3.2 Privity of Contract Lecture

Introduction

Commercial transactions of the modern times are no longer confined to individuals or simple sale-purchase deals.  With the multiplicity of parties on one hand, and the various stages of performance on the other, contemporary commercial contracts have become a complex web. Needless to state, the consequences and enforcement of such contractual relations are difficult to decipher.

  1. An example may be a contract between two parties- A and B, where A promises to pay B £5000 to B against the construction of a water tank.  B sub-contracts a part of the task to C for £1000, which C completes.  Upon non-receipt of £1000 from B, C seeks to recover the amount from A. A denies the payment as there was no contract ever executed between A and C.
  1. Conversely, while undertaking the task at A’s premise, C causes some damage to the site.  A then seeks to sue C for contractual breach, which C refutes on the ground that A was not privy to its sub-contract with B.  The complication further intensifies where the contract between A and B contains an exclusion clause seeking to exclude any liabilities on B or its associates for damage on site.
  1. Another instance being, where A (in its contract with B) agrees to pay £5000 to C, for work done by B.  Here, while the consideration flows from B, the benefit accrues to C.  In the event of non-payment, C seeks to enforce the contract executed between A and B only.
  1. Lastly, A and B (supplier) agree in a supply contract that C will bear all costs of materials supplied at the site, to which C has not consented otherwise or of which C is not aware.  Later, upon non-payment, B seeks to recover the dues from C.

All of the above illustrate the nuances of the doctrine of “privity of contract” and its implications on commercial arrangements.  While there are no straight-jacket solutions, certain principles have evolved over time in common law and statutes, which attempt to provide a direction to the issue - explained in more detail below.

General Rule

The Doctrine

The general rule at common law states that a contract creates rights and obligations only as between the parties to such contract.  As a corollary, a third party neither acquires a right nor any liabilities under such contract.  This is what the proclaimed doctrine of “privity of contract” enunciates and establishes as the overarching rule underlying any contractual relation.

The rule can trace its roots in the classical Roman law, which although later (in seventeenth century) made a divergence to recognise third party rights of action or contractual enforcement- Zimmerman, The Law of Obligations (Oxford University Press 1996).  Having followed this, English law too witnessed a journey of disarray – while the rule of no third party rights or liabilities formed the foundation since as early as the thirteenth century (Ibbetson, A Historical Introduction to the Law of Obligations (Oxford University Press 1999)) evidenced in cases like Crow v Rogers (1724) 1 Str 591, decisions favouring third party actions could be found in Dutton v Poole (1678) 2 Lev 210, Pigott v Thompson (1802) 3 Bos & Pul 98, and Carnegie v Waugh (1823) 1 LJ KB 89.

The position was somewhat fixed by the triple rulings in Price v Easton (1833) 4 B&Ad 433, followed by Tweddle v Atkinson (1861) 1 B&S 393, later affirmed in Dunlop Pneumatic Tyre Co Ltd v Selfridge Ltd [1915] AC 847.  In Price v Easton, the contract between Easton and another party provided for certain payment to Price against work done by such party.  While the work was completed, Easton failed to pay Price, who then sought to enforce the contract.  The court ruled that, as Price was not an executing party to the contract and did not supply any consideration to Easton, no rights of enforcement arose in favour of Price.

In Tweddle v Atkinson concerning an agreement between Guy and John to pay certain sums to William Tweddle where the contract allowed the latter to sue either of them upon non-payment, the court disallowed such right of action as William Tweddle was not a party to the contract.  This result was corroborated in Gandy v Gandy (1884) 30 ChD 57, and later in Dunlop Pneumatic Tyre Co, where a manufacturer sought to sue a subsequent dealer for sale of tyres on terms in breach of the original contract between the manufacturer and the intermediary wholesaler.  The court held that only a person who is a party to the contract can sue on it or be sued, and thus, no right accrued to the manufacturer to sue the dealer (a third party).  The court explained that “our law knows nothing of a jus quaesitum tertio arising by way of contract. Such a right…cannot be conferred on a stranger to a contract as a right to enforce the contract in personam”-Dunlop Pneumatic Tyre Co Ltd v Selfridge Ltd [1915] AC 847, 853.

