66 4: Formation of contract II Part B The law of obligations
Jones v Vernons Pools 1938
The facts: The claimant argued that he had sent to the defendant a football pools coupon on which his
predictions entitled him to a dividend. The defendants denied having received the coupon. A clause on the
coupon stated that the transaction should not 'give rise to any legal relationship ... but ... be binding in
honour only'.
Decision: This clause was a bar to an action in court.5 Privity of contract
As a general rule, only a person who is a party to a contract has enforceable rights or obligations under it.
This is the doctrine of privity of contract. The Contracts (Rights of Third Parties) Act 1999 has had a
fundamental effect on the doctrine.There is a maxim in contract law which states that consideration must move from the promisee. As
consideration is the price of a promise, the price must be paid by the person who seeks to enforce the
promise. For example, A promises B that (for a consideration provided by B) A will confer a benefit on C.
Therefore, C cannot as a general rule enforce A's promise since C has given no consideration for it.Tweddle v Atkinson 1861
The facts: The claimant married the daughter of G. On the occasion of the marriage, the claimant's father
and G exchanged promises that they would each pay a sum of money to the claimant. G died without
making the promised payment and the claimant sued G's executor for the specified amount.
Decision: The claimant had provided no consideration for G's promise.In Tweddle's case each father could have sued the other but the claimant could not sue. The rule that
consideration must move from the promisee overlaps with the rule that only a party to a contract can
enforce it. No-one may be entitled to or bound by the terms of a contract to which they are not an original
party.Privity of contract can be defined as follows.
As a general rule, only a person who is a party to a contract has enforceable rights or obligations under it.
Third parties have no right of action save in certain exceptional instances.The following is the leading case on privity of contract.Dunlop v Selfridge 1915
The facts: The claimant supplied tyres to Dew & Co, a distributor, on terms that they would not re-sell the
tyres at less than the prescribed retail price. If Dew & Co sold the tyres wholesale to trade customers, they
must impose a similar condition on those buyers to observe minimum retail prices. Dew & Co resold tyres
on these conditions to the defendant. Under the terms of the contract between Dew & Co and Selfridge,
Selfridge was to pay to the claimant a sum of £5 per tyre if it sold tyres to customers below the minimum
retail price. They sold tyres to two customers at less than the minimum price. The claimant sued to
recover £5 per tyre as liquidated damages.
Decision: The claimant could not recover damages under a contract (between Dew & Co and Selfridge) to
which it was not a party.The party to the contract who imposes the condition or obtains a promise of a benefit for a third party can
usually enforce it, but damages cannot be recovered on the third party's behalf, since a claimant can only
recover damages for a loss they have suffered. Other remedies may be sought however.Key termFAST FORWARD