to a contract if
PRIVITY Generally speaking, a person will be regarded as being ‘privy’ to a contract if:
that person entered into the agreement (e.g. that person made a promise in exchange for another party’s promise); and that person provided consideration in support of the agreement Two Implications: A contract cannot impose an obligation (burden) on a third party without that party’s consent. Where a contract confers a benefit (right) on a third party, that party cannot enforce the contract The issue of privity of contract becomes important where two persons have entered into a contract and by the terms of that contract, a benefit has been conferred on a third person. ***Privity does not prevent a contract from conferring a benefit on a third person. It simply prevents the third person from enforcing the contract.
Central to the rules of privity of contract therefore is identifying the contracting parties Denies 3rd party to enforce right-Hc restated it in Cooles case-next slide. Best to argue that the 3rd party is party to agreement-what tried to argue in next case.
Coulls v Bagot’s Executor & Trustee Co Ltd (1967; HC of A) Facts: A written agreement was entered into by Arthur Coulls and O’Neil Construction Pty Ltd (“the Agreement”) headed “Agreement between Arthur Leopold Coulls and O’Neil Construction Proprietary Limited” and included written terms: • Mr Coulls gives to O’Neil Construction the sole right to quarry 50 acres of his land. • O’Neil Construction agrees to pay 3d per ton for all stone quarried and sold, and a fixed minimum royalty of £12 per week for a period of 10 years with an option of another 10 years at the above basis. (consideration) • O’Neil Construction to pay all money connected with the Agreement to Mr Coulls and his wife, Doris Coulls as joint tenants-(wanted to make it clear if i die my wife should inherit interest not children). Agreement was signed by Mr and Mrs Coulls and O’Neil Construction. (clearly endorsed agreement and was there at time agreement was made). After Mr Coulls died, his 2 children from a previous marriage stood to benefit if the royalties were payable to Mr Coulls’ estate.
Held: Majority of the HC held that the company owed no contractual obligation to Mrs Coulls as she wasn’t a party to the agreement. Contract expressly purported to be made between Arthur Coulls and the company. Moreover, the company made no express promise to pay royalties to Mrs Coulls. Dissent argued that Mrs Coulls signature of the agreement was explicable only on the basis that she was intended to be a party to the agreement, Agency An agent is a person who has power to enter into a contact on behalf of another person (the ‘principal’). If A, acting as agent of P, enters into a contract with B, then the parties to the contract are P and B. In this case, a party not involved in the acts of contract formation (the ‘principal’) is nevertheless a party to the contract. (exception to Privity). Requirements: – an agency relationship exists; and – with respect to the particular transaction under consideration, the agent was purporting to act on behalf of the principal and not solely on his or her own behalf, unless the contract is subsequently ratified. Port Jackson Stevedoring Pty Ltd v Salmond & Spraggon (Australia) Pty Ltd (1978; HC of A) Facts: The carrier of a consignment of razor blades shipped from Canada to Australia issued a bill of lading to the consignor of the goods, the terms of which were expressly accepted by the consignee, The bill of lading imposed a one year time bar on proceedings in respect of loss or damage to the goods. Clause 2 extended the benefit of that limitation to servants, agents and independent contractors employed by the carrier. The appellant stevedore was 49% owned by the carrier, commonly acted as its stevedore and was aware of the terms of the bill of lading. The goods were unloaded by the stevedore and placed in its storage shed, from which 33 of the 37 cartons were stolen. The consignee sued Stevedore for damages outside the stipulated time period. Held: A stevedore (PJS) is entitled to the benefit of an exemption clause in a bill of lading if: 1. the bill of lading makes it clear that the stevedore was intended to be protected; Yes – clause 2 2. the carrier was contracting as agent for the stevedore as well as on its own behalf; Yes – clause 2 3. the carrier was authorised to make the contract on behalf of the stevedore or the stevedore subsequently ratified the carrier’s actions; Yes – the carrier acted as PJS’s agent and made an arrangement with the consignor for the protection of PJS as an independent contractor participating in the handling of the cargo; by later accepting the bill of