Despite some initial doubts raised in cases like Smith and Snipes Hall Farm Ltd v River Douglas Catchment Board [1949] 2 KB 500, and Pyrene Co Ltd v Scindia Steam Navigation Co Ltd [1954] 2 QB 402, the doctrine was confirmed in Scruttons Ltd v Midland Silicones Ltd [1962] AC 446, and established firmly in Port Jackson Stevedoring Pty Ltd v Salmond & Spraggon (Australia) Pty Ltd (The New York Star) [1981] 1 WLR 138, and Amsprop Trading Ltd v Harris Distribution Ltd [1997] 1 WLR 1025.  While Scruttons and The New York Star dealt with benefit of exclusion clauses in shipment contracts, Amsprop Trading was concerned with beneficial covenants relating to land and property vis-à-vis third persons.

Rule of Consideration

The above line of cases hint at another rule ancillary to the main doctrine of privity of contract, that being, consideration must flow from the promisee.  In other words, “if a person with whom a contract has been made is to be able to enforce it consideration must have been given by him to the promisor”- Dunlop Pneumatic Tyre Co Ltd v Selfridge Ltd [1915] AC 847, 853.  Thus, while this rule of consideration is distinct and separate from the doctrine of privity, as upheld in Kepong Prospecting Ltd v Schmidt [1968] AC 810, it yields the same result so as to be closely connected. For instance, in an arrangement of sub-contract, the promisor cannot sue the sub-contractor (who is not the promisee) for any damage or defect in the work – Junior Books Ltd v Veitchi Co Ltd [1983] 1 AC 520. Conversely, the sub-contractor cannot bring an action of non-payment against the promisor too.    

General Rule: A contract creates rights and obligations only as between the parties to such contract.  A third party neither acquires a right nor any liabilities under such contract. 

Right of Action

It is worthwhile to highlight that what the doctrine prohibits is the right of action or enforcement in favour or against a third party, and not beyond.  That is, a contract may bestow benefits to a third party, although such imposition of liabilities remains a bar.  In the former case, a breach may be enforced by the other contracting party for and on behalf of the third party, by way of remedies such as specific performance, stay of proceedings, and damages, as discussed below.

Specific Performance

The leading case on this issue is Beswick v Beswick [1968] AC 58. In this case, John made promises to pay monies to Peter and his wife for life, against acquisition of certain coal delivery business from the latter.  The agreement was made between Peter and John, where the wife was not a party. Upon death of Peter, John refused to make the agreed payments to Peter’s wife, who then sought to enforce the agreement in the capacity of (a) administrator of Peter’s estate, and (b) personal right.  The court, citing the decisions in Robertson v Wait (1853) 8 Exch 299, and Lloyd’s v Harper (1880) 16 Ch D 290, ruled that where a contract is made with A for the benefit of B, A can bring an action for benefit of B, and recover all dues as if the contract was made with B himself.  The contracting party may, singly or jointly with the third party, have the contract performed by way of a court order for specific performance.  Accordingly, the claim of the wife as the administrator (as a contracting party) succeeded to obtain an order for specific performance by way of payment of all dues and arrears.

Having said that, the claim made in her personal capacity (as a third person) was not accepted on ground of the doctrine of privity. Moreover, it was clarified that such contracting party cannot retain the monies so recovered to himself (as it belongs to the beneficiary third party), and thus, he must hold the proceeds for the third person.  Accordingly, the monies recovered in the Beswick case was appropriated to the wife for her own benefit, and not to her husband’s (Peter’s) estate.

Stay of Proceedings

This remedy is relevant where a contract provides for a covenant not to sue the third person.  Where a party institutes a legal action against the third person in breach of such covenant, the other contracting party may seek to discontinue such proceedings by way of a stay order.  This relief was granted in the case of Snelling v John G Snelling Ltd [1973] 1 QB 87, concerning the forfeiture of certain dues owed by a company to its directors (three brothers), which agreement was executed only between such brothers. The question, thus, arose whether one of the brothers could later sue the company for recovery of debt, notwithstanding the agreement of forfeiture.  The company along with the other two directors (by way of counterclaim) sought to invoke the agreement so as to stay the legal action, and/or dismiss the recovery claim.

Having said that, the following conditions must be satisfied to obtain a stay- Gore v Van Der Lann [1967] 2 QB 31:

  1. The contract must provide for an undertaking by the promisor not to sue the third person, and
  1. The promisee must have a sufficient interest in the enforcement of the promise.

In the above case of negligence against a bus conductor, the promisee sought to invoke its agreement with the passenger excluding liability on injury to stay the action.  The court, stating the absence of both of the above conditions, declined to order stay of proceedings.

