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Strangers to Justice No Longer: The Reversal of the Privity Rule Under the Contracts (Rights of Third Parties) Act 1999

Published online by Cambridge University Press:  25 July 2001

Neil Andrews*
Affiliation:
Fellow of Clare College, Cambridge
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Abstract

The Contracts (Rights of Third Parties) Act 1999 allows third parties to sue for breach of contract even though they are not parties to the contract. The Act also allows third parties to take the benefit of other types of promise, notably the benefit of exclusion clauses. This article explains the common law background to this important legal development and the Law Commission’s preparation for this legislation (L.Com. No. 242). But the main discussion is devoted to the Act’s effects. In particular, the author examines in detail the test for ascribing to a third party a right under the 1999 Act and the rules determining when the third party’s rights cease to be revocable by the main contracting parties.

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Copyright © Cambridge Law Journal and Contributors 2001

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References

1 The Act substantially implements “Privity of Contract: Contracts for the Benefit of Third Parties”, L. Com. No. 242, (Cm. 3329, 1996), which considered its consultation paper, (same title) L. Com. C.P. No. 121 (1991); for a summary of the Act, see Explanatory Notes on the Contracts (Rights of Third Parties) Act 1999 (1999) (issued by the Lord Chancellor's Department); for Hansard references to the Bill's progress in Parliament, see Explanatory Notes, ibid., p. 10.

The main sources of comment on the Act (in final form) are: A. Burrows, “The Contracts (Rights of Third Parties) Act 1999 and its Implications for Commercial Contracts” [2000] L. M.C.L.Q. 540; Merkin, R. (ed.), Privity of Contract (London 2000)Google Scholar, esp. ch. 5 (by R. Merkin) (hereafter “Merkin”); Treitel in (1) Chitty on Contracts, 28th edn. (London 1999), paras. 19.075ff.; (2) The Law of Contract, 10th edn. (London 1999) pp. 600-614; (3) Birks, Peter (ed.), English Private Law (Oxford 2000)Google Scholar paras. 8.300-8.308; Catherine MacMillan, “A Birthday Present for Lord Denning: The Contracts (Rights of Third Parties) Act 1999” (2000) 63 M. L.R. 721.

For comment on the proposals for legislation see: J.N. Adams, D. Beyleveld and R. Brownsword, “Privity of Contract—the Benefits and Basis of Law Reform” (1997) 60 M.L.R. 238; H. Beale, “Privity of Contract: Judicial and Legislative Reforms” (1995) 9 J.C.L. 103; J. Beatson, “Reforming Privity of Contract” (1992B) 45 C.L.P. 1; (on the relationship between the 1999 Act and the common law) J. Beatson, “The Role of Statute in the Development of Common Law Doctrine” (2001) 117 L.Q.R. 247, 265-269; A. Burrows, “Reforming Privity of Contract” [1996] L.M.C.L.Q. 467; A.M. Tettenborn, “Third Party Contract—Pragmatism from the Law Commission” [1996] J.B.L. 602. Beatson and Burrows are former Law Commissioners, responsible respectively for the consultation paper and report, cited above.

On the Act's implications for general contractual theory see: P. Kincaid, “The UK Law Commission's Privity Proposals and Contract Theory” (1994) 8 J.C.L. 51, “Privity and Private Justice in Contract” (1997) 12 J.C.L. 47 and “Privity Reform in England” (2000) 116 L.Q.R. 43; Catherine Mitchell, “Privity Reform and the Nature of Contractual Obligations” (1999) 19 L.S. 229.

2 The decisive case was Tweddle v. Atkinson (1861) 1 B. & S. 393. Calls for its reversal included: the Law Revision Committee's Sixth Interim report: Statute of Frauds and the Doctrine of Consideration (1937) Cmd. 5449, paras. 41-48 (on that report's non-implementation, Beatson, op. cit. n. 1 above at pp. 10-15); Beswick v. Beswick [1968] A.C. 58, 72, H.L., per Lord Reid; Woodar Investment Development Ltd. v. Wimpey Construction UK Ltd. [1980] 1 W.L.R. 277, 300, H.L., per Lord Scarman.