lading, the consignee became party to the arrangement with the consignor. 4. the stevedore provided consideration to the promisor. Yes - the performance by PJS of unloading the cargo satisfied the need for consideration moving from PJS. (but held that the actions weren’t covered by the clause). 1. A contract makes it clear that a benefit is to be conferred on a beneficiary 2. The contract makes it clear that the promise is acting as agent of the beneficiary 3. The promise was authorised to enter into the contract on the beneficiary’s behalf (or the contract was subsequently ratified). 4. The beneficiary provided consideration for the promise The beneficiary is a party to the contract and is entitled to enforce it. Circumventing the Privity rule
Analyse relationship b/w parties to see one party is actually a party-one party acting on behalf of the party c-new york star case. Port Jackson. Assignment – transfer of some or all of the contractual (non-personal) rights owed to one contractual party to a third party Novation – termination of the original contract and the formation of a new contract between one of the original contracting parties and a substituted (third) party Estoppel – If a party has relied to his/her detriment on an expected benefit or entitlement arising from a contract to which he/she is not a party Misleading and deceptive conduct – E.g., statutory rights of action under s 18 of the Australian Consumer Law. Tort (e.g. a claim of negligence) – Hill v Van Erp (1997) – Trident General Insurance Co Ltd v McNiece Bros Pty Ltd (1998) – Special exceptions – Unjust enrichment – Trust
A non party to contract can also have contractual rights assigned or have contract novated. An assignment involves the transfer of some or all of the contractual rights owed to one contractual party to a third party. The doctrine of Privity doesn’t prevent the assignee from enforcing the contractual rights that have been assigned as they have been assigned ownership of the rights. Novation is where a third party may be substituted for one of the original contracting parties. Novation involves the termination of the original contract and the formation of a new contract. However, the original contract may authorise a party to
substitute another party in its place without the need for a further agreement. The contractual relationship between the original parties ends and Privity of contract is then established between the remaining original party and the substituted party. Hill v Van Erp (1997; HC of A) Facts: Mrs Currey retained Mrs Hill (a solicitor) to prepare her will which included a disposition in favour of Mrs Van Erp. Mrs Hill failed to ensure the will was properly witnessed with the result that the disposition in favour of Mrs Van Erp failed. Mrs Hill owed Mrs Currey a contractual duty of care, but not Mrs van Erp because Mrs van Erp was not a party to the contract between Mrs Curry and Mrs Hill. Mrs Van Erp sued Mrs Hill in tort for negligently preparing the will. Held: Mrs Hill owed Ms Van Erp a duty of care and Mrs Van Erp was entitled to damages for breach of that duty.
that person entered into the agreement (e.g. that person made a promise in exchange for another party’s promise); and that person provided consideration in support of the agreement Two Implications: A contract cannot impose an obligation (burden) on a third party without that party’s consent. Where a contract confers a benefit (right) on a third party, that party cannot enforce the contract The issue of privity of contract becomes important where two persons have entered into a contract and by the terms of that contract, a benefit has been conferred on a third person. ***Privity does not prevent a contract from conferring a benefit on a third person. It simply prevents the third person from enforcing the contract.
Central to the rules of privity of contract therefore is identifying the contracting parties Denies 3rd party to enforce right-Hc restated it in Cooles case-next slide. Best to argue that the 3rd party is party to agreement-what tried to argue in next case.
Coulls v Bagot’s Executor & Trustee Co Ltd (1967; HC of A) Facts: A written agreement was entered into by Arthur Coulls and O’Neil Construction Pty Ltd (“the Agreement”) headed “Agreement between Arthur Leopold Coulls and O’Neil Construction Proprietary Limited” and included written terms: • Mr Coulls gives to O’Neil Construction the sole right to quarry 50 acres of his land. • O’Neil Construction agrees to pay 3d per ton for all stone quarried and sold, and a fixed minimum royalty of £12 per week for a period of 10 years with an option of another 10 years at the above basis. (consideration) • O’Neil Construction to pay all money connected with the Agreement to Mr Coulls and his wife, Doris Coulls as joint tenants-(wanted to make it clear if i die my wife should inherit interest not children). Agreement was signed by Mr and Mrs Coulls and O’Neil Construction. (clearly endorsed agreement and was there at time agreement was made). After Mr Coulls died, his 2 children from a previous marriage stood to benefit if the royalties were payable to Mr Coulls’ estate.