Damages

As a general rule, a contracting party can sue for damages only in respect of his own loss, and not for losses suffered by a third person- Alfred McAlpine Construction Ltd v Panatown Ltd [2001] 1 AC 518. 

This rule, however, has been applied with exception where the third person had no alternate course of remedy available to make good the loss, commonly referred to as a situation of “legal black hole”- Darlington Borough Council v Wiltshier Northern Ltd [1995] 1 WLR 68, 79.  This was affirmed in Linden Gardens Trust Ltd v Lenesta Sludge Disposals Ltd [1993] UKHL 4, and St Martins Property Corporation Ltd v Sir Robert McAlpine & Sons Ltd [1994] 1 AC 85, 115 - where the court held "In such a case, it seems to me proper… to treat the parties as having entered into the contract on the footing that Corporation would be entitled to enforce contractual rights for the benefit of those who suffered from defective performance but who, under the terms of the contract, could not acquire any right to hold McAlpine liable for breach”. 

The above position was followed in Darlington Borough Council v Wiltshier Northern Ltd [1995] 1 WLR 68, in relation to a construction contract (although doubted without definite results in another construction case of Woodar Investment Development Ltd v Wimpey Construction UK Ltd [1980] 1 WLR 277). Moreover, in the context of family losses in Jackson v Horizon Holidays Ltd [1975] 1 WLR 1468, the court upheld Jackson’s right to recover damages for losses suffered by his wife and sons from the travel company in relation to breach of certain accommodation conditions.  

However, the position as regards such right of recovery of damages by the other contracting party (without having suffered any loss) differs where the third person may have an independent right to claim- (GH Treitel, ‘Damages in Respect of Third Party Loss’ (1998) 114 LQR 527).  This is the reasoning on which the refusal of claim for damages in Alfred McAlpine Construction may be differentiated from the allowance in the above cases.  In Alfred McAlpine Construction, the court held that there was no justification for Panatown to recover damages on behalf of X, when X had its own cause of action against Alfred. 

Doctrine of Privity prohibits right of action only. Thus, a contract may bestow benefits to a third party, although imposition of liabilities remains a bar.

Such benefits can then be enforced by promisee to procure remedies for the third person, by way of:

  • specific performance,
  • stay of proceedings, and/or
  • damages.

Exceptions to the Doctrine

The rule that a third person has no right to enforce a contract to which he is not a party is not absolute, as it is qualified by a number of exceptions, arising in common law and statutes:

Statutory Exceptions

Some of the earliest statutory right of third person to enforce contractual obligation of another can be found in section 56(1) of the Law of Property Act 1925 (invoked in Beswick v Beswick), section 11 of the Married Women’s Property Act 1882, section 14(2) of the Marine Insurance Act 1906, and section 148(7) of the Road Traffic Act 1988 (all of the above relating to policy of assurance/insurance for benefit of family or third persons).  Also, section 2 of the Carriage of Goods by Sea Act 1992 bestows a holder of bill of lading with all rights of legal action permissible under the contract of carriage, notwithstanding that he was not a party to it when originally drafted.

The Contracts (Rights of Third Parties) Act 1999

The most frequently invoked statutory exception lies in the Contracts (Rights of Third Parties) Act 1999 (1999 Act), which came about pursuant to the Law Commission deliberations and report of 1996 (Law Commission, Privity of Contract: Contracts for the Benefit of Third Parties, Law Com No 242,1996).  The enactment was devised to remedy the uncertainties and ambiguities surrounding the doctrine and its exceptions in common law, more particularly, that depriving a third person of such enforcement right has unwarranted results- (a) eroding the intention of the original contracting parties, (b) a situation of dichotomy where the person who has suffered loss is left with no remedy while one who can sue has no damage, (c) the promisee, although can seek redress for the third person, may chose not to do so, (d) injustice to third person interests, and (e) overall inconvenience to the commercial domain- (Law Commission Report, paras 3.1- 3.28).  

The 1999 Act prescribes a two-fold test to allow a third person action or enforcement of contract, namely (section 1) -

  1. Where the contract expressly provides for it, or
  2. Where the contract purports to confer a benefit on such third person.

For either of the conditions, the third person must be clearly identifiable, i.e., by name or class/category of persons (even if not in existence then).  Such class or category may be references to stevedores, tenants, owners, family, future spouse, an unincorporated company, or unborn child, or   a description of characteristics (A Burrows, ‘The Contracts (Rights of Third Parties) Act and its Implications for Commercial Contracts’ (2000) LMCLQ 540).  Notably, such identification must be specific and express, ruling out any scope for identification by construction or inference- (Avraamides v Colwill [2006] EWCA Civ 1533). 