On the “third party debate” before 1861, see Palmer, V.V., The Paths to Privity: The History of Third Party Beneficiary Contracts at English Law (San Francisco 1992)Google Scholar, reviewed N.H. Andrews (1995) 69 Tulane L. Rev. 1393; Merkin, op. cit. pp. 2-15. On the common law rule, see: Merkin, op. cit. n. 1 above, chs. 1-4.

3 [1962] A.C. 446, H.L.; for details, Chitty on Contracts, 28th edn. (London 1999) paras. 14.039— 14.056.

4 E.g., Treitel, The Law of Contract (10th edn. 1999), p. 545; N.H. Andrews “The Paths to Privity …” (1995) 69 Tulane L. Rev. 1393, 1394.

5 Admittedly, some dissentients oppose third party rights: e.g. Kincaid op. cit. n. 1 above; and S.A. Smith, “Contract for the Benefit of Third Parties: in Defence of the Third Party Rule” (1997) 17 O.J.L.S. 643.

6 [1915] A.C. 847, 853, H.L., saying that at common law (a) only a party can sue on a contract (the present proposition) and (b) only someone who has furnished consideration can sue on a contract, unless it is a deed.

7 (1861) 1 B. & S. 393.

8 S. 2(3)(a).

9 L. Com. C.P. No. 121 (1991).

10 L. Com. No. 242, para. 1.7. Earlier, seven arguments against change had been constructed and then countered in L. Com. C.P. No. 121 (1991) paras. 4.3-4.7.

11 L. Com. No. 242, Part III; Burrows, “Reforming Privity of Contract” [1996] L.M.C.L.Q. 467, 468-471, enumerated nine defects of the common law and consequent reasons for reform: (1) the intentions of the original contracting parties are thwarted; (2) injustice to the third party; (3) the person who has suffered the loss cannot sue, while the person who has suffered no loss can sue; (4) the promisee may not be able, or wish, to sue; (5) the development of non-comprehensive exceptions; (6) complexity, artificiality and uncertainty; (7) widespread criticism throughout the common law world; (8) the legal systems of most Members of the European Union allow third parties to enforce contracts; (9) the privity rule causes difficulties in commercial life.

12 Swain v. Law Society [1983] 1 A.C. 598, 611, H.L.

13 L. Com. No. 242, paras. 5.1ff.

14 Ibid., paras. 5.5-5.6. For details, see Ontario Law Reform Committee, Report on Amendment of the Law of Contracts (Toronto 1987) pp. 6871Google Scholar. The Supreme Court of Canada's decision in London Drugs Ltd. v. Kuehne & Nagel [1992] 3 S.C.R. 299, 97 D.L.R. (4th) 261, has enabled the Canadian courts to make pragmatic inroads on the privity doctrine without the need for general enabling legislation. As Stephen Waddams noted, “It is now open to any court to establish a new exception whenever justice and commercial convenience require …” (1993) 109 L.Q.R. 349, 351.

15 For details, see section X(A) below. Cf. Dawson J.'s contention that judicial reform of the privity doctrine cannot properly proceed selectively by reference to particular types of contract, but must be quite general: Trident General Insurance Co. Ltd. v. McNiece Bros. Pty. Ltd. (1988) 62 A.L.J.R. 517, 532 (High Ct. of Aust.).

16 J. Beatson, “Reforming Privity of Contract” (1992) 45 C.L.P. 1, 18, noting especially the comments of Brennan, Deane and Dawson JJ. in the Trident case, (1988) 62 A.L.J.R. 517, 520-522, 528, 531-532 (High Ct. of Aust.).

17 Ibid. pp. 21-22.

18 For the further question whether C's rights become irrevocable, see section VI of text below.

19 S. 1(1)(a). Such a statement, ineffective at common law, was made between the contracting parties in Tweddle v. Atkinson (1861) 1 B. & S. 393.

