A.) [lxxvi]Short for cestui a que use le trust estcréé, meaning ‘the person for whose benefit anything is given in trust to another’. Collateral contracts have been used as a means of rendering exclusion clauses enforceable by a third party; and are extensively used in the construction industry as a way of extending to subsequent owners or tenants the benefits of a builder’s or architect’s or engineer’s contractual obligations. Despite several attempts by Denning LJ to allow rights of suit by third party beneficiaries,[xxi] the House of Lords reaffirmed the general rule in Midland Silicones Ltd v Scruttons Ltd[xxii] Viscount Simonds said: “[H]eterodoxy, or, as some might say, heresy, is not the more attractive because it is dignified by the name of reform. Thus, though the contract entered between his father and ‘G’ was for he is benefiting he remained stranger the contract and the contract denied to give him rights to enforce the terms of the contracts.eval(ez_write_tag([[580,400],'lawtimesjournal_in-medrectangle-3','ezslot_5',111,'0','0'])); Further in Dunlop Pneumatic Tyre v. Selfridge and Co. Ltd., the fundamental proposition in the English law, i.e. [lxiii] Defences that can normally be raised against an action to enforce a promissory duty can be raised by the promisor against the beneficiary.[lxiv]. The traditional law was very strict and third parties had no redress of any manner if they were affected. There is a thin divide between (i) making a contract for the benefit of a third party; and (ii) making a contract for the benefit of a third party and, immediately thereafter, assigning that benefit to the third party (especially where the third party does not provide consideration). There are some exceptions. The same was true in Scotland[lii]. In a later case, Jamna Das v. Ram Autar[xciii], the Judicial Committee pointed out that the purchaser’s contract to pay off a mortgage could not be enforced by a mortgagee who was not a party to the contract. The sister and her husband sued her brother for the amount that was originally promised between the father and son. Exceptions to the Doctrine of Privity of Contract Privity of consideration states that only a person who has provided consideration can enforce the contract and take action against it. [xlix] See e.g.Greenwood Shopping Plaza Ltd v. Beattie (1980) 111 DLR (3d) 257, [l] See e.g.Coulls v. Bagot’s Executor and Trustee Co  ALR 385; Wilson v Darling Island Stevedoing&Lighterage Co Ltd (1956) 95 CLR 43. Apart from promisor (s) … Although McNiece was within the category covered it was not directly in contract with Trident.  As well as Haldane's judgment in Dunlop, the courts have stated a similar principle in other cases such as Scruttons Ltd v Midland Silicones Ltd  AC 446 and Beswick v Beswick – that privity is separate from consideration. At all times, whether it’s working, studying or just sitting idle I aim to find happiness. After establishing the position in England, the student tries to discuss the position of the concept of Privity, in detail, in the Country of India, mostly with the help of landmark case laws, changing the course of the rule despite of the very high influence of the English Laws and cultures on the Indian laws. It lasted for only 3 months. It clearly depicts that stranger to consideration cannot enforce the … For if, immediately after a contract for a third party’s benefit is made, the promisee assigns his rights under it to that third party, the third party can enforce the contract and the promisee loses all right to enforce, vary or cancel the contract. In Pandurang v. Vishwanath[xcv], it has been held the person beneficially entitled under the contract can sue even though not a party to the contract itself. The recognized exception mentioned in the quoted judgment is worded widely so as to cover the beneficiaries under the terms of the contract. Nevertheless, as Godfrey VP reiterated in the B + B case, the privity doctrine is still part of the Hong Kong law.[lxxv]. The main principle highlighted by this concept of Privity of Contract is regarding the rights of third parties in a contract. It has been argued, however, that privity is not even a distinct doctrine, but rather simply part of consideration. At law school, I have developed a keen interest in researching. The suit was held to be maintainable. In India also there has been a great divergence in of opinion in the courts as to how far a stranger to contract can enforce it. [lxi]Queensland Property Law Act 1974, ss 55(2). In this case, the bride’s father (the defendant) had promised the groom’s father (the plaintiff) that he would pay would pay 200 pounds to the plaintiff’s son after the marriage had taken place and hence the