Further, the test (i) if satisfied, also covers negative rights as specified in section 1(6), such as right of exclusion or limitation of liability (Himalaya clause) - the subject matter of much dispute in common law (to be discussed in part 3.4 later).

The position as regards test (ii) however remains controversial.  This is because it indicates towards an implied case of third person right, where no express stipulations exist in the contract.  This leaves much scope for subjectivity and lack of predictability, as under the common law exceptions- Trident General Insurance Co Ltd v McNiece Bros(1988) 165 CLR 107.  Moreover, the right is allowed only where the contract “purports to confer” benefit on the third person, such that consequential or incidental benefits are not covered- Dolphin Maritime & Aviation Services Ltd v Sveriges Angfartygs Assurans Forening [2009] EWHC 716. 

Also, the condition does not enable a third person action where the intention of the contracting parties appears to the contrary in the contract (section 1(2)). This rebuttal was invoked in the case of Nisshin Shipping Co Ltd v Cleaves & Co Ltd [2003] EWHC 2602, where it was asserted on the ground that the third person had a right of action otherwise, so that such right under the 1999 Act was not necessary.  Likewise, in Laemthong International Lines Co Ltd v Artis (The Laemthong Glory) [2005] EWCA Civ 519, it was argued that allowing third person action would be inconsistent with the sequential contractual structure in place between the charterer, owner and receiver (following from para 7.18 of the Law Commission Report precluding third person actions to cut through the custom of chain of contracts prevalent in the construction industry). The court, however, ruled that simply a sequential arrangement of contract does not negate third person right, unless backed by industry customs, as in the construction industry.  This is further affirmed in Great Eastern Shipping Co Ltd v Far East Chartering Ltd (The Jag Ravi) [2012] EWCA Civ 180.

Moreover, the 1999 Act prevents the variation or rescission of a contract where such third person right to action is established, except by way of consent of the third person (section 2).  While this opens up the potential for third person legal suits on one hand (N Andrews, ‘Strangers to Justice No Longer: The Reversal of the Privity Rule Under the Contracts (Rights of Third Parties) Act 1999’ (2001) CLJ 353), the 1999 Act seeks to balance the case for contracting parties too through provisions on defences to the promisor (section 3), avoidance of double liability (section 5), promissee enforcement rights (section 4), and exceptions to third person action (section 6).

All in all, the 1999 Act (although an exception) does not abrogate the doctrine of privity of contract, which continues to remain the predominant overarching rule governing contractual relations.  Additionally, the 1999 Act does not alter the legal position, including the exceptions, under common law, which continue to be applied by courts alongside (GH Treitel, The Law of Contract (Sweet & Maxwell 2003).

1999 Act

Two-fold Test:

  1. Where the contract expressly provides for third person action, or
  2. Where the contract purports to confer a benefit on such third person (consequential or incidental benefits not covered).

When Allowed?

Identifiable Third PersonNegative Clauses Included

No Contrary Intention of Contracting Parties

Common Law Exceptions

Collateral Contracts

This exception is much conflicted as it depends upon the finding of the court of a contract in existence where the claimant is an actual contracting party, and not a third person.  It was brought to test in the case of Shanklin Pier Ltd v Detel Products Ltd [1951] 2 KB 854.  In this case, the defendant represented that certain paints were suitable for use in re-painting of the pier with a life of seven to ten years.  Relying upon this, the plaintiffs re-painted the pier which paint was found to be unsuitable, and having a much lesser life. The court was, thus, concerned with deciding whether such representation could be reckoned as a warranty between the plaintiff (owner of the pier) and the defendant (paint manufacturer) where the original sale and purchase of paint was not undertaken between them.  Such collateral contract was found to be existing in this case.

Whether or not such collateral contract exists depends upon evidence of the generally applicable constituents of a valid contract, namely- offer, acceptance, intention to create legal relations and consideration- Gravy Solutions Ltd v Xyzmo Software GmbH [2013] EWHC 2770.  Where any of such elements is absent, the exception enabling third person action will not be triggered- Independent Broadcasting Authority v EMI Electronics (1980) 14 Build LR 1.

