Topics: Contract, Contract law, Offer and acceptance Pages: 7 (2838 words) Published: May 9, 2013
Privity essay
Privity of Contract is the relation that exists between contracting parties . Privity of contract applies mainly to HYPERLINK "http /www .wordiq .com /definition /Contract_of_sale " \o "Contract of sale " contracts of sale of goods or services and is restricted to the parties to a contract . Thus , a third party is precluded from initiating legal action against the parties to the contract for entitlement in excess of its benefits as provided in the contract . Moreover , a third party cannot claim or sue for damages resulting from a contract to which it s not a party . This constitutes a hindrance , where the contract was made to the benefit of the third party . Collateral warranties support the viability of this rule The doctrine of privity emerged together with the doctrine of HYPERLINK "http /www .answers .com /main /ntquery ?method 4 dsid 2222 dekey Considerat ion curtab 2222_1 " \t "_top " consideration , which states that consideration must move from the promisee . That is if nothing is given for the promise of something to be given in return , that promise is not legally binding unless promised as a HYPERLINK "http /www .answers .com /main /ntquery ?method 4 dsid 2222 dekey Deed curta b 2222_1 " \t "_top " deed Hence , in Price v Easton , a contract was made for work to be done in exchange for payment to a third party . This third party 's legal action to obtain payment was dismissed as it was held to be not privy to the contract In Tweddle v Atkinson , 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 This was further developed in HYPERLINK "http /www .answers .com /main /ntquery ?method 4 dsid 2222 dekey Dunlop Pne umatic Tyre v Selfridge and Co Ltd curtab 2222_1 " \t "_top " Dunlop Pneumatic Tyre Co . Ltd v Selfridge Co . Ltd through the judgement of Lord Haldane "An act or forbearance of one party , or the promise thereof , is the price for which the promise of the other is bought , and the promise thus given for value is enforceable Strict adherence to the privity doctrine proves to be artificial and contrary to the parties ' intention leading to injustice and inconvenience . Sometimes , the doctrine does not apply , either because of supervening principles of law or because of specific statutory provisions , which allow a third party to enforce a right conferred on it by the contracting parties However , in Beswick v Beswick , a nephew bought his uncle 's coal business on the condition that he would support his aunt on his uncle 's death Since , the nephew refused to support his widowed aunt , she was permitted to sue as executor of her husband 's estate and obtain compensation In Vandepitte v Accident Insurance co , it was held that a party to a contract can act as a trustee for a third party in respect of a right under the contract and thus bestow such rights on to a third party . Subsequently , the trustee can commence steps to enforce performance as in the case of other equitable rights Under Common Law , a promisee can implement the promise . As such , a third party who is not a promisee is not privy to the contract . In Dunlop Tyre Co v Selfridge , the plaintiffs sold tyres to Dew Co , on the condition that Dew would ensure that the retailers would not sell the tyres at a lesser price than what the plaintiff 's would . However , the defendants sold them at a lower price than the list price of the plaintiffs . The plaintiffs then sought an injunction and damages . The court denied such action because the plaintiffs were not a third party to it and only a person who is a party to a contract can sue on it A collateral contract , with the same subject matter , may exist between one of the parties to a contract and a third party . The doctrine of Privity can result in injustice and inconvenience if applied strictly...
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