Privity of contract 65Package Travel, Package Holidays and Package Tours Regulations 1992 now provide that
damages can be awarded to holidaymakers who do not get the holiday contracted for, even
if they did not themselves make the contract. However, these Regulations are confined to
package holidays and do not change the principles of the general law of contract.
The Contracts (Rights of Third Parties) Act 1999
The Contracts (Rights of Third Parties) Act 1999 has changed the privity rule but not
abolished it. The Act provides that a third party can in two circumstances sue on a contract
which he or she did not make:
(i) A third party can sue on the contract if the contract expressly provided that he should be able
to sue. [The s. 1(1)(a) route.]For example, a man might buy a car for his son and the contract might state that if the car
was not of satisfactory quality the son could sue the seller on the contract. (Tweddlev
Atkinsonwould now therefore be differently decided.)
(ii) A third party can sue on the contract if the contract intended to confer a benefit on the third
party. [The s. 1(1)(b) route.]However, the s. 1(1)(b) route does not apply if the other party to the contract can show that
the parties to the contract did not intend the contract to be enforceable by the third party.
Section 1(3) requires that the third party must be expressly identified in the contract
by name, as a member of a class or as answering a particular description. This is the case
for both routes. Express identification by name needs no explanation. Express identification
by class could arise in many ways; for example, if a contractual provision was made for
the benefit of all the members of a particular club, or for the benefit of the contracting
party’s brothers and sisters. Express identification of the third party as his or her answering
a particular description could also arise in many ways; for example, if a contractual provi-
sion was made for the benefit of ‘my youngest brother’ or for the benefit of the Sheriff
of Nottingham. Applying the Act to Danielsv White and Tarbard, we can see that the
Act would not have allowed Mrs Daniels to sue on the contract with the retailer unless
Mr Daniels had expressly identified Mrs Daniels as a person for whose benefit the contract
was being made.
When a benefit is conferred on a third party by the Act, the third party gets any remedy
which would have been available to him if he had made the contract. The third party can
also avail himself of exclusion or limitation clauses. Any rights conferred on the third party
are additional to rights conferred on the person who made the contract. However, s. 5 pro-
tects the promisor from double liability.
If a party to the contract has any defences arising from the contract, these are as avail-
able against the third party as they would have been available against the other party to the
contract.
Example
A contract is made between Bert and Chas. Bert is to sell 50 bicycles to Chas, and a term
of the contract provides that Chas should pay the price to Dan. Bert delivers only 30 bicy-
cles to Chas. Chas accepts the 30 bicycles. Chas will not need to pay the whole contract
price to Dan, but will need to pay only the price of 30 bicycles.