Trust 

The way for this exception was paved by the ruling in Dunlop Pneumatic Tyre Company Ltd v Selfridge and Company Ltd [1915] AC 847, 959, where it was held that although privity of contract does not allow third person action, such a “right may be conferred by way of property, as for example, under a trust”.  This was affirmed in Les Affreteurs Reunis v Walford [1919] AC 801.  In this case, Walford (broker) negotiated a contract between the charter party and the ship owner, containing a stipulation as regards certain commission payable to Walford.  Upon failure of such payment, Walford sued the ship owner.  The court found a trust to have been created owing to Walford receiving benefit under the agreement.

Caution should, however, be exercised to not confuse this exception with that of a simple contract executed for benefit of a third person.  Not in every such contract involving third person beneficiary is a trust of contractual right created.  This was highlighted in the case of Re Schebsman [1944] Ch 83, 89.  Schebsman employment was terminated with a company, following which he entered into an agreement with the company for certain payments against such termination.  The payments, in the event of his death, were to be made to his wife and daughter. Upon his death and failure of payments by the company, it was argued that the contract between Schebsman and the company created a trust in favour of the wife and daughter.

The court ruled that no such trust was created as “It is not legitimate to import into the contract the idea of a trust when the parties have given no indication that such was their intention. To interpret this contract as creating a trust would… be to disregard the dividing line between the case of a trust and the simple case of a contract made between two persons for the benefit of a third. That dividing line exists, although it may not always be easy to determine where it is to be drawn”. 

Thus, aside to receipt of benefit by the third person, the general character of trust and an intention to create one must be established- Green v Russel [1959] 2 QB 226. The above proves the potential ambiguity surrounding the application of the exception from a practical perspective.

Assignment

As such, a contracting party can assign his rights (not liabilities, except by way of consent) under the contract to a third person.  Having said that, a mere right to litigate or sue for damages cannot be so assigned, unless the third person has a commercial interest in assuming such right, as enunciated in Trendtex Trading Corporation v Credit Suisse [1982] AC 679.  Moreover, defences of the promisor and the extent of remedy available to the third person would be as what was contemplated and applicable under the original contract- Offer Hoard v Larkstore Ltd [2006] EWCA Civ 1079.

Agency

This exception can be traced from the Dunlop Pneumatic Tyre Company Ltd case, i.e., a principal not named in the contract may sue upon it if the promisee really contracted as his agent, and consideration was directed personally or via the promisee in the capacity of an agent.  In other words, the real right of action then rests with the principal as the contracting party, as the agent (promisee) then moves out of the arrangement so as not to sue or be sued- Wakefield v Duckworth [1915] 1 KB 218.

Action in Tort

In the event of a breach of duty of care, an independent claim for negligence can be instituted by the person having suffered the loss, regardless of any contractual arrangement otherwise.  This can be best asserted through the case of Donoghue v Stevenson [1932] AC 562, where despite the claimant having no contractual relation with the ginger beer manufacturer, a claim in tort could be successfully sustained.

Similar stance in the domain of tort was witnessed in Junior Books Ltd v Veitchi Co Ltd [1983] 1 AC 520, where a claim against defective construction was allowed by the pursuer against the sub-contractors (contractually possible only via the main contractor). This was however criticised much, including the more recent case of Linklaters Business Services v Sir Robert McAlpine Ltd [2010] EWHC 1145, which advocated for sequential action owed to immediate contracting party under contract law instead. Nonetheless, action in tort continues to be a prime area of third person actions where contractual remedy may otherwise be barred due to the doctrine of privity, more so when that renders a situation of lacunae and injustice- White v Jones [1995] 2 AC 207.

Restrictive Covenants

In an example of sale and purchase of land, any terms of conveyance will generally be confined to the seller and the buyer, and not extend to subsequent buyers/owners.  Having said that, a restrictive or negative covenant such as bar on use of the land for commercial purposes or on constructing permanent fixtures on the land, may be carried forward with the land and enforced by the seller against subsequent owners.  This was upheld in Tulk v Moxhay [1848] 41 ER 1143.

Exclusion/Limitation/Himalaya Clause

The question whether or not a third party could take benefit of an exclusion or limitation clause (popularly known as the Himalaya clause) in a contract, more particularly, in a contract of carriage, has been subject to much judicial bargain- E McKendrick, Contract Law (Oxford University Press 2012). 