Held: Majority of the HC held that the company owed no contractual obligation to Mrs Coulls as she wasn’t a party to the agreement. Contract expressly purported to be made between Arthur Coulls and the company. Moreover, the company made no express promise to pay royalties to Mrs Coulls. Dissent argued that Mrs Coulls signature of the agreement was explicable only on the basis that she was intended to be a party to the agreement, Agency An agent is a person who has power to enter into a contact on behalf of another person (the ‘principal’). If A, acting as agent of P, enters into a contract with B, then the parties to the contract are P and B. In this case, a party not involved in the acts of contract formation (the ‘principal’) is nevertheless a party to the contract. (exception to Privity). Requirements: – an agency relationship exists; and – with respect to the particular transaction under consideration, the agent was purporting to act on behalf of the principal and not solely on his or her own behalf, unless the contract is subsequently ratified. Port Jackson Stevedoring Pty Ltd v Salmond & Spraggon (Australia) Pty Ltd (1978; HC of A) Facts: The carrier of a consignment of razor blades shipped from Canada to Australia issued a bill of lading to the consignor of the goods, the terms of which were expressly accepted by the consignee, The bill of lading imposed a one year time bar on proceedings in respect of loss or damage to the goods. Clause 2 extended the benefit of that limitation to servants, agents and independent contractors employed by the carrier. The appellant stevedore was 49% owned by the carrier, commonly acted as its stevedore and was aware of the terms of the bill of lading. The goods were unloaded by the stevedore and placed in its storage shed, from which 33 of the 37 cartons were stolen. The consignee sued Stevedore for damages outside the stipulated time period. Held: A stevedore (PJS) is entitled to the benefit of an exemption clause in a bill of lading if: 1. the bill of lading makes it clear that the stevedore was intended to be protected; Yes – clause 2 2. the carrier was contracting as agent for the stevedore as well as on its own behalf; Yes – clause 2 3. the carrier was authorised to make the contract on behalf of the stevedore or the stevedore subsequently ratified the carrier’s actions; Yes – the carrier acted as PJS’s agent and made an arrangement with the consignor for the protection of PJS as an independent contractor participating in the handling of the cargo; by later accepting the bill of
lading, the consignee became party to the arrangement with the consignor. 4. the stevedore provided consideration to the promisor. Yes - the performance by PJS of unloading the cargo satisfied the need for consideration moving from PJS. (but held that the actions weren’t covered by the clause). 1. A contract makes it clear that a benefit is to be conferred on a beneficiary 2. The contract makes it clear that the promise is acting as agent of the beneficiary 3. The promise was authorised to enter into the contract on the beneficiary’s behalf (or the contract was subsequently ratified). 4. The beneficiary provided consideration for the promise The beneficiary is a party to the contract and is entitled to enforce it. Circumventing the Privity rule
Analyse relationship b/w parties to see one party is actually a party-one party acting on behalf of the party c-new york star case. Port Jackson. Assignment – transfer of some or all of the contractual (non-personal) rights owed to one contractual party to a third party Novation – termination of the original contract and the formation of a new contract between one of the original contracting parties and a substituted (third) party Estoppel – If a party has relied to his/her detriment on an expected benefit or entitlement arising from a contract to which he/she is not a party Misleading and deceptive conduct – E.g., statutory rights of action under s 18 of the Australian Consumer Law. Tort (e.g. a claim of negligence) – Hill v Van Erp (1997) – Trident General Insurance Co Ltd v McNiece Bros Pty Ltd (1998) – Special exceptions – Unjust enrichment – Trust
A non party to contract can also have contractual rights assigned or have contract novated. An assignment involves the transfer of some or all of the contractual rights owed to one contractual party to a third party. The doctrine of Privity doesn’t prevent the assignee from enforcing the contractual rights that have been assigned as they have been assigned ownership of the rights. Novation is where a third party may be substituted for one of the original contracting parties. Novation involves the termination of the original contract and the formation of a new contract. However, the original contract may authorise a party to
substitute another party in its place without the need for a further agreement. The contractual relationship between the original parties ends and Privity of contract is then established between the remaining original party and the substituted party. Hill v Van Erp (1997; HC of A) Facts: Mrs Currey retained Mrs Hill (a solicitor) to prepare her will which included a disposition in favour of Mrs Van Erp. Mrs Hill failed to ensure the will was properly witnessed with the result that the disposition in favour of Mrs Van Erp failed. Mrs Hill owed Mrs Currey a contractual duty of care, but not Mrs van Erp because Mrs van Erp was not a party to the contract between Mrs Curry and Mrs Hill. Mrs Van Erp sued Mrs Hill in tort for negligently preparing the will. Held: Mrs Hill owed Ms Van Erp a duty of care and Mrs Van Erp was entitled to damages for breach of that duty.