20 S. 1(1)(b),(2).

21 On the latter, s. 1(6).

22 S. 7(4).

23 S. 1(3).

24 Known to the Roman jurists as postumi: Thomas, J.A.C., Textbook of Roman Law (Amsterdam 1976), p. 494Google Scholar.

25 On the question whether the Act overrides the general law relating to capacity, e.g. minors’ contracts, Merkin, op. cit. n. 1, para. 5.21.

26 L. Com. No. 242, paras. 7.5, 7.12-7.16; for the management company example, A. Burrows, “Reforming Privity of Contract” [1996] L.M.C.L.Q. 467, 472.

27 The principles of construction of written contracts established in Investors Compensation Scheme Ltd. v. West Bromwich Building Society [1998] 1 W.L.R. 896, H.L. will apply, notably reference to the contract's “factual matrix”: Merkin, op. cit. n. 1 above, para. 5.29.

28 The Law of Contract, 10th edn. (London 1999), p. 602.

29 A. Burrows, “Reforming Privity of Contract” [1996] L.M.C.L.Q. 467, 473.

30 L. Com. No. 242, para. 7.18 (iii). For doubts, Catherine MacMillan, “A Birthday Present for Lord Denning: The Contracts (Rights of Third Parties) Act 1999” (2000) 63 M.L.R. 721, 725 (contending that the Law Commission's discussion of chain contracts in the building industry is unpersuasive); similarly Tettenborn in Merkin, op. cit. n. 1 above, paras. 7.48-7.51.

31 Tettenborn discusses the fuzzy edge of s. l(l)(b) in Merkin, op. cit. n. 1 above, paras. 7.38— 7.43.

32 [1995] 2 A.C. 27, H.L., Lords Keith and Mustill dissenting. For an extension of the White v. Jones ruling to negligence by financial advisors, causing economic disappointment to dependants of a pension-holder or life assured, see Gorham v. British Telecommunications pic [2000] 4 All E.R. 867, 877, 878, 881, C.A (on the facts, per Pill and Schiemann L.JJ., causation not satisfied, therefore no liability; Sir Murray Stuart-Smith dissenting on this point).

33 L. Com. No. 242, paras. 7.19 ff.; A. Burrows, “Reforming Privity of Contract” [1996] L.M.C.L.Q. 467, 473-474, quoting analysis by Kit Barker, “Are We Up to Expectations?” (1994) 14 O.J.L.S. 137, 140.

34 [1968] A.C. 58, H.L.

35 L. Com. No. 242, para. 11.7.

36 S. 7(4).

37 L. Com. No. 242, para. 14.6 (stating that there was no need for the Act itself to declare or facilitate this).

38 Treitel in Birks, Peter (ed.), English Private Law (Oxford 2000)Google Scholar, para. 8.04, crisply explains the expectation interest.

39 L. Com. No. 242, para. 9.33.

40 S. 1(5); “other relief” will include debt claims, declarations, stays of proceedings and injunctions.

41 L. Com. No. 242, para. 3.33(iii).

42 Notwithstanding s. 3(6), which provides that the third party cannot acquire rights under s. 1 “if he could not have done so (whether by reason of any particular circumstances relating to him or otherwise) had he been a party to the contract.”

43 L. Com. No. 242, para. 3.33(iii).

44 The wording is from s. 1(5); L. Com. No. 242, para. 3.33(h).

45 S. 7(3), referring to Limitation Act 1980, ss. 5, 8. In Aiken v. Stewart Wrightson Members’ Agency Ltd. [1995] 3 All E.R. 449, 458-461, Potter J. (affmd. [1996] 2 Lloyd's Rep. 17, C.A.), held that the twelve year rule covers all actions for breach of contract founded on a deed, considering R v. Williams [1942] A.C. 541, P.C; other recent case law concerning s. 8 includes Rahman v. Sterling Credit Ltd. [2001] 1 W.L.R. 496, 500-502, C.A.; Securum Finance Ltd. v. Ashton [2000] 3 W.L.R. 1400, 1405, C.A.

46 Merkin, R. (ed.), Privity of Contract (London 2000)Google Scholar (hereafter “Merkin”), paras. 5.75-5.93.

47 S. 2(1),(2).

48 Treitel, , The Law of Contract, 10th edn. (London 1999), p. 605Google Scholar suggests that the variation might be to C's advantage; until C has accepted or relied, A and B could retreat from the variation.