In the early case of Elder Dempster v Paterson Zochonis [1924] AC 522, where oil was damaged by bad stowage in relation to a contract between the claimant and the carrier, the court extended the exclusion in the bill of lading to the ship owner, notwithstanding the absence of any direct contract of the ship owner with the claimant.  This was so because the clause expressly mentioned ship owners, reckoned to have operated as the agent of the carrier.  This stance was, however, soon refuted in Scruttons Ltd v Midland Silicones Ltd [1962] AC 446, which enumerated several requirements for such an extension of exclusion clause to a third person, such as stevedore, namely- (i) declaration of agency in the clause itself that the carrier had contracted as agent of the stevedore for the purpose of securing the benefit, and (ii) carrier must have the authority from the stevedore to do so (even if by later ratification).  In this case, drums of chemicals were damaged by stevedore during carriage under a contract between the carrier and the claimant.  The court ruled that, as the stevedores were not parties to the carriage contract, they could not avail the exclusion clause.

Notwithstanding the above, the position of Elder Dempster was once again reiterated in New Zealand Shipping v AM Satterthwaite Ltd (The Eurymedon) [1975] AC 154, where the Himalaya clause was held to be capable of protecting third persons.  The case facts were similar as above cases, concerning liability of stevedore under bill of lading executed between the shipper and the carrier.  The court found a new contract between the shipper and the stevedore, separate from and collateral to the main contract of carriage.  The above reasoning based on agency and collateral contract were affirmed in the New York Star case - Port Jackson Stevedoring Pty Ltd v Salmond & Spraggon (Australia) Pty Ltd [1981] 1 WLR 138. 

In relation to exclusive jurisdiction clause too, as evidenced in the Pioneer Container case [1994] 2 AC 324, the doctrine of privity was excepted.  In this case, the shipper allowed the carrier to sub-contract the carriage. The carrier then sub-bailed the goods to the ship owner under certain bills of lading, which contained an exclusive jurisdiction clause providing for Taiwan to be the forum to determine any disputes. The Privy Council held that the exclusive jurisdiction clause in the bills of lading were binding and enforceable against the shipper too. On the contrary, such a jurisdiction clause was held to be not stretchable to the ship owner from a contract between the shipper and the carrier.  This was so because only the liability clause (and not jurisdiction) extended to the ship owner from the original contract- The Mahkutai [1996] AC 650. 

The swing of law, however, stands settled to certain extent by the 1999 Act, which expressly provides for the extension of negative clauses (protection), where applicable, to third persons (section 1(6)).

Common Law Exceptions

Collateral Contracts                         TrustAssignment

Agency                      Action in Tort                Exclusion/Limitation/Himalaya Clause

Conclusion

It is clear that the doctrine of privity of contract is an established norm, and third person action or right to enforce a contract of which he is not a party is an exception to the general rule.  This position remains unshaken, notwithstanding the debate around the redundancy of the doctrine in the contemporary commercial context, as advanced by Flannigan, who condemned the doctrine as being an error and inconsistent- (R Flannigan, ‘Privity- the End of an Era (Error)’ (1987) 103 LQR 564).

The above view is refuted by the school of advocacy defending the doctrine, including inter alia, observations in response to and criticising the Law Commission arguments for reform, by Stevens, Smith and Kincaid (R Stevens, ‘The Contracts (Rights of Third Parties) Act 1999’ (2004) 120 LQR 292; SA Smith, ‘Contracts for the Benefit of Third Parties: In Defence of the Third-Party Rule’ (1997) 7 OJLS 643; and Kincaid, ‘Third Parties: Rationalising A right to Sue’ [1989] CLJ 243).

On another note, the implementation of the doctrine has been much turbulent, owing to the uncertainty and ambiguous contours of the common law exceptions.  Although much has been sought to be streamlined through the 1999 Act, the legislation remains underused- H Beale, ‘A Review of the Contracts (Rights of Third Parties) Act 1999’ in A Burrows & E Peel (eds), Contract Formation and Parties (Oxford University Press 2010). 

Moreover, in terms of the second limb of the test under section 1 of the 1999 Act, the position continues to be determined by courts on a case-to-case basis, with little improvement from the situation previously under common law- T Roe, ‘Contractual Intention under Section 1(1)(b) and 1(2) of the Contracts (Rights of Third Parties) Act 1999’ (2000) 63 MLR 887.  This statutory gap is reiterated by Rhune, who advices for equivocal exclusion of the 1999 Act, so as to avoid enforcement by third persons, where the contracting parties intend to do so- J de Rhune, ‘Contracts (Rights of Third Parties) Act 1999’ (2000) The Legal Executive 22.  Unless so stated, all of the 1999 Act along with the common law exceptions may be triggered towards spur of third person litigation, diluting the voluntary or personal facet of contract law. 


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