Self-test questions: Privity

. Which one of the following statements is a true presentation of the common law doctrine of privity of contract?

A person is not bound by a contract to which it is not a party but it may enforce the contract if the contract is expressly made for its benefit.

A person may be bound by a contract to which it is not a party and it may also enforce the contract, if the contract is expressly made for its benefit.

A person is not bound by a contract to which it is not a party, nor may it enforce the contract, even if the contract is expressly made for its benefit.

A person may be bound by a contract to which it is not a party, but it may not enforce the contract, even if the contract is expressly made for its benefit.

A person may enforce a contract expressly made for its benefit to which it is not a party, but if it elects to do so it then becomes bound by that contract, including its burdens.

. Which one of the following statements relating to the test of enforceability in s. 1 of the Contracts (Rights of Third Parties) Act 1999 is true?

A third party must be in existence at the time the contract is made.

Where a contract expressly provides that it shall not be enforced by third parties, the 1999 Act will not apply.

A third party need not be expressly identified in the contract.

A third party seeking to rely on s. 1(1)(b) (i.e. contract purports to confer a benefit on that party) must prove that the contracting parties intend the contract to be enforceable by it.

A third party may only enforce a term of the contract if the contract expressly provides that it may.

. The doctrine of privity of contract is generally applicable to which one of the following contractual documents?

Bills of exchange.

An agency contract.

Bills of lading.

Promissory notes.

Negotiable instruments.

. According to s. 2(1) of the Contracts (Rights of Third Parties) Act 1999, in which one of the following circumstances will the contracting parties have not lost their rights to vary or cancel a contract term granting a third party rights without that third party's consent?

The promisor can reasonably be expected to have foreseen that the third party would rely on the term and the third party has in fact relied on it.

The third party sends the promisor a letter to communicate its assent to the term and the letter is lost in transit.

The third party communicates its assent to the term to the promisor.

The third party relies on the term and the promisor knows this.

The third party has communicated its assent to the term to the promisor by conduct.

. Barrie employs Augusto to carry out work on Kelly's property and, at the time of contracting, Augusto knows that the property belongs to Kelly and that Barrie will shortly assign his rights under the contract to Kelly. Barrie does so. Due to Augusto's negligence, the work is defective and causes damage to the property. Which one of the following most accurately summarises the parties' legal position?

Substantial damages are recoverable, on the basis of the decision in Jackson v Horizon Holidays Ltd [1975] 1 WLR 1468.

Substantial damages are recoverable, on the basis of the decision in Shanklin Pier Ltd v Detel Products Ltd [1951] 2 KB 854.

Substantial damages are recoverable, on the basis of s. 1(1)(a) of the Contracts (Rights of Third Parties) Act 1999.

Substantial damages are recoverable, on the basis of the decision in Darlington Borough Council v Wiltshier Northern Ltd [1995] 1 WLR 68.

Substantial damages are recoverable, on the basis of the decision in New Zealand Shipping Co Ltd v A M Satterthwaite & Co Ltd, The Eurymedon [1975] AC 154.

. Jin employs Coe Ltd to carry out work on Jin's property and, at the time of contracting, Coe Ltd knows that the property is to be transferred to Pat when the work is completed. Due to Coe Ltd's negligence, the work is defective and causes damage to the property. Which one of the following most accurately summarises the parties' legal position?

Substantial damages will not be recoverable, because of the legal 'black hole' problem.

Pat can claim substantial damages from Coe Ltd on the basis of a collateral contract.

Jin is likely to be able to recover substantial damages on behalf of Pat.

Pat can claim substantial damages from Coe Ltd via s. 1 of the Contracts (Rights of Third Parties) Act 1999.

Substantial damages will not be recoverable, because of the decision in Woodar Investment Development Ltd v Wimpey Construction (UK) Ltd [1980] 1 WLR 277.

. Alex Ltd says to Suham that, if Suham lets Alex Ltd carry out work on a property to be acquired by Suham from Beth in the near future, Alex Ltd guarantees that the work will be of satisfactory quality. Suham asks Beth to employ Alex Ltd to carry out the work and Beth does so. Due to Alex Ltd's negligence, the work is defective and causes damage to the property. Which one of the following most accurately summarises the parties' legal position?

Beth can recover substantial damages on behalf of Suham from Alex Ltd as the facts fall within the special category of cases in which one party contracts for the benefit of a group for reasons of convenience.

Beth is unlikely to recover substantial damages on behalf of Suham from Alex Ltd as Suham should have a claim in her own right.

Substantial damages will not be recoverable, because of the legal 'black hole' problem.

Suham can only recover substantial damages if she entered into a duty of care deed with Alex Ltd.

Substantial damages are recoverable on the so-called 'narrow ground' principle.