49 L. Com. No. 242, para. 9.46. Burrows has now contradicted the Law Commission's earlier view: “The Contracts (Rights of Third Parties) Act 1999 and its Implications for Commercial Contracts” [2000] L.M.C.L.Q. 540, 547 n. 22, pointing to the wide language of s. 2(3)(b).

50 Merkin, op. cit. n. 46 above, para. 5.86.

51 Chitty on Contracts, 28th edn. (London 1999), paras. 19.065-19.074; further on trusts of promises, see section XI.B below.

52 S. 7(1).

53 H.L. Deb. vol. 601, col. 1055, 27 May, 1999 (Amendment 7A, cited Merkin, op. cit. n. 46 above, p. 491).

54 As emphasised by Lord Wilberforce in Photo Production Ltd. v. Securicor Transport Ltd. [1980] A.C. 827, 844, H.L. and Johnson v. Agnew [1980] A.C. 367, 392-393, H.L. In the latter case he said of an innocent party's election to terminate a contract for breach: although [the innocent party to a contract] is sometimes referred to … as ‘rescinding’ the contract, this so-called ‘rescission’ is quite different from rescission ab initio, such as may arise for example in cases of mistake, fraud or lack of consent. In those cases, the contract is treated as never coming into existence … In the case of an accepted repudiatory breach the contract has come into existence but has been put an end to or discharged.” Cf. Treitel, , The Law of Contract, 10th edn. (London 1999), pp. 703704Google Scholar, who adheres to the rescission terminology in the context of breach, supplying reasons. With respect, this is unhelpful and against the linguistic tide. On the historical subtleties of “rescission”, both in Lord Wilberforce's sense and in Treitel's sense, see Janet O’Sullivan, “Rescission as a Self-Help Remedy” [2000] C.L.J. 509, esp. 525ff.

55 For a recent example of the latter concept, B.C.C.I. International S.A. (in liquidation) v. Ali [2000] 3 All E.R. 51, C.A., at paras. 25, 33, 80-81. The decision was upheld on a different ground in [2001] 2 W.L.R. 735, H.L., and the question of “unconscionability” was not examined: paras. 20, 33, per Lord Bingham and Lord Nicholls.

56 On releases generally, see the next note; see also Chitty on Contracts, 28th edn. (London 1999), paras. 23.003-23.011.

57 B.C.C.I. International S.A. (in liquidation) v. Ali [2000] 3 All E.R. 51, C.A., per Scott V.-C. at paras. 9, 10 (further appeal was not directed at this dictum: [2001] 2 W.L.R. 735, H.L.).

58 Chitty para. 23.006.

59 The Law of Contract, 10th edn. (London 1999), p. 606.

60 S. 2(3)(a); for discussion, see sub-section E below.

61 S. 2(2)(a), referring to s. 2(1)(a).

62 S. 2(2)(b); L. Com. No. 242, para. 9.21.

63 S. 2(3)(b); L. Com. No. 242, para. 9.41.

64 S. 2(3)(b), referring to s. 2(1)(a) to (c).

65 S. 2(1),(2).

66 Merkin, op. cit. n. 46 above, 5.82-5.84 discusses some difficulties.

67 L. Com. No. 242, para. 9.19; Tettenborn in Merkin, op. cit. n. 46 above, para. 7.68.

68 Ibid. para. 9.19. C declares to his friends, “terrific, I’m a third party beneficiary”, but makes no attempt to communicate “assent” to A. A and B later purport to vary or rescind the contract. Has C relied? It seems he might have: L. Com. No. 242, paras. 9.21, 9.31, does not rule out this possibility. General principles of estoppel might suggest otherwise: e.g., per Goff J., The Post Chaser [1982] 1 All E.R. 19, 27: “But it does not follow that in every case in which the representee has acted, or failed to act, in reliance on the representation, it will be inequitable for the representor to enforce his rights, for the nature of the [representee’s] action, or inaction, may be insufficient to give rise to the equity [justifying relief].”

