Privity Of Contract Case Study

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Both Lord Diplock and Lord Steyn have at some point taken a negative view towards the doctrine of privity, the former described the privity rule as “an anachronistic shortcoming that has for many years been regarded as a reproach to [the] law ” and the later declaring it has having “no place in our more complex commercial world ”. The decisive case that establishes the doctrine of privity of contract is Tweedle v Atkinson , where the courts ruled that there is no legal entitlement conferred on third parties to an agreement nor are third parties able to derive any rights from that agreement nor subject to any burdens imposed by it. The common law doctrine of privity has been a central rule of English contract law for over 200 years. The fact …show more content…

This rule can cause significant commercial inconvenience. For example, contracts often contain exclusions of liability and indemnities in favour of third parties but the third parties may have to depend on the ability of a contracting party to obtain substantial remedy, as recognised in Midland Silicone and The Eurymedon . It is important to recognise that in the case of the Eurymedon, the courts departed from a formalist viewpoint and applied principles of consideration to reach a justifiable conclusion for the third party. This highlights that not only does the doctrine not act unjustly, but also that despite the solid foundations, the doctrine has been open to interpretation to accommodate consumer welfarist …show more content…

The Act, prompted by the recommendations of the law commission impacts upon every aspect of commercial legal practice and it makes fundamental changes to the doctrine of privity hence why it should be explored. Section 1 (1) of the Contracts (Rights of Third Parties) Act introduced a limited third party right of action. It also comes with various implications to allow such a right of action, such as the third party needs to be ‘expressly identified’, an issue which arose in the case of Avraamides . Cliona Kelly stated that in practice privity does not cause real difficulties due to the statutory exceptions devices which are frequently used to circumvent the rule and hence presents an argument in favour that sticking to the ‘status quo’ of the original doctrine would have been sufficient, but I have so far rebutted this; demonstrating problems of injustice and inconvenience. From my evaluation I believe the 1999 act to be positive by addressing previous concerns from the doctrine of privity. To cite an instance, Jackson v Horizon Holidays Ltd would now be partly resolved by Section 1(1)b of the act, allowing a third party to claim independently. But yet it also brings unconstructive development, ideas of which I now give explanation

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