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Established exceptions to the doctrine of privity of contract

Statutory exceptions

A number of these exist, for example:

• The Married Women’s Property Act 1882 allows a spouse or children to
  obtain the benefit of a contract of life assurance made in their favour.
  This then gives them the right to enforce a contract to which they are not
  an original party.


• Under the Law of Property Act 1925 it is possible to assign property
  rights arising under a contract.


• The Road Traffic Act 1988 makes a person issuing insurance to a driver
  liable to pay not just the driver in the event of an accident but those
  covered by the policy, such as a third party whose car the driver damages.

This last exception is obviously essential, as the contracts of insurance
would be pointless if they were not enforceable, and, regarding the Road
Traffic Act, innocent members of the public would be left unprotected from
traffic in a busy environment.

Agency

Agency is a common law exception to the doctrine of privity, and is where
one person acts as the representative of another (often for commercial
convenience). The principal (person A) appoints someone else, the agent
(person B), to act on his behalf with a third party (person C). Generally, the
principal may sue the third party. In fact, the principal and his agent, A and
B, are treated as one person, and form contracts as one of the parties, the
other being the third party, C.

136 Contract law

Principal

Contract of

appointment as agent

right to sue under

the terms of this

contract

Third party

Agent

Right to sue the

agent directly under

the contract (and

generally a right to

sue the principal –

therefore an

exception to the

general rule)

Contract

Figure 9.4