So this method of creating a trust is not likely to operate generally as a
method of evading the rules of privity. It should be noted that even if
successful, it is only really an apparent exception to the common law rules,
as the rights of a beneficiary are equitable.
The Law of Property Act 1925 s.56
This Act contains in s.56(1) a provision that a person who is not named as
a party to the ‘conveyance or other agreement’ can still benefit under the
agreement. This appears to contradict the rule of privity, and some have
attempted to use the section to acquire rights where they would otherwise
be stopped by privity.
If the sections were to be interpreted freely according to the plain meaning
of the words, then ‘other property’ could include contractual rights. This
would clearly provide a way to evade the doctrine of privity of contract,
taking the law back to the position before Tweddle v Atkinson (1861).
In fact, such a liberal interpretation has not found favour in the courts,
as can be seen in the case of Beswick v Beswick (above), as the Act was
intended to be interpreted in the context of land law, and to use it in this
way would be to abuse it.
The law of tort
Although an injured party may not be able to obtain a satisfactory remedy
in contract law, it should always be remembered that a remedy may exist in
another area of law. This particularly arises with the close relationship of
the law of contract with the law of tort.
The Contracts (Rights of Third Parties) Act 1999
There have been many calls for reform of the strict doctrine of privity, to
allow a person to enforce the handing over of a benefit due under a
contract. The most recent report was that of the Law Commission in 1996,
Privity of Contract: Rights of Third Parties, Law Com No. 242. This
formed the basis of the bill which led to the Contracts (Rights of Third
Parties) Act 1999, now in force, and long overdue. The main principle of
the Act is that where a contract is made specifically for the benefit of a
third party, and that party is clearly identified, they may enforce the
contract, even though they are not a party to the contract.
Privity of contract 141fortunate that she was, as otherwise she would have received nothing,
despite this arrangement clearly being made so as to support her if she
became widowed.