Self-test questions

. 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 he is not a party but he may enforce the contract if the contract is expressly made for his benefit.

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

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

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

. Which of the following statements relating to the test of enforceability in s. 1 of the Contracts (Rights of Third Parties) Act 1999 are true? [Please select all that apply.]

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 must 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.

. According to s. 2(1) of the Contracts (Rights of Third Parties) Act 1999, in which of the following circumstances may the contracting parties lose their rights to vary or cancel a contract term granting a third party rights without that third party's consent? [Please select all that apply.]

The third party has actual knowledge of the existence of the contract and the term.

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, or ought reasonably to know, this.

. 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.

. The general rule is that the promisee is not entitled to substantial damages if it suffers no loss from the breach, but this general rule is subject to exceptions. In which of the following circumstances is the promisee (B) unlikely to recover substantial damages on behalf of a third party (C) from the promisor (A)? [Please select all that apply.]

B employs A to carry out work on B's property and, at the time of contracting, A knows that the property is to be transferred to C when the work is completed. Due to A's negligence, the work is defective and causes damage to the property.

A says to C that, if C lets A carry out work on a property to be acquired by C from B in the near future, A guarantees that the work will be of satisfactory quality. C asks B to employ A to carry out the work and B does so. Due to A's negligence, the work is defective and causes damage to the property.

B employs A to carry out work on C's property and, at the time of contracting, A knows that the property belongs to C and that B will shortly assign his rights under the contract to C. B does so. Due to A's negligence, the work is defective and causes damage to the property.

B employs A to carry out work on B's property and, at the time of contracting, A does not know that the property is to be transferred to C when the work is completed. Due to A's negligence, the work is defective and causes damage to the property.

. Where a contract is specifically enforceable and the Contracts (Rights of Third Parties) Act 1999 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 codefendant.

True

False

. 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 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.

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.

. A employs B Ltd to build a conservatory for her house. C, a self-employed glass supplier, indicates to A that, if B buys glass from him, he guarantees that his glass is of high quality and suitable for the conservatory. A instructs B to buy glass from C. B then enters into a contract with C for the purchase of glass, which does not mention A or her conservatory. The glass supplied by C proves to be defective. A attempts to claim damages from C. Which of the following statements are likely to be true? [Please select all that apply.]

A is not entitled to claim damages from C, because A is not a party to the contract for the sale of glass between B and C.

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

A is entitled to claim damages from C, because C owes a duty of care to A by making the indication that is relied upon by A.

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

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

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

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

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

A is not entitled to the difference, because all that B is liable for is to refund the hire.

. In to order successfully enforce a contract according to the Contracts (Rights of Third Parties) Act 1999, a third party must show that it has provided consideration under the contract.

True

False

. Where a third party to a contract attempts to enforce an exemption clause under the contract in accordance with the Contracts (Rights of Third Parties) Act 1999, the Unfair Contract Terms Act 1977 will then apply.

True

False

. The Contracts (Rights of Third Parties) Act 1999 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.

True

False

. Where a promise is made for the benefit of a third party and the promisee expressly declares itself to be a trustee, on behalf of the third party, of a right to enforce the promise, the third party may enforce the promise against the promisor in its own right.

True

False

. A bailor will be bound by the terms of a sub-bailment entered into by the bailee, provided the bailor has expressly or impliedly consented to those terms.

True

False

. The Contracts (Rights of Third Parties) Act 1999 abolishes the common law doctrine of privity of contract.

True

False

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