What (rights Of Third Parties) Act 1999 Intended Essay Example

assert a positive right under the contract (largely family arrangements) and secondly where he seeks to rely on a term in the contract as a defence to a claim bought by the claimant (complex commercial arrangements).

These two issues can be demonstrated clearly in numerous cases. Firstly, in Beswick a widow was not allowed to seek grievances from the court regarding the lack of fulfilment of a contract made to benefit her, as she was not privy on it. However, she could successfully sue the plaintiff under her husband’s estate which was contrastingly not a benefiter of the contract. This decision eventually bought about justice, but only as the claimant was the “husband” and not third party.

This demonstrated how the privity doctrine could give rise to great injustice. Secondly the case of Scruttons demonstrates the second issue regarding exclusion clauses. In this, stevedores hired by Midland silicone negligently dropped a drum of chemicals and were consequently sued. Upon contract with Midland Silicone a limitation clauses stated that maximum liability of claim was $500. The stevedores relied upon this limitation clause in court however it was ineffective in providing the protection sought.

The court ruled that the contract was between Scrutton and Midland Silicone, therefore the limitation clause was not applicable to the third party (stevedores). This bought about many commercial issues, s it became apparent that employers could not provide their employees with the benefit of an exclusion clause. Another important aspect of the doctrine of privity is its relationship with the doctrine of consideration. This can be explained most efficiently using case law. The two leading cases in this relation

are Tweedle and Dunlop.

The case of Tweedle demonstrated a very close relationship between the two doctrines and emphasised that privity and the rule that consideration must move from the promisee formed one conjoined rule. This can be seen in both cases as in both instances the claimant could not sue due to the fact he had not provide consideration for the defendants promise. Despite the obvious strength of the argument the more widely accepted view was one stated by Viscount Haldane which stated that privity is separate and distinct and that consideration is to be moved from the promisee .

Howevr, despite the above, and all is strengths and ovious connections, it is important remember that privity and the rule of consideration are two separate rules. Thus far, case law denotes that the doctrine of privty conjured up many criticisms. Prior to the contracts (Rights of Third Parties) Act 1999 a great array of problems with the docterne was evident. This could largely be broken down into four key issues . Firstly , the doctrine provided many examples of failing to honour intentions of parties.

In Tweedle, the DoP obstructed the intentions of the contracting parties and agreements were frustrated by the DoP . Secondly, When courts tried to divert the DoP around its obstacles for third parties, issues arose as it was very complex, artificial and as seen in the case of New Zealand Shipping Company - doubt was placed as to whether it was even possible. It was found far too complex a task to give effect to the parties intentions. Thirdly, it was thought outrageous in circumstances were

a person who had suffered no loss was eligible to sue whereas an individual at loss could not.

Particularly in commercial issues as stated in Scruttons and most notably the difficulties of The Eurymedon, whereby commercial transactions had to seek other forms of protection, such as statutory footing in order to avoid the unfavourable outcomes of privity. Furthermore, the great Injustice of privity was widely acknowledged. when a third party controlled his affairs, he did so on the basis that he will be exempt unless benefitting from the promise of the promisee, as noted in Tweedle.

Hence, the Law Commisson (1996) recommended the reform of this area of law and thus In 1999 the contract right of third parties act was developed. In its enforcement is sought to "fix" many of the issues of the DoP and work alongside it - but in no way sought to replace it. It was stated by the Law Commission Report that the old rule of privty of contract with its exceptions are to remain. The new Act will add to the doctrine of privity a right for third parties to action as well as providing exceptions to when this addition is not available Privity and the exceptions stated in s7. 14-7. 21 remain intact.

And alike Privity and its exceptions, the introduction of the third party right of action also displays its exceptions. However although it is widely noted that the Act has bought improvements to the law it is often noted to be of a complex nature (chitty,2008, para 18-002). This is largely due to the fact that the act must coincide and work alongside

the laws of Privity. The complexities and issues can be distinguished into four main points. Firstly, it is apparent that third parties have a right of action under the act but not at common law.

Here the act only works to regulate the issue. The second issue is the reverse of the first and so is when the act sees no opportunity for a claim but does under common law. In such a case the third parties right will follow the rules of the successful provision and dismiss the act. Thirdly , in situations whereby the third party has rights at common law and the Act - in such instances the third party is allowed to decide which they should apply under. And finally, when a third party has no rights under both common law and the Act.

Here the only remedy can be sought by way of persuading courts that the law of this area requires further developing and thus new exceptions shall be made. This issue was expressly encouraged by the Law Commission Report (para 5. 10). The rights of the third party created by the act are largely determined by the intention of the contracting parties. These intentions can be categorised into two limb test. The first situation is discussed in s. 1(1)(a), whereby it is stated that "the contract expressly provides that he may.. " This denotes situations whereby express intention is stated within a contract.

The right of action given to the third party may vary from the right to sue or the right to rely upon a limitation clause that was agreed upon. This tackles both

issues seen in such pre mentioned cases as Beswick and The Eurymedon. Since the introduction of the 1999 Act the difficulty in giving effect to such third party rights has been reduced as now, a simple clause stating the right of the third party's involvement or exclusions within the contract are enough for action to take place. However, it is important to note that such clause must be explicit, and infered clauses may not be considered adequete.

Another benefit of this is that parties are able to exclude third party action without the fear of the UCTA (unfair contract terms act 1977). However, there is some unfairness regarding this clause still. As in certain exceptional circumstances whereby death or personal injury is caused bu negligence of a contrcting party, the UCTA will take force and the limitation clause will be void. Unfairness arises when we go on to look at property damage or other forms of loss whereby UCTA will only regulate clauses of a tort (negligence) nature and not those through contract.

Secondly, is the issue of when contracting parties do not expressly state their intentions and the rights of the third party. In such cases, the third party may still have a right to enforce the term as s(1)(b) only states that the benefit of the third party is to be "purported. " The difficultly lies here in demonstrating whether or not the intention of the parties was for the third party if it is not expressly stated, however if demonstrated, the term purport could mean cause for action.

Further to this the term "benefit" used in s. 1(b) also

gives rise to claims. this was noted in Dolphin Maritime (dolphin maritime & Aviation Services Ltd v Sveriges Angfartygs Assurans Forening [2009] EWHC 716 (Comm); [2009] 2 Lloyd's Rep 123) where it was stated that if a contracts purpose is made for the benefit of the third party this is now suffice in prooving right, even without express declaration. According to such terms, cases such as Beswick reapplied could now seek claims, as here - the inference of a intention is evident.

Although, having said this, it is important to note that this is still a very unrefined issue and still causes mixed outcomes as many judgements vary on the basis of "how the judge infers the term. " Here, it would be, how the judge infers s. 1(1)(b) and whether he takes the meaning of purport literally and strictly as seen in Nisshin Shipping Co Ltd v Cleaves & Co Ltd [2003] EWHC 2602 (Comm); [2004] 1 Lloyds Rep 39 We can thus state that, although attempting to resolve issues of the DoP. The act still requires clarifications and refinement in itself.