A
well-established principle of contract law is that only the parties to the
contract can make claims against it.
Dunlop sold tyres to Dew & Co., with a
term in the agreement that Dew would not sell more cheaply to anyone else, and
that Dew would not enter into a contract with anyone else except on the same
terms. Dew sold tyres to Selfridge at
the stipulated terms, but Selfridge sold them more cheaply. Dunlop brought an action against Selfridge,
which failed on the basis that Dunlop had no contract with Selfridge, and was
not a party to the contract which had allegedly been breached.
Presumably Dunlop could have taken an action
against Dew, who in turn could have taken action against Selfridge.[1]
Clearly, it is
fair that people should not incur obligations in respect of contracts to which
they are not party and which offer them no benefits. However the principle of ‘privity’ does mean
that it is difficult to enter a contract that benefits a third party without
taking out a separate contract with the third party.
Woodar contracted to sell some land to Wimpey
for £850,000 on the understanding that £150,000 would be paid to a third party
on completion. Wimpey backed out of the
deal without paying any money, leaving Woodar to make a claim under the
contract. This they could not do,
because Wimpey pointed out that Woodar would have no claim on the £150,000
(privity), and the beneficiary of this money would have no claim as there was
no contract in place to support it.[2]
No comments:
Post a Comment