For a rich source of material concerning reliance under general law, see Wilken, S. and Villiers, T., Waiver, Variation and Estoppel (Chichester 1998)Google Scholar.

69 S. 2(1)(b); on which, see Merkin, op. cit. n. 46 above, para. 5.82. It is curious and arguably indefensible (although consistent with s. 2(l)(a)) that what matters is the promisor's awareness of the third party's reliance and that the promisee's awareness counts for nought.

70 L. Com. No. 242, para. 9.28.

71 Ibid., para. 9.34.

72 Similar difficulties have arisen at common law when applying “Himalaya” clauses: see, e.g., Salmond and Spraggon (Australia) Pty. Ltd. v. Port Jackson Stevedoring Pty. Ltd. (“The New York Star”) [1981] 1 W.L.R. 138, P.C., on which see Treitel, G.H., The Law of Contract, 10th edn. (London 1999), p. 583Google Scholar.

73 [1995] 1 All E.R. 545; Virgo, G., Principles of the Law of Restitution (Oxford 1999), pp. 717720Google Scholar, criticising this decision, and Burrows, A.S., The Law of Restitution (London 1993), pp. 424425Google Scholar (Burrows had anticipatorily supported Clarke J.'s decision); but Burrows has changed his own position, criticising the denial of change of position in respect of pre-transaction “reliance” as “excessively technical and unwarranted”, “Swaps and the Friction between Common Law and Equity” [1995] R.L.R. 15, 21; similarly, Burrows, A. and McKendrick, E., Cases and Materials on the Law of Restitution (Oxford 1997), p. 802Google Scholar. Additionally, s. 2(1) of the Act (“… where a third party has a right under section 1 to enforce a term of the contract …”) suggests that reliance (or assent) by C must be subsequent to the contract's formation.

74 S. 2(3)(a); Chilly on Contracts, 28th edn. (London 1999), para. 19.089 suggests it will be prudent to stipulate that such a variation or rescission will be effective even if C has relied or assented.

75 L. Com. No. 242, para. 9.39 on this point.

76 S. 2(4)(5).

77 The last case is added at s. 2(5).

78 S. 2(6).

79 The Law of Contract, 10th edn. (London 1999), p. 607.

80 A. Burrows, “Reforming Privity of Contract” [1996] L.M.C.L.Q. 467, 477-478, succinctly explains these various provisions; Merkin, op. cit. n. 46 above, paras. 5.94-5.108; Explanatory Notes on the Contracts (Rights of Third Parties) Act 1999 (HMSO, 1999), paras. 15-20 (issued by the Lord Chancellor's Department).

81 S. 3(1)(2); the phrase “proceedings for the enforcement of a term of a contract are brought by a third party” is inapt to include the situation where C is seeking to raise an exclusion clause against A; but s. 3(6) specifically enables A to object to C enjoying the benefit of an exclusion clause, including the fact that A and B's contract is inoperative or vitiated.

82 L. Com. No. 242, paras. 10.8-10.12, rejecting the tentative opinion at L. Com. C.P. No. 121 (1991), para. 5.24 (the consultation paper had flirted with the analogy of an assignee who steps into the assignor's shoes and so takes subject to all “equities” in favour of the promisor); Merkin, op. cit. n. 46 above, paras. 5.94, 5.97.

83 S. 3(3).

84 S. 3(4), which is also subject to s. 3(5); the counterclaim possibility is a peculiarity of this provision: L. Com. No. 242, para. 10.18 for the justification.

85 Merkin, R. (ed.), Privily of Contract (London 2000)Google Scholar, para. 5.103.

86 S. 1(4).

87 S. 3(6).

88 On the penalty jurisdiction, see Chilly on Contracts, 28th edn. (London 1999), paras. 27.102ff.

89 S. 3(6) (just examined) and s. 3(4) thus overlap (the latter providing that A has such defences against C as A would enjoy if C were a party to the contract).

