the owners to obtain his

compensation money and relied on the decision in Strathcoma. Diplock held that

Strathcoma was not good law as there needed to be some proprietary interest to support

the claim based on Tulk and Moxhay. There was an absence of such interest in

Strathcoma. Further in this case the defendant did not know of the plaintiff’s rights. No

damages or money compensation could be obtained.

See also

Law Debenture Trust Corp v Ural Caspian Oil Corp [1993] 2 ALL ER 355 - principle

enforces a negative injunction and cannot require a positive duty by the third party.

And See

Smith and Snipes Hall Farm Ltd. v River Douglas Catchment Board [1949] 2 KB 500

By a contract under seal made in 1938 the def agreed with 11 owners of land joining a

stream to improve the banks and to’ maintain for all time he work when completed.”

The landowners agreed to pay a proportion of the cost. In 1940 one of the landowners

conveyed her land to Smith, the first plaintiff, and in 1944 Smith lease it to Snipes Hall

farm Ltd, the 2nd plaintiff. In 1946 owing to the defendant’s negligence the banks burst

and the land flooded.

Though both plaintiffs were strangers to the contract the Court of Appeal held that the

covenants undertaken by the defendants affected the use and value of the land, that they

were intended from the outset to benefit anyone whom the land might be transferred and

that the defendant was liable.

Collateral Contracts

Contract between A and B may be accompanied by a collateral contract between one of

them and a third party C concerning the same subject matter, which may entitle C to

benefits under main contract. A contract between two parties may be accompanied by a

collateral contract between one of them and a third person relating to the same subject-

matter.

Shanklin Pier v Detel Products [1951] 2 KB 854 - The owners PP engaged contractors

CC to paint the pier and specified DD's paint; the paint (bought by CC) did not wear as

well as DD had promised, and the court found a collateral contract under which PP could

recover damages. PP had given consideration by instructing the contractors to use DD's

paint, and that was sufficient consideration.

The plaintiffs had employed contractors to paint a pier. They told them to buy paint made

by the defendants. The defendants had told them that the paint would last for seven years.

It only lasted for three months. The court decided that the plaintiffs could sue the

defendants on a collateral contract. They had provided consideration for the defendants'

promise by entering into an agreement with the contractors, which entailed the purchase

of the defendants' paint.

There must, however, be an intention to create a collateral contract before that contract

can be formed

C must be able to establish that:

There was an intention to create the collateral contract before the main contract was

formed.

Consideration must have moved from C.

Statutory Exceptions

Certain statutes have created exceptions to the doctrine, including:

Married Women’s Property Act

Road Traffic Act

Conveyancing Act

Evasion

Suit by Promisee

Beswick v Beswick [1966] 3 ALL ER 1

Lloyds v Harper (1860) 16 Ch D 290 where a contract is made with A for the benefit of

B, A can sue on the contract for the benefit of B, and recovery all that B could have

recovered if the contract had been made with B himself.

Linden Gardens Trust v Lenesta Sludge Disposals Ltd [1994] 1 AC 85

MH removed the asbestos from a building under a contract with SC, who then sold the

building to PP. The work was defective and PP suffered financial loss as a result. The

House of Lords held that where the original contractor was aware that the building was to

be sold on, so that defective work could lead a third party to suffer loss of essentially the

same nature as the original buyer would suffer if the building were not sold, such loss

was damage for which the original buyer (if he had not assigned his rights to the

purchaser) could sue on the purchaser's behalf.

Woodar Investment v Wimpey Construction Ltd [1980] 1 ALL ER 571 the House of

Lords rejected the basis on which Lord Denning had arrived at his decision, and

reaffirmed the view that a contracting party cannot recover damages for the loss sustained

by the third party. Their Lordships did not dissent from the actual decision in Jackson,

which they felt could be supported either because the damages were awarded for the

plaintiff's own loss; or because booking family holidays or ordering meals in restaurants

calls for special treatment.

C) TRUSTS

Equity developed a general exception to the doctrine of privity by use of the concept of

trust. A trust is an equitable obligation to hold property on behalf of another.

The device was approved by the House of Lords in Les Affreteurs Reunis v Leopold

Walford [1919] AC 801, where a broker (C) negotiated a charter party by which the ship

owner (A) promised the charterer (B) to pay the broker a commission. It was held that B

was trustee of this promise for C, who could thus enforce it against A.

However, the trust device has fallen into disuse because of the strict requirements of

constituting a trust and most particularly that there should be a specific intention on the

part of the person declaring the trust that it should be a trust.

