Video 10.1

Video 10.1 transcript

This chapters to do with the parties to a contract, and in particular, whether or not third parties have some sorts of rights. And I think it's useful to deal with it here because privative contract is strongly linked with consideration. So, you can see this in the first slide. So, if there's a contract between A and B, and there's consideration between the parties A and B. then C is a stranger to the consideration, is a third party, does not provide any consideration. And so, shouldn't really be able to sue on the contract. That's the starting point at least of English law. And equally this third party, C, shouldn't be subject to any burdens as a result of the contract between A and B. So, I can't contract with you to impose a burden upon my wife, right? Clearly can't do that, but if me and you agree a contract and agree to confer a benefit on my wife, should she be able to then bring a claim based as if we don't provide that benefit? And the starting point, as I say is that because C, in this example, my wife, hasn't provided any consideration, she shouldn't get any rights, and if she wants rights she should provide consideration and enter into a contract. Now, clearly that can look very tough in some situations. And common criticism of this traditional approach is that it fails to give effect to the party's intentions. Which is a real criticism which you should be aware of, should keep thinking about. But I do want to flag now that some of the exceptions, or some of what is traditionally called exceptions to the privity rule are not really exceptions at all. So, for example, in the second slide, you can see that here there is consideration between A and C. And so here you have a collateral contract between A and C. There's one contract between A and B, which you might think of as the main contract, there’s a collateral contract then between A and C. But this is a real contract, even if it's a collateral contract, it's a real contract, and here C is bringing a claim in the law of contract on its own contract with A. And we've seen collateral contracts a bit already and will examine them in more detail in the next chapter. Another common example as you can see from this third slide is that C, the third party might have a claim in tort. And in some situations that might look like it's circumventing the privity rule, but again, C, this third party has to establish all the elements for a successful claim in tort. So, it's not really an exception to privity, it's just looking at the scope of tort law. And similarly, in this final slide, it's possible, but where B contracts with A, B will be holding the promise, or holding some sort of rights on trust for C. And if there is a trust for C, and C has vested proprietary interest, perhaps in the promise, and the way that trust law works is that C is a beneficiary under a trust, and C can sue the trustee, B, and force the trustee to sue A. So, in a way, C can sue A by going through this trust mechanism. But again, I don't think that's really an exception to the privity rule. So, you want to think about when and why C, who looks like a third party to the contract should be able to sue A. And also, critically assess whether or not they are really exceptions. But one true exception, I think, and by far the most important exception is the 1999 Act, which we'll look at later.