90 S. 7(4) (a model of delphic succinctness). See generally on this feature of the Act: Merkin, op. cit. n. 85 above, paras. 5.104-5.106; Catherine MacMillan, “A Birthday Present for Lord Denning: The Contracts (Rights of Third Parties) Act 1999” (2000) 63 M.L.R. 721, 731-732.

91 The Unfair Contract Terms Act 1977, s. 2(1), combined with s. 3(6) of the 1999 Act: here s. 7(4) of the 1999 Act does not bar C's resort to s. 2(1) of the 1977 Act because the latter provision does not require the person subject to the exclusion clause to be a party to the relevant contract. For background, L. Com. No. 242, para. 10.22; Explanatory Notes on the Contracts (Rights of Third Parties) Act 1999 (HMSO, 1999), para. 31 (issued by the Lord Chancellor's Department). Cf. s. 7(2) of the 1999 Act prevents C from invoking s. 2(2) of the Unfair Contract Terms Act 1977 (which invalidates unreasonable clauses which exclude or restrict A's liability for other types of loss consequent upon A's breach of duty).

92 Lord Borrie, H.L. Deb. vol. 596, cols. 26, 32, 11 January 1999; ibid. col. 1432, 2 February 1999, (cited Merkin, op. cit. n. 85 above, at p. 131 n. 127).

93 Merkin ibid., paras. 5.64-5.73.

94 S. 5; Treitel, , The Law of Contract, 10th edn. (London 1999), p. 613Google Scholar, notes that this provision catches only “the sum recovered” by B; the provision is inapplicable if B has obtained a nonmonetary order, e.g. specific performance of a positive obligation to do (rather than pay), or an injunction, or a declaration, or a stay or dismissal of proceedings.

95 “Nor will there be a problem if the third party first recovered damages because then the promisee would be left with no corresponding loss outstanding”: L. Com. No. 242, para. 11.16.

96 Northern Ireland: subject to slight modification, s. 9.

97 McBryde, W., The Law of Contract in Scotland (Edinburgh, 1987)Google Scholar, ch. 18.

98 Treitel, 10th edn. (London 1999) p. 609 and Merkin, op. cit. n. 85 above, para. 5.109, for the background to these exceptions.

99 S. 6(1); on the reasons for this exclusion from the Act's scope, L. Com. No. 242, para. 12.16.

100 S. 6(2); on which, see L. Com. No. 242, para. 2.61.

101 S. 6(3)(4); these expressions are derived from ss. 34(1), 35(2), 54 of the National Minimum Wage Act 1998.

102 S. 6(5)(a)(6)(7); L. Com. No. 242, paras. 12.7ff., noting that the Carriage of Goods by Sea Act 1992 already deals with third party rights in this context; see G.H. Treitel, “The Contracts (Rights of Third Parties) Act 1999 and the Law of Carriage of Goods by Sea”, chap. 17 of Rose, F.D. (ed.), Lex Mercatoria: Essays on International Commercial Law in Honour of Francis Reynolds (London 2000)Google Scholar.

103 S. 6(5)(b),(8); L. Com. No. 242, paras. 12.12ff., noting that the 1999 Act might otherwise undermine the scheme of entitlements and restrictions contained in these conventions.

104 S. 6(5)(6)(7)(8).

105 L. Com. No. 242, para. 7.18(iii).

106 Merkin, op. cit. n. 85 above, paras. 5.115-5.121; Catherine Macmillan, “A Birthday Present for Lord Denning: The Contracts (Rights of Third Parties) Act 1999” (2000) 63 M.L.R. 721, 732-733.

107 Merkin, ibid, paras. 14.14ff.

108 Ibid. para. 5.120.

109 H.L. Deb. vol. 606, cols. 1363-1364, 10 November 1999.

110 (HMSO, 1999), paras. 33-35 (issued by the Lord Chancellor's Department).

111 S. 8(1) (provided the arbitration clause is an agreement in writing for the purpose of Part 1 of the Arbitration Act 1996).

