EXCEPTIONS TO THE PRIVITY RULE: CONTRACT (RIGHTS OF 3 RD PARTIES) ACT 1999 y s1 - 3rd parties can sue if: o (a) The contract

provides that he may; or o (b) A term purports a BENEFIT to him. y s3 - The 3rd party has to be identified in the contract however. y S7 (1) Act does not affect any other right founded in common law (so all the above cases still stand)

Nisshin Shipping Co. v Cleaves & Co. Ltd If a benefit/rights are/is accrued to a 3 rd party from the main contract then the 3 rd party can sue on the main contract y An arbitration clause in the main contract between C and a ship owner purported a benefit onto a 3rd party (D). Held: Due to the benefit they could sue the 3rd party.

y y

Cases such as Beswick v Beswick would now fall under the act. She was identified (s3) and the term purports a benefit to here (s1 a) Act gives parties an incentive to make their intentions clear at the time of contracting

Can a promisee sue and recover damages in respect of a THIRD PARTY S LOSS? (useful when the 3rd party isn t named in the contract so you can t use the act)
General rule: Alfred Mcalpine v Panatown A promisee can only recover damages in respect of his own loss, not on behalf of a third party who has suffered loss y Majority held it would be illogical for this not to be the case as the whole purpose of damages is to compensate for loss, receiving compensation for loss not sustained cannot be justified. y However: Dissenting Goff provided the example, where A contracts with B to do work for C. If B doesn t do the work, A has suffered no loss and cannot therefore recover damages. Exceptions: Jackson v Horizon Holidays Speculative authority (seemingly overruled in Woodar) that a party can recover losses suffered by a 3 rd party y C booked a holiday. Specified what food/accommodation and facilities he wanted. y Told his hotel wouldn t be ready so they put him in another one and promised that his requirements would be fulfilled. They weren t, suffered distress. Awarded £1100. y First Judge said he could only award damages for Jackson s distress personally, not the distress suffered by his family as they weren t party to the contract. y CoA: o Denning: He recovered damages on behalf of his family, damages would have been excessive otherwise claims you can recover on behalf of 3rd parties!! o Orr LJ: I agree (but does he agree with Denning s statement that damages can be recovered on behalf of a 3rd party nobody knows can t say) o James LJ: Agrees with first judge So it is not unequivocal authority for the proposition that a party can sue for losses suffered to a 3rd party.

2 steadfast exceptions: Woodar v Wimpey Construction Agrees with the general rule in Panatown but states that a trustee and an agent (suing for their beneficiaries/prin ciples) are exceptions to the rule y D buys land from C. Apart from the purchase price D also had to make a payment to a 3rd party. Asked in obiter: Could C claim damages if this payment wasn t made? y Held: o Disagreed with Denning s reasoning in Jackson. o Two exceptions to the general rule:  A trustee can recover losses even if the losses were suffered solely by the beneficiaries.  An agent can recover losses even if the losses were suffered by his principle

1 more exception added:

The Albazero An exception in commercial contracts y In a commercial contract: o (1) where the original party may transfer proprietary interests in goods after completion of the contract, o (2) then the original party is taken to have contracted for the benefit of all parties who may acquire a benefit in those goods o (3) then the original party can recover damages on their behalf

Alfred Mcalpine v Panatown Rules the the Albazero exception does not apply if the 3 rd party has a right of action of their own y Panatown contracted Mcalpine to build on UIPL s land. (3rd party) y Building contracted failed, cost of repair and delay £40million y Panatown said they could sue on 2 grounds: o 1. Entitled to recover damages suffered by a 3rd party (UIPL) o 2. It could recover as it had suffered loss due to the breach y Held: o 1. Couldn t recover on behalf of UIPL because UIPL had a right of action of its own as Mcalpine owned them a duty of care (had signed an agreement with UIPL) o 2. Could not recover for the loss, as it hadn t suffered any loss, the loss was suffered by UIPL and any interest they had in the loss was recoverable by UIPL s right of action against Mcalpine.

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