. Lou contacts Seb's company to hire a minibus to transport Lou and a group of other people to London. Due to the negligence of one of Seb's employees, the minibus breaks down in transit and Lou and other passengers have to pay a much higher fee to hire several taxis to complete the journey. Lou claims the difference between the total taxi fees and the hire from Seb. Which one of the following statements most accurately summarises the legal position between Lou and Seb?

Lou is entitled to the difference, because the difference is the loss actually suffered by Lou as a result of Seb's breach.

Lou is entitled to the difference, because Lou has contracted on behalf of other passengers and is entitled to recover damages for loss suffered by them.

Lou is not entitled to the difference, because it is not the loss actually suffered by Lou.

Lou is not entitled to the difference, because all that Seb is liable for is to refund the hire.

Lou is not entitled to the difference, because one can only recover damages for one's own loss.

. Which one of the following statements relating to the hypothetical applicability of the Contracts (Rights of Third Parties) Act 1999 to the facts of New Zealand Shipping Co Ltd v A M Satterthwaite & Co Ltd, The Eurymedon [1975] AC 154 is true?

The 1999 Act would have been applicable to The Eurymedon because the Himalaya clause expressly gave the stevedore the right to enforce the clause.

The 1999 Act would not have been applicable to The Eurymedon because the Himalaya clause did not purport to confer a benefit on the stevedore.

The 1999 Act would not have been applicable to The Eurymedon because the stevedore was not employed by the carriers at the time the contract was made.

The 1999 Act would not have been applicable to The Eurymedon because the stevedore did not provide any consideration for the Himalaya clause.

The 1999 Act would have been applicable to The Eurymedon because the Himalaya clause purported to confer a benefit on the stevedore and there was no indication in the contract that the parties did not intend the clause to be enforced by the stevedore.

. Lola employs Baskind Ltd to build a conservatory for her house. Col, a self-employed glass supplier, tells Lola that, if Baskind Ltd buys glass from him, he guarantees that his glass is of high quality and suitable for the conservatory. Lola instructs Baskind Ltd to buy glass from Col. Baskind Ltd then enters into a contract with Col for the purchase of glass, which does not mention Lola or her conservatory. The glass supplied by Col proves to be defective. Lola attempts to claim damages from Col. Which one of the following statements most accurately summarises the parties' legal position?

Lola is not entitled to claim damages from Col, because Lola is not a party to the contract for the sale of glass between Baskind Ltd and Col.

Lola is entitled to claim damages from Col, because the Contracts (Rights of Third Parties) Act 1999 applies.

Lola is entitled to claim damages from Col, through the principle of transferred loss.

Lola is entitled to claim damages from Col, because there is a separate contract between Lola and Col in respect of the quality of the glass supplied by Col.

Lola is only entitled to recover damages if she can show that the principle in Jackson v Horizon Holidays Ltd [1975] 1 WLR 1468 applies.

. Which one of the following statements in relation to the Contracts (Rights of Third Parties) Act 1999 is true?

In order to successfully enforce a contract according to the Act, a third party must show that it has provided consideration under the contract.

The Act preserves the promisee's right to enforce the promise but requires the promisee to pass any damages recovered from the promisor to the third party beneficiary.

Where a contract is specifically enforceable and the Act does not apply, a third-party beneficiary may compel the promisee to bring a claim for specific performance by starting proceedings and joining the promisee as co-defendant.

The third party can meet the requirement of s. 1(3) that it must be identified in the contract by name, as a member of a class or as answering a particular description by showing that the contract refers to the third party by implication.

The effect of the Act is that a third party might be able to claim damages for expectation loss.

. Zain Ltd has a contract to supply goods to Yip Ltd. Six months into the contract, Zain Ltd informed Yip Ltd that the majority of the goods would henceforth be supplied by Zain Ltd's sister company, Dinah Ltd. This was the first Yip Ltd knew of Dinah Ltd. Yip Ltd has now informed Zain Ltd that all future performance obligations are terminated because it claims the goods are not compliant with industry standards. Zain Ltd has brought a claim for loss of profits in respect of its own anticipated profits under the rest of the contract and those of Dinah Ltd. Which one of the following most accurately summarises the parties' legal position?

A claim for transferred loss will not succeed, because Yip Ltd did not know of the existence of the third party, Dinah Ltd, at the time the contract was formed.

A claim for transferred loss will succeed, because Zain Ltd can bring a claim on behalf of itself and Dinah Ltd as the contract falls in the category of one made on behalf of a group for reasons of convenience.

A claim for transferred loss will succeed, on the basis of the existence of a collateral contract.

A claim for transferred loss will not succeed, because the claim is for a loss of profit.

A claim for transferred loss will not succeed, because the contract is one of sale of goods.

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