Chapter 9

1. Chapter 9 Privity

2. Introduction • Tweedle v Atkinson (1861) • Consideration a factor? • Dunlop v Selfridge (1915)

3. Theory • Para 9-04 – Grey Box • Question of Extension of Benefit? • Darlington BC v Wiltshire Northern Ltd (1995) • Privity of Contract and Third Party Rights (2008) – LRC • Ways around? Need to reform?

4. Agency • Excel Delivery agrees to transport ABC’s goods. The contract between the parties has a clause exempting Excel from any damage to ABC’s goods. However, Excel does not have the infrastructure to get the goods to the delivery point and intends to use a third party delivery firm for some of the distance (Fast Transit). Fast Transit, however, might be interested in also being exempt from any damage to goods owned by ABC and may be unwilling to deal with Excel without that. Certainly Excel could agree to indemnify Fast Transit against any damage they cause to ABC’s goods but a tidier solution would be for Excel Delivery to contract with ABC on its own behalf and as agent for Fast Transit so that Fast Transit could get the direct benefit of the exclusion clause.

5. Midland Silicones Ltd v Scrutton (1962) • Obiter – 3P could rely on limitation clause where • Parent K makes it clear that the 3P is to be protected by its provisions • Parent K makes it clear that contracting party contracts qua agent for the third party • Contracting party has authority from 3P to so act • There is consideration moving from 3P

6. New Zealand Shipping v AM Satterthwaite – The Eurymedon • K of Carriage – ExC for Employees, agents and subK’s engaged by carrier • Said carrier entered K as agent or trustee for them • Steveadores negligently damaged cargo – sued by shipper • PC said could rely on the ExC • Analysed it as bargain between shipper and steveadores made through carrier – unilateral at first – becoming full once S’s performed servics • Performance was the Consideration for the agreement by the shipper that S’s should have the benefit of the ExC

7. Hearn & Matchroom Boxing v Collins • Management K over Steve Collins between SC and Matchroom Boxing (operated by Hearn) • Could Hearn rely on the K? • O’Sullivan J – yes – company acted as agent for Hearn in making it and Hearn provided C by agreeing to be bound by the management contract

8. LRC doubt about this technique in Ireland? • Problems? • Approaches in other jurisdictions? • London Drugs Ltd v Kuehne & Nagel International Ltd (1992)

9. Fraser River Pile & Dredge Ltd v Can Dive Services (1999) • Canadian Supreme Court held that it does not matter if the clause does not expressly benefit the third party so long as two conditions are met:- • The parties to the contract must intend to extend the benefit of the clause in question to the third party seeking to rely on the clause. • The activities performed by the third party seeking to rely on the contractual provision must be the very activities contemplated as coming within the scope of the contract, as determined by reference to the intention of the parties.

10. Contractual Trusts • The idea • Gandy v Gandy (1861) • Vandepitte (1933) • Cadbury Ireland v Kerry Co-op and Dairy Disposals (1982)

11. Other ways • Tort • Covenants • Statute • Assignment • Collateral Contracts • Pain in the neck

12. What did the LRC say? • The privity rule is subject to a large number of common law and statutory exceptions. These exceptions have developed in a piecemeal fashion to deal with specific problems which were caused by the privity rule. • Some of these exceptions are quite complex, and there are various difficulties associated with them. • However, more fundamentally, it is clear that the current exceptions do not, and will not, cover every situation where an unjust or illogical result is caused by the privity rule. • It could be argued that further specific exceptions could be created to deal with such situations, but it is the Commission‘s view…that the non comprehensive nature of an already long list of exceptions supports the need for a more general rule in favour of third party rights.

13. Damages for Loss Suffered by Third Party April 2008, Q5 March 2007, Q7(a)

14. The Start • Jackson v Horizon Holidays (1975) • P contracts with D for holiday – terrible holiday • Jackson got £500 for mental distress and was appealed • Upheld, but • Denning MR – excessive for Jackon, but it covered the family • James LJ – covered the distress he suffered for his families distress

15. Woodar Investment v Wimpey Construction (1980) • HL basically said Denning MR’s idea did not reflect a general principle • Only reserved for “special cases” • In this case – Purchaser was to pay Vendor 850K and 3P 150K • What would have happened?

16. The “Black hole” • One breaches a contract causing serious loss to a third party and the third party has no remedy • On the other hand, the party who has the remedy may only suffer nominal damages

17. Extension of Albazero • Alfred McAlpine v Panatown (2001) • No general rule save those scenarios in Woodar and the Albazero Exception • Based on Dunlop v Lambert (1839) • Carrier carrys good at sea on foot of contract with another (Dunlop – consignor / owner) • Goods damaged after carrier passed to third party • Third party had no contract with carrier (Lambert) – no remedy…. • But L could be sued by D • Deemed to know that property would pass to third party – therefore shipper (consignor) is treated as contracting for the benefit of all such third parties

18. Applied in Albazero • Could it be extended?

19. Linden Gardens Trust v Lenesta Sludge Disposals (1994) • Builder developed for “employer” • Site then transferred to another • Builder in breach of contract – the employer sues • Builder said – you’ve suffered no loss, you’re not the owner

20. House of Lords Rejected Argument • “The Broader Ground”: On this reading of the case the employers right to damages were based on the notion that the employer was entitled to be compensated for the sums he had spent in ensuring that the third party received the intended benefit. • “The Narrower Ground”: Lord Keith and Lord Bridge preferred to hold with Lord Brown Wilkinson that the loss was really suffered by the third party but comes within a the Albazero exception.

21. Darlington Borough Council v Wiltshier Northern Ltd (1995) • LA wanted building done • A deal was struck with the bank as “employer” of the project and the defendant as contractor (builder) • Bank would ensure it was done, and assign benefit to LA • When assigned, work was incomplete • Logic was bank assigned right to sue to LA • But the LA could sue for the whole amount – i.e. could sue for what the bank could have all along • No transfer of property to third party…extension?

22. Alfred McAlpine Construction v Panatown (2001) • Panatown employed McAlpine to build a building on land owned by UIPL. • The work was defective. • Panatown sought to terminate the contract on the ground of McAlpine's failure in performance. • Panatown has suffered no loss. UIPL owns a defective building, which requires a significant expenditure for its repair, and has been unable for a considerable period to put the building to a profitable use. • Panatown seeks to recover, by way of an arbitration, from McAlpine the loss which UIPL has suffered.

23. HL re-state principle – no general rules allows one to recover for loss suffered by 3P unless within the exceptions (Albazero) • Note that 3P had right of recovery in tort against builder