112 Merkin, op. cit. n. 85 above, para. 5.118.

113 L. Com. No. 242, paras. 10.24ff.

114 S. 8(2); on this aspect, see “Explanatory Notes op. cit. n. 109 above, para. 35.

115 Merkin, op. cit. n. 85 above, paras. 5.123-5.125; A. Burrows, “The Contracts (Rights of Third Parties) Act 1999 and its Implications for Commercial Contracts” [2000] L.M.C.L.Q. 540, 552 n. 28; on jurisdiction clauses generally, E. Peel, “Exclusive Jurisdiction Agreements: Purity and Pragmatism in the Conflict of Laws” [1998] L.M.C.L.Q. 182.

116 L. Com. No. 242, paras. 14.18-14.19.

117 For explicit reference to arbitration clauses, s. 8.

118 Explanatory Noles on the Contracts (Rights of Third Parties) Act 1999 (HMSO, 1999), para. 32 (issued by the Lord Chancellor's Department).

119 Merkin, op. cit. n. 85, paras. 5.107, 5.123-5.125.

120 S. 1(6).

121 S. 6(5) linking with s. 1(6).

122 Merkin, op. cit. n. 85 above, para. 5.47, and suggesting that the facts of The Mahkutai [1996] A.C. 650, P.C. (discussed in text below) would be unaffected by the Act because the contract concerned international carriage of goods. Chitty on Contracts, 28th edn. (London 1999), para. 19.077 n. 71, shares this view. With respect, the Law Commission's discussion of this point (L. Com. No. 242, para. 14.19) has been superseded by amendment of its draft bill.

123 S. 13(1) Unfair Contract Terms Act 1977, including within the scope of exemption clauses a clause: “(b) excluding or restricting any right or remedy in respect of the liability …; (c) excluding or restricting rules of evidence or procedure” S. 13(2) of the 1977 Act states that an arbitration clause is not an exemption clause. The 1977 Act does not refer to exclusive jurisdiction clauses. Quaere, therefore, whether they are, by implication, embraced by s. 13(1)?

124 [1996] A.C. 650, P.C.; L. Com. No. 242, para. 2.33 summarises this reasoning and does not disagree with it.

125 The analogy is s. 8(2) conferring the “pure” benefit of an arbitration clause on C, as explained in the text at n. 114 above.

126 S. 4 states: “Section 1 does not affect any right of the promisee to enforce any term of the contract.”

127 L. Com. No. 242, para. 5.15. Note that the promisee's remedies are not, however, confined to damages, but include claims for debt, specific performance, injunctions, declarations.

128 Commencement: 11 May, 2000, unless the parties expressly took advantage of the Act's “lead-in” or transitional period (11 November, 1999 onwards): s. 10(2)(3). On express exclusion of the Act, see section X.B above.

129 The leading cases are: Beswick v. Beswick [1968] A.C. 58, H.L. (B's estate obtaining specific performance of annuity for benefit of C), Woodar Investment Development Ltd. v. Wimpey Construction Co. Ltd. [1980] 1 W.L.R. 277, H.L. (dicta restating general rule that B cannot obtain damages in name of C). The latter rule was qualified by Linden Gardens Trust Ltd. v. Lenesta Sludge Disposals Ltd. [1994] 1 A.C. 85, H.L., and by Darlington B.C. v. Wiltshier Northern Ltd. [1995] 1 W.L.R. 68, C.A. See also the next sentence on Panatown case. On these developments, see Chitty on Contracts, 28th edn. (London 1999), paras. 19.042-19.058.

130 Panatown Ltd. v. Alfred McAlpine Construction Ltd. [2000] 3 W.L.R. 946, H.L.; discussed, Brian Coote, “The Performance Interest, Panatown and the Problem of Loss” (2001) 117 L.Q.R. 81.

131 Panatown case, per Lords Clyde, Jauncey and Browne-Wilkinson (Lords Goff and Millett dissented), reversing (1998) Building L. Rep. 67, C.A.

