CHAR_A01.PDF, page 1-18 @ Normalize ( CHAR_A01.QXD )

Collateral contracts

These are not strictly exceptions to privity, but have been used to circumvent
the privity rule.

Covenants which run with the land

A principle of land law provides another exception to the doctrine of
privity. In certain circumstances, covenants (or promises to do something)
imposed on land may ‘run with the land’. This means that the promises
attach themselves to the land, and go with it when it is sold to someone else.
The covenants are then enforceable against subsequent owners.

Privity of contract 137

NZ Shipping Co v Satterthwaite Co Ltd (1974) (The Eurymedon)

A contract was made between the plaintiffs and the defendant carriers

to ship a cargo from Liverpool to New Zealand, the bill of lading

containing various exemption clauses, including one which said that a

servant or agent of the carrier would not be liable for damage to the

cargo due to negligence in carrying out the work. The carriers then

contracted with stevedores to unload the cargo, and they damaged it

while unloading it. The plaintiffs argued that the stevedores could not

rely on the exemptions in the bill of lading because they were not party

to the contract, but it was held that the carriers were acting as agents

for the stevedores, so were treated as one party to the contract with the

plaintiffs.

Shanklin Pier Ltd v Detel Products Ltd (1951)

The plaintiffs, who owned Shanklin pier on the Isle of Wight,

contracted with painters to paint the pier. The plaintiffs required

assurance over the quality of the paint, so the painters agreed with

Detel that they would buy Detel paint if Detel gave a warranty to the

plaintiffs that it would last for seven to ten years. The painting went

ahead on this basis, but the paint only lasted for three months. A

problem of privity arose in that Detel had given assurance to the

plaintiffs, but it was the painters who had made the contract to buy the

paint. It was held that the pier owners could sue the paint manu-

facturers on a collateral contract, thus providing a remedy but avoiding

the issue of privity.