plaintiff on this condition gave his consent for the marriage. D.) Motor Insurance: Under section 148(7) of the Road Traffic Act 1988, a person issuing a policy under Section 145 of the Act shall be liable to indemnify the persons or classes of person specified in the policy in respect of any liability which the policy purports to cover in the cases of such persons. The consideration for the, Here, the consideration for the defendants promise to pay the annuity was the gift deed made by the old lady and the consideration was being furnished by the plaintiff. In Carnegie v. Waugh[xii], the tutors and curators of an infant, C, executed an agreement for a lease with A, for an annual rent to be paid to C. It was held that C could sue on the instrument, even though he was not a party to it. It also follows that in considering the details of reform it is instructive to consider the rules of assignment dealing with, for example, the defences and counterclaims available to the promisor (the principle is that an assignee takes “subject to equities”), and joinder of the original promisee (joinder of the assignor is sometimes necessary).[xxxv]. Though the doctrine of privity was recognised and established in the case of Tweddle v. Atkinson[iii], its foundations had been laid by the English courts over the years, starting from as early as the end of 16th century. Another important decision is that of Hadvesv. From the nature of the covenant entered into by him, a lessee has both privity of contract and of estate; and though by an assignment of his lease he may destroy his privity of estate, still the privity of contract remains, and he is liable on his covenant notwithstanding the ass “Though originally there was no privity of contract between B and C, B having subsequently acknowledged his liability, C was entitled to sue him for recovery of the amount.”. [xxix] Under this, the principal, i.e. Hence, at issue was whether the scope of the indemnity extended to the plaintiff. (Hons.). The doctrine of privity means that as a general rule, a contract does not grant rights or enforce duties arising under it on any person except the parties to it. This rule although distinct from privity doctrines it often yields to same result as to be so connected. want. A decision of the High Court of Australia Trident General Insurance Co Ltd v. McNiece Bros Pty Ltd[liii]and that of the Canadian Supreme Court London Drugs Ltd v. Kuehne and Nagel International Ltd[liv]are the two most significant cases in this aspect. Punjab & Haryana HC directed Haryana DGP to book Investigating Officers who fail to secure the CCTV footages in Criminal Cases, Maneka Gandhi vs Union Of India – Case Summary. Copyright © 2020 Lawctopus. As such, the respondents are not complete strangers to the limitation of liability clause. [lxiv]Queensland Property Law Act 1974, s 55(4). In the words of Toohey J[lv]: “When a rule of the common law harks back no further than the middle of the last century, when it has been the subject of constant criticism and when in its widest form, it lacks a sound foundation in jurisprudence and logic and further, when that rule has been so affected by exceptions or qualifications, I see nothing inimical to principled development in this Court now declaring the law to be otherwise in the circumstance of the present case.”. Consideration is the most important essential of any contract formed between the parties unless there is consideration a contract is said to be void. In Gandy v Gandy[xvii], Bowen LJ said that, in spite of earlier cases to the contrary, Tweddle v Atkinson[xviii]had laid down “the true common law doctrine”. In the words of Jenkins, CJ: “That Indian Contract Act is unlike the English Contract Act and the limits with which the doctrine of privity of contract operates in English law cannot with same vigour be applicable to Indian Contract Act”[lxxxiii]. Fire Insurance: Under section 83 of the Fire Prevention (Metropolis) Act 1774, where an insured house or building is destroyed by fire, the insurer may be required “upon the request of any person or persons interested” to lay out the insurance money for the restoration of the building. Here, the plaintiff’s father and ‘G’ entered into an agreement to pay the plaintiff a certain sum of money in consideration to plaintiff’s marriage to the daughter of ‘G.’‘G’ failed to do so and the plaintiff sued his executors for the same. [xxvi]Richards v Delbridge(1874) LR 18 Eq 11; Cleaver v. Mutual Reserve Fund Life Association  1 QB 147, 152; Re Foster  3 All ER 357; Green v. Russell  1 QB 28. The first recorded case of such an instance was decided upon in 1599. As in the Trident case, the central issue in London Drugs was whether the particular circumstances were appropriate ones in which to relax the privity doctrine. And although it were objected that the father was at the charge for the curing the son of his wounds, yet, because it was a thing he was a thing he not compelled unto, it is no cause why he should maintain this action.”