in his speech in scruttons ltd v midland silocones ltd 1962 lord reid stated that the argument that the carriers had acted as the stevedore’s agent in obtaining for them were an exemption clause could be successful if a number of conditions were met. what are these conditions? were they met in the case before him?
scruttons unloading ship
contract there was limitation of liabiluty of £179 per box.
boxes daage by stevedores. stevedores under contract with shipping company and had exclusion clause
midlands did not know of this
it seemed stevedores could not be exempted since there wa sno privity of contract
no bailment was found
. conditions. 1 bill of lading makes it clear that stevedores are intended to be proected by provisions of limitation of liability
2. bill of lading makes it clear he the carrier is acting as an agent for the stevedoresand provisions apply to stevedores
3. carrier has authority of stevedore to do that or there is later ratification by stevedore
4. any difficulty about moving from stevedore was overcome.
to affect the consignee it would need to be proven that Bill of LadinG aCT applied
I guess it did not operate. so onerous.
consider the arguments in favour of privity of contract and arguments against
contracts are between contracting parties. wrong for benefits or burdens to pass
sometimes it is logical that these pass. one acts for another.
why had privity of contract survived for so long?
because of consideration and precedent
- when is a third party given a right to enforce a term of a contract?
where a contaract says that he can
where a contract confers a benefot on him and there is no reason to stop him asserting that right.
Contracts rights of third parties act 1999.
2. what rights are given to a third party?
to enjoy benefits conferred by the contract. however, some of these benefits do not give him the right to seek a remedy. the rights only arise if the contract it performed.
right not to have a contract varied to his disbenefit. right to an exclusion of liability in some circs.
3. what defences are available to the promisee in an action brought by the third party?
if the promisee recovers money from the promisor then the promisee can keep what he deserves before hading some on to the third party.
4. to what extent can the parties to the contract vary or rescind the contract?
to an extent that it does not harm the third party. However, the contractors can exclude operation of the contracts rights of third parties act.
5. how can the parties to a contract exclude the rights of a third party?
they can state this in the contract.
what is the relationship between the 1999 act and the common law with regard to the provision of exceptions to privity?
common law was fairly strict. privity prevented third parties having many assertable rights under a contract.
common law allowed a contractor to sue the other contract for non performance on a promise to beneft a third party.
there can be a performance interest for one of the parties in seeing that the contract is performed to benefit a third party
specific performance can be ordered
jackson v horizon holidays. holiday booked. one who booked holiday got compensation on behalf of family
there was an ability under cmmon law for a contractor to recover damages on behalf of third party
the 1999 act extended common law rights
is it likely that courts will accept a performance interest on the part of the promisee and allow the promisee to recover substantial damages for a breach which deprives the third party of his intended benefit?
what conditions must be met in order for the exemption clause to protect the third party throgh the eurymedon device?
A must make a contract with B and A offers immunity to C through B.
the eurymedon. new zealand shipping v scatherwaite. 1975
what consideration was provided by C to A for the contract of immunity in eurymedon?
the consideration was the service.
A contracts with B for B to carry goods between dover and calais by sea. include d in this contract is a clause that exempts B and B ;s agent employees and subcontractors from liability for any damage howsoever caused. B contracts with C for C to unload the ship. the ship carries several cargoes and besides A goods. in unloading goods belong to Z, C accidentally destroys A’s goods. what advice do you give to C as to his liability for the damages?
C is not liable. he is exampted.
would the widow in red schebsma have been better off if there had been a trust?
schebsman employed. 1940 to receive payments for loss of employment. if he died before all 6 payments then rest to go to wife or daughter
he died in may 1942. he had been declared bankrupt in march 1942
trustee in bankruptcy said that the payments were part of estate
trustee said he could take the payments from the widow. trustee was in the same position as the deceased – the legal pwner.
the widow lost. she would have been better off with a trust.
b. in what way if at all does the decision in beswick and beswick form an exception to privity?
1967. specific performance was ordered. uncle and nephew. nephew bought business from dying uncle. term that nephew had to pay uncle ‘s wdidow money.
old man died. nephew reneged on promise. court held that the term was valid. it was an excption to privity. the widow was the administratrix of her husband’s estate.
c. how would the contracts rights of third parties act 1999 affect the decison in new zealand shippin v AM sattherwaite?
it probably would not. the third parties were protected by te Himalaya Clause in the bill of lading. so outcome would be the same. they would nt have had to satisfy lord reid’s quatripartite test
the contract was unilateral. it was activated by unloading the drill said the lords, exemption in bill of lading
d. how would the contracts rights of third parties act affect beswick v beswick?
it would make it even easier for the widow.
e. following the enacement of the 1999 act is it likely courts will continue to devise exceptions to the doctrine of privity?
maybe privity has been considerably weakened w. will not get much weaker.
self assessment questions
- what are the two aspects of the doctrine of privity?
only a party to a contract can sue on it.
a third party cannot be obliged to do anything by a contract.
2. name three devices used in common law to give enforceable benefots to third parties?
agency. collateral contracts. trusts. agency and assignment. land law. third party insurance. contracts for benefit of a group.
3. what is the main test of whether third parties should be given rights under contract?
is it just to do so?
4. in relation to the doctrine of privity what is a performance interest?
if a party would be benefited by a contract being performed.
5. outline eurymedon case and when the device created in this decision can be utilised by contracting parties?
Eurymedon was a ship. New Zealand Shipping corpm v satterherwaite 1975
drilling machine shipped from liverpool to NZ. bill of lading limitd liability for contractors and their agents. this is a Himalaya clause.
carrier co was subsidiary of stevedore co that unloaded drill. negligence stevedores damaged drill whilst unloading.
stevedores claimed limitation of liability
lords said that stevedores could rely on the limitation
lord reid test. 1. bill of lading said limitation applied to agents.
2. bill of lading said this applied to stevedores
3. carrier has authority from stevedores
4. difficulties about consideration were overcome
bill of lading was a unilateral contract.
companies can use a himalaya clause.
6. can a contract impose a liability on a third party?
- last year C entered employment of D for a period of 6 years fixed. his contract said if he died before the end of 6 years then D would pay his widow 2 000 for three years. C died in January this year but D refused topay widow.
The wdow is executric and can recover funds. contract intended to benefit her.
2. F lives alone in his house. house suffers badly from damp. living conditions are unpleasant. but F does not have money to pay for damp proofing. his daughter G offers to pay for damp proofing. F accepts offer. G hires hopless builders to do damp proofing. hopeless agree to undertake the task for 10 000. G pays hopeless in advance. hopeless estimates cost between 7 K and 10 K. they agree ti redun any difference between 10 K and the actual cost. the refund is given directly to F. damp proofing is badly done. F ‘s house is damaged as a result. the cost is only 8 K.
hopless refusse to provide refund.
Contract was intended to benefit F. But G signed it. If G sues she will win. If F sues she will probably win as it would be just. the contract migjt have grnated her rights under rights of third parties act impliedly if not explicitly.
3. doctrine of privity has become largely irrelevant as a result of recent changes
True. Contracts right sof third parties act has provided many exceptions. Eurymedon already moved it this way. third party motor insurance is another blow to privity.