long period of time. The act should prevent injustice in individual
circumstances, such as Beswick. It should also avoid attempts to get around the
difficulties of privity and the need to stretch other legal principles, such as
trusts and collateral contracts, to their limits, in an attempt to avoid its
constraints. It should remove the need to ‘find’ exceptions to the doctrine. If
Mr Jackson (Jackson v Horizon) were to book a similar holiday today, with his
wife and family named on the booking form, they would clearly be intended
to benefit from the contract, so would satisfy section 1(1)(b), and would be
identified within it, so would satisfy section 1(3). They would then be able to
enforce the benefit and claim damages if the contract was breached.
The change will bring English law into line with that of many other
countries. Most other EU countries, including Scotland, do not have such a
restraint, and neither do many American states. However, the passing of the act
clearly does not do away with the whole of the law of privity. The common law
rules that we have examined, which have developed through case law, still
stand. This is justified, as it would be unfair to remove the law of privity if it
meant that a duty could then be imposed on a person under a contract to which
that person had not agreed. The rule is also needed to prevent a benefit claimed
by a third party, where one was not originally intended.
Welcome as the statute is, though, it will need refining through
interpretation. Not every third party claim will – or necessarily should –
succeed.
- It must be clear that a benefit was intended by the original parties to the
contract. Until cases are considered by the courts we will not know how
clearly and precisely this intention needs to be expressed. - The third party who is to receive the benefit must be identified in the
contract – either by name or by their role or capacity. Again – how
precise does this need to be? - In Nisshin Shipping v Cleaves(2004) importance was placed on what the
original contracting parties would have considered to be an appropriate
interpretation at the time of forming the contract.
It is largely these potential problems that have caused some concern since
the passing of the statute, and they arise particularly in the construction
industry, where a mistake in the use of the statute could have extensive and
long-term consequences. The act has been viewed, therefore, as potentially
beneficial, but until it has become more refined it is said, in an article by
Donald Bishop in Construction Law, to be a ‘trap for the unwary’. Until the
interpretation of the act becomes clearer by case law, those in commerce
and industry, and particularly the construction industry, may choose to
make their intentions regarding the act precise by stating expressly whether
they intend to pass any benefit to a third party.
The doctrine is now, then, in the state that has been recommended so many
times by law reform bodies and individuals, although it will need some fine-
Privity of contract 143