See also

Barclays Bank v Quistclose Investments [1968] 3 ALL ER 651 - A company,

Rolls Razor Ltd (RR), declared a dividend that it did not have sufficient funds to pay.

Quistclose Investments Ltd (Quistclose) was willing to lend RR £1m so that RR could

pay that dividend. The advance was made on the condition that it would be deposited in a

separate bank account with Barclays Bank Ltd (Barclays) and that it would only be used

to pay the dividend. Notice of that arrangement was given to Barclays. RR went into

voluntary liquidation before the dividend was paid. As a result, Quistclose sought to

recover the funds in the dividend account from Barclays. However, Barclays claimed that

it was entitled to set off the credit balance in the dividend account against part of the

debit balance on RR’s other accounts held at Barclays. This dispute lead to the

subsequent legal proceedings, which ultimately ended in the House of Lords (HL).

Two questions arose for the HL to consider which, if answered in the affirmative, would

allow Quistclose to recover the loan:

The first question was whether, as between Quistclose and RR, the terms on which the

loan was made were such as to impress a trust in Quistclose’s favour in the event of the

dividend not being paid.

The second was whether, in that event, Barclays had such notice of the trust or of the

circumstances giving rise to it as to make the trust binding on it.

The Decision of the Court & the Legal Issues Raised:

Was a trust created in Quistclose’s favour?

HL held that, because of the exclusive purpose for which the loan was made, RR received

the money in the fiduciary character of a trust to repay the dividend. Since that purpose

had failed, there was a resulting trust in favour of Quistclose.

Avoidance of Fraud

Snelling v John G Snelling Ltd [1973] 1 QB 87 the plaintiff and his 2 brothers were all

directors of the defendant company. The company was financed by substantial loans

from all 3 brothers. As part of the arrangement to borrow money from a finance

company, the 3 brothers agreed to a contract not to demand payment of their loans during

the currency of the loan from the finance company. The company was not a party of this

contract.

If any resigned as directors they would forfeit their rights to the money owning on the

loan. One retired and claimed that as the company was as not a party to the contact, that

agreement didn’t affect his rights against the company. The Company in defence relied

on the Agreement. Because the company has an independent personality, it was not a

party to the agreement. In principle the plaintiff could succeed, however the other

brothers could gain a declaration saying the promise not to sue the company was binding:

This can occur even though the benefit is intended for the company (a third party).

Effectively prevented the brother from suing the company.

Norwich CC v Harvey [1989] 1 ALL ER 1180

A contract for a major shopping development provided that the owner (not the contractor)

was to bear all fire risks, and a sub-contractor had dealt with the main contractor on that

basis. When fire damage was caused through the sub-contractor's negligence and the

owner sued in tort, the court said it would not be just and reasonable to exclude the sub-

contractor from the protection of the clause, even though he was not party to the contract

in which it was contained.

New Zealand Shipping v Satterwaite, The Eurymedon [1975] AC 154

in this case the subcontractors had performed their part of the agreement and unloaded

the ship. Although they were already under a contractual obligation, this obligation was

to the carrier and not to the owner, and so could form new consideration in respect of a

"third party".

the stevedore were able to rely on the limitation clause between the cargo owner and the

shipping company brought into existence a bargain between the stevedores and the

shipper/ owner of the goods made through the agency of the shipping company. The

performance of the services by the stevedore was for the benefit of the cargo owner and

the consideration was the benefit of the exemption clause in the bill of lading.

American Solution –

A third party, who, is intended, by the terms of the contract between Y and Z, to benefit

from Y’s and Z’s performance of the contract can enforce the contract.

The Second Restatement of Contracts Law S. 133 distinguishes between intended and

incidental beneficiaries:

[A] beneficiary ... is an intended beneficiary if recognition of a right to performance in

the beneficiary is appropriate to effectuate the intention of the parties and ... the promise

manifests an intention to give the benefit of he promised performance.

Intended Beneficiary: A third party for whose benefit a contract is formed.

An incidental beneficiary is a beneficiary who is not an intended beneficiary.... A third

party who benefits from the performance of a contract, but whose benefit was not the

reason the contract was formed.

Beaston, ‘Reform the Law of Contracts for the Benefit of Third Parties: A Second Bite at

the Cherry’ (1992) 45 Current Legal Problems 1

Is the American ‘solution’ desirable?

Extra-Contractual Relief

A remedy may be available outside of contract, for example, through an action in tort for

breach of duty.