132 Per Lords Goff and Millett, and less enthusiastically Lord Browne-Wilkinson (all three following Lord Griffiths’ minority and tentative approach in Linden Gardens Trust Ltd. v. Lenesta Sludge Disposals Ltd. [1994] 1 A.C. 85, 96-97, H.L.). Lords Clyde and Jauncey in the Panatown case dissented (attractively) on this point and preferred to base B's damages on a “narrow ground”, namely the proposition, adopted by the majority in the Linden case, that B can recover substantial damages when it is foreseeable that B might transfer property (real or movable) to C or it is otherwise foreseeable or manifest that A will have breached his contract without effective liability unless B can recover substantial damages on C's behalf.

133 S. 7(1).

134 For all these points, see Chitty on Contracts, 28th edn. (London 1999), paras. 19.065-19.074.

135 The Law of Contract, 10th edn. (London 1999) p. 601 n. 7.

136 Although this is controlled by the various rules (C's “assent” or “reliance”) discussed above at section VI.

137 Civil Procedure Rules (1998), r. 19.2(1)(2).

138 [1915] A.C. 847, 853, H.L. per Lord Haldane L.C., who said that at common law (a) only a party can sue on a contract and (b) only someone who has furnished consideration can sue on a contract, unless it is a deed.

139 Johan Steyn, “Contract Law: Fulfilling the Reasonable Expectations of Honest Men” (1997) 113 L.Q.R. 433, 436.

140 L. Com. No. 242, para. 5.10.

141 In Panatown Ltd. v. Alfred McAlpine Construction Ltd. [2000] 3 W.L.R. 946, 960E, 1002H-1003A, H.L., Lords Clyde and Browne-Wilkinson indicated that the Act might inhibit judicial expansion of the common law; similarly, Catherine MacMillan, “A Birthday Present for Lord Denning: The Contracts (Rights of Third Parties) Act 1999” (2000) 63 M.L.R. 721, 731.

142 Respectively, (1861) 1B.& S. 393; [1915] A.C. 847, H.L.

143 Practice Statement [1966] 1 W.L.R. 1234; [1966] 3 All E.R. 77, (no longer following the practice declared in London Tramways Co. v. London C.C. [1898] A.C. 375, 380-381, H.L., per Lord Halsbury L.C.); on the 1966 statement, R. Cross and Harris, J., Precedent in English Law (Oxford 1991), pp. 104Google Scholar ff. and Stone, J., Precedent and Law (Sydney 1985)Google Scholar, ch. 10.

144 Notably, Berwick v. Beswick [1968] A.C. 58, H.L.

145 J. Beatson, “Reforming Privity of Contract” (1992) 45 C.L.P. 1, 27; for later comment, see J. Beatson, “The Role of Statute in the Development of Common Law Doctrine” (2001) 117 L.Q.R. 247, 265-269, esp. 267, where judicial unwillingness to reverse the privity rule is described as “understandable” but “misplaced”.

146 L. Com. No. 242, paras. 1.10, 6.9-6.12; Treitel, The Law of Contract, 10th edn. (London 1999), pp. 536-537; on this doctrine, see A. Burrows, “Reforming Privity of Contract” [1996] L.M.C.L.Q. 467, 483-484.

147 B.P. Exploration Co. (Libya) Ltd. v. Hunt (No. 2) [1983] 2 A.C. 352, H.L. (substantially affirming Goff J. [1979] 1 W.L.R. 783); Gamerco S.A. v. I.C.M/Fair Warning (Agency) [1995] 1 W.L.R. 1126.

148 S. 1(1)(b)(2); L. Com. No. 242: paras. 7.17-7.51.

149 L. Com. No. 242, paras. 9.19, 9.32-9.33.

150 On reliance, ibid., paras. 9.14-9.36.

151 S. 8 of the 1999 Act.

152 See references in the three preceding notes.

153 L. Com. No. 242, paras. 6.13-6-17, concluding at para. 6.17: “But for the present we see no practical difficulty in taking the limited step in this paper of recommending what may be regarded as a relaxation of the requirement of consideration to the limited extent necessary to give third parties rights to enforce valid contracts in accordance with the contracting parties’ intentions.”

154 Ibid. para. 6.17; A. Burrows, “Reforming Privity of Contract” [1996] L.M.C.L.Q. 467, 483, re-adopts the passage.

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