. LAWFUL CONSIDERATION The most important factor of valid contract is the consideration. The court of Queen’s Bench denied the principle and ruled that a beneficiary who is stranger to the consideration cannot take advantage of it. Although the principle of vicarious immunity was subsequently generally accepted by the lower courts, it did not survive the decision of the House of Lords (Lord Denning dissenting) in Midland Silicones Ltd v Scruttons Ltd.[xxxvii]the defendant stevedores, engaged by the carrier, negligently damaged a drum containing chemicals. The court held that the third party beneficiary was entitled to rely on the waiver of subrogation clause whereby the insurer expressly waived any right of subrogation against the third party beneficiary. This is somewhat similar to the rule of privity, as only the parties actually entered into the contract and who have offered consideration are able to benefit from the agreement. Also, the intention to benefit the third party must be irrevocable. Here it should be noted the difference between the stranger (third-party) to consideration and a stranger to a contract. D.) Tort of Negligence: The tort of negligence can be viewed as an exception to the third party rule where the negligence in question constitutes the breach of a contract to which the plaintiff is not a party. It is not far from their Lordships’ minds that, if the English courts were minded to take that step, they would be following in the footsteps of the Supreme Court of Canada (see [the London Drugs Ltd case]) and, in a different context, the High Court of Australia (see [the Trident case]).Their Lordships have given consideration to the question whether they should face up to this question in the present appeal. Click to see full answer. Whether affiliates, relatives and agents of the parties can be treated as “beneficiary” if their role is restricted to few terms like mentioned hereinabove? …If the principle of jus quaesitumtertio is to be introduced into our law, it must be done by Parliament after a due consideration of its merits and demerits”. Life Insurance: By section 11 of the Married Women’s Property Act 1882, a life insurance policy taken out by someone on his or her own life, and expressed to be for the benefit of his or her spouse or children, creates a trust in favour of the objects named in the policy. Are there any criteria to be met to fall under the category of “beneficiary”? Thought the position in various countries is now similar, if not the same, it was not the same when the rule came into being. In this case: U was appointed by his father as his successor and was put in possession of his entire estate. The court in, Later, in 1861, the position in England changed in, Position of Privity of Consideration in India, This principle of the doctrine of privity of consideration is not applicable in India. [xxxv]See Chitty on Contracts (27th ed, 1994), paras 19-002, 19-022-19-023. Time and again Indian judiciary has reiterated that the administration of justice should not be hampered by Tweedle v Atkinson[lxxxiv] and that in India, we are free from these trammels and are guided in matters of procedure by the rules of justice, equity and good conscience. The court in Dutton v. Poole did not consider this principle. Consideration is a rule that there must be a "benefit or detriment" involved in any contract, and that this must initially come from the promisee. Privity of contract came about when third parties went to court to enforce the terms of contracts, even though they weren’t actually parties to the contract. [lvi]Western Australia Property Law Act 1969, s 11(2)(a). Five years after the publication of its provisional recommendations in favour of reforming the privity rule in English Contract Law, the Law Commission confirmed its view and, indeed the view of a considerable body of judicial and academic options, as well as that of the vast majority of the Commission’s consultees- that the privity rule was ripe for reform. If any other person furnishes the consideration, the promisee becomes the stranger and, therefore, cannot enforce the promise. Marriage Settlement, Partition or Other Family Arrangements: Where an agreement is made in any of the mentioned concerns and a provision is made for the benefit of a person, he may take advantage of that agreement although he is no party to it. 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