A third party may also be able to pursue a concurrent action in tort. Donoghue v

Stevenson [1932] AC 562, HL P went to a café with a friend, who bought her a bottle of

ginger beer. After drinking most of it, P found a decomposed snail in the bottle and

became ill. P had no contract with the café, so she sued the manufacturers in delict (the

Scottish equivalent of tort). The House of Lords said the manufacturers had a duty of care

to the consumer of their product.

BWIA v Bart [1965] 9 WIR 220

In Bart v British West Indian Airways Ltd, 325 the plaintiff claimed damages from the

airline on the basis of delay in delivering what was a winning football coupon sent them

by the plaintiff’s agent in Georgetown, to the UK from Guyana. By a majority the

Guyana Court of Appeal, allowing an appeal by the air carrier, held that the plaintiff was

not a party to the contract and so not entitled to damages. Bollers CJ argued (at 275) that

in the absence of a fixed time there would be an implied agreement between the shipper

and carrier that the goods would be conveyed by air within a reasonable time but that

under the air consignment note issued by the defendants, it was agreed that no time was

fixed for completion of the carriage and no obligation was assumed by the carrier to carry

the goods by any specific aircraft or over any particular route or to make any connection

at any point according to any particular schedule. Further, Bollers CJ observed that under

the general conditions of carriage for cargo no time was fixed for the commencement or

completion of the carriage; time tables were to be regarded as approximate only, were not

guaranteed and formed no part of the contract of carriage:

…it would be surprising to me to find an airline company willing to bind itself to deliver

goods within a fixed time when weather conditions, aircraft worthiness and expected or

unexpected eventualities may intervene to render futile their most earnest intention.

The majority (Stoby C dissenting) held there was no privity of contract between the

plaintiff and the carrier, the plaintiff was not an undisclosed principal and there was no

agency relationship between plaintiff and person who had contract with carrier.

White v Jones [1995] 2 WLR 187 - HL holds that a solicitor retained to draw up a will,

but who fails to do so before the testator's sudden death, may owe a duty in tort to

disappointed beneficiaries, with the result that they can claim the value of their lost

legacies from the solicitor if they can establish fault. There was no contractual duty

between the beneficiaries and the solicitor but a duty existed in tort.

Charnock v Liverpool Corporation [1968] WIR 1498

There is a contract between the insurance company and the garage to repair the car. It is

said that the car owner did not make any contract: he was merely a bystander and in the

hands of the insurance company. The garage took eight weeks to repair the car when in

normal time, it would have done the repairs in four or five.

Whittingham v Crease (1979) DLR (3d) 353 - a solicitor was instructed by his client to

draw up a will in which the plaintiff was identified as the “residuary beneficiary”. For

some reason, the will failed and the beneficiary lost his interest in the estate. The B.C.

Court of Appeal held that the solicitor owed a duty of care toward the third party.

Because that third party was so closely and directly affected by the lawyer’s acts or

omissions, the lawyer could have reasonably foreseen that the third party was likely to be

injured by his acts and omissions. The lawyer was liable to the beneficiary even though

there was no contractual relationship between them.

Cf: Balsamo v Medici [1984] 2 ALL ER 201

See also

Jackson v Horizon Holidays [1975] 1 WLR 1468 – the contracting party was able to

recover loss sustained by an intended beneficiary

The question of the extent to which a contracting party may recover for loss sustained by

a third party who is intended to benefit from the contract was raised in:

The plaintiff entered into a contract for himself and his family. The holiday provided

failed to comply with the description given by the defendants in a number of respects.

The plaintiff recovered damages and the defendants appealed against the amount. Lord

Denning MR thought the amount awarded was excessive compensation for the plaintiff

himself, but he upheld the award on the ground that the plaintiff had made a contract for

the benefit of himself and his family, and that he could recover for their loss as well as

for his own.

However, in Woodar Investment Development v Wimpey Construction [1980] 1 WLR

277, a contract for the sale of land provided that on completion the purchaser would pay

850,000 pounds to the vendor and also 150,000 lbs to a third party. The vendor claimed

damages for wrongful repudiation. In fact there was found no wrongful repudiation, but

the House of Lords expressed that a contracting party cannot recover damages for the loss

suffered by another/ 3rd party.

The House of Lords rejected the basis on which Lord Denning had arrived at his

decision, and reaffirmed the view that a contracting party cannot recover damages for the

loss sustained by the third party. Their Lordships did not dissent from the actual decision

in Jackson, which they felt could be supported either because the damages were awarded

for the plaintiff's own loss; or because booking family holidays or ordering meals in

restaurants calls for special treatment.

Cf: Woodar Investment v Wimpey Construction Ltd [1980] 1 ALL ER 571