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Third-party rights[ edit ] Privity of contract occurs only between the parties to the contract, most commonly contract of sale of goods or services. Horizontal privity arises when the benefits from a contract are to be given to a third party.
Vertical privity involves a contract between two parties, with an independent contract between one of the parties and another individual or company. If a third party gets a benefit under a contract, it does not have the right to go against the parties to the contract beyond its entitlement to a benefit.
An example of this occurs when a manufacturer sells a product to a distributor and the distributor sells the product to a retailer. The retailer then sells the product to a consumer. There is no privity of contract between the manufacturer and the consumer.
This, however, does not mean that the parties do not have another form of action: Donoghue bought her a bottle of ginger beer, which contained the partially decomposed remains of a snail. Since the contract was between her friend and the shop owner, Mrs.
Donoghue could not sue under the contract, but it was established that the manufacturer was in breach of a duty of care owed to her. Accordingly, she was awarded damages in the tort of negligence for having suffered gastroenteritis and "nervous shock".
History[ edit ] Prior to there existed decisions in English Law allowing provisions of a contract to be enforced by persons not party to it, usually relatives of a promisee, and decisions disallowing third party rights.
That is to say that if nothing is given for the promise of something to be given in return, that promise is not legally binding unless promised as a deed.
Eastonwhere a contract was made for work to be done in exchange for payment to a third party. When the third party attempted to sue for the payment, he was held to be not privity to the contract, and so his claim failed. This was fully linked to the doctrine of consideration, and established as such, with the more famous case of Tweddle v.
In this case the plaintiff was unable to sue the executor of his father-in-law, who had promised to the plaintiff's father to make payment to the plaintiff, because he had not provided any consideration to the contract. The doctrine was developed further in Dunlop Pneumatic Tyre v.
Privity of Contract played a key role in the development of negligence as well. In the first case of Winterbottom v. Wrightin which Winterbottom, a postal service wagon driver, was injured due to a faulty wheel, attempted to sue the manufacturer Wright for his injuries.
The courts however decided that there was no privity of contract between manufacturer and consumer. This issue appeared repeatedly until MacPherson v. Judge Cardozowriting for the New York Court of Appealsdecided that no privity is required when the manufacturer knows the product is probably dangerous if defective, third parties e.
Foreseeable injuries occurred from foreseeable uses. Cardozo's innovation was to decide that the basis for the claim was that it was a tort not a breach of contract. In this way he finessed the problems caused by the doctrine of privity in a modern industrial society.
Although his opinion was only law in New York State, the solution he advanced was widely accepted elsewhere and formed the basis of the doctrine of product liability.
Exceptions[ edit ] Common law exceptions[ edit ] There are exceptions to the general rule, allowing rights to third parties and some impositions of obligations. Collateral Contracts between the third party and one of the contracting parties Trusts the beneficiary of a trust may sue the trustee to carry out the contract Land Law restrictive covenants on land are imposed upon subsequent purchasers if the covenant benefits neighbouring land Agency and the assignment of contractual rights are permitted.
Third-party insurance - A third party may claim under an insurance policy made for their benefit, even though that party did not pay the premiums. Contracts for the benefit of a group where a contract to supply a service is made in one person's name but is intended to sue at common law if the contract is breached; there is no privity of contract between them and the supplier of the service.
Attempts have been made to evade the doctrine by implying trusts with varying successconstructing the Law of Property Act s. Statutory exceptions[ edit ] In the United Kingdom, the Contracts Rights of Third Parties Act provided some reform for this area of law which has been criticised by judges such as Lord Denning and academics as unfair in places.
This means that a person who is named in the contract as a person authorised to enforce the contract or a person receiving a benefit from the contract may enforce the contract unless it appears that the parties intended that he may not. The Act enables the aim of the parties to be fully adhered to.
In Beswick v Beswickthe agreement was that Peter Beswick assign his business to his nephew in consideration of the nephew employing him for the rest of his life and then paying a weekly annuity to Mrs. Since the latter term was for the benefit of someone not party to the contract, the nephew did not believe it was enforceable and so did not perform it, making only one payment of the agreed weekly amount.
Yet the only reason why Mr. Beswick contracted with his nephew was for the benefit of Mrs. Under the Act, Mrs.The doctrine of privity means that a contract cannot confer rights or impose obligations arising under it on any person except the parties to it.
This Revised Act is an administrative consolidation of the Land and Conveyancing Law Reform Act It is prepared by the Law Reform Commission in accordance with its function under the Law Reform Commission Act (3/) to keep the law under review and to undertake revision and consolidation of statute law..
All Acts up to and including Criminal Justice (Spent Convictions and . WARRANTIES IN MARINE INSURANCE Prepared by Christopher J. Giaschi Presented to the Association of Marine Underwriters of British Columbia at Vancouver on April 10, Bouvier's Law Dictionary Edition.
P. PACE.A measure of length containing two feet and a half; the geometrical pace is five feet long. The common pace is the length of a step; the geometrical is the length of two steps, or the whole space passed over by the same foot from one step to another.
The doctrine of privity of contract is a common law principle which provides that a contract cannot confer rights or impose obligations upon any person who is not a party to the contract..
The premise is that only parties to contracts should be able to sue to enforce their rights or claim damages as such. However, the doctrine has proven problematic because of its implications upon contracts.
Director of Public Prosecutions, Western Cape v Parker (/14)  ZASCA (12 December ) Criminal law – failure to pay value-added tax in terms of Value-Added Tax Act 89 of – charged with common law theft – whether relationship between registered vendor and South African Revenue Service is a trustee relationship.