S.S.

Jain Subodh Law College

Case Study : Dutton v. poole

Submission To: Submitted By:

Ms. Anusha Tomar Gaurav Upmanyu

Assistant Professor Roll no:- 29

Semester 3rd section A

 CONTENTS

1. Certificate

2. Acknowledgement

3. Introduction

4. Dutton v. Poole

5. Privity Of Contract

6. Exceptions

7. Bibliography
 CERTIFICATE

This is to certify that Gaurav Upmanyu student of B.A. L.L.B. of S.S. Jain Subodh Law
Collage, has completed his project on under the guidance of Ms. Anusha Tomar, Assistant
Professor, S.S. Jain Subodh Law Collage, Jaipur. This project is an original, independent work to
the best of my knowledge and has not been published anywhere and has been pursued solely for
academic interest.

(Signature of Teacher)

Ms. Anusha Tomar

 ACKNOWLEDGEMENT

The project is incomplete without thanking a few people who have been my pillar of support
throughout this work.

I would like to express my deep and sincere gratitude to my teacher Ms. Anusha Tomar for her
continuous support. She have always been there to listen , guide me and help has been constantly
monitoring the progress of my work and show me the different way to approach a research
problem and also the need to become persistent to accomplish any mission.

I am also obliged to acknowledge the college administration for providing a wonderful library
which is a store house of knowledge and also for providing all the electronics resource without
which no such research could have been possible.

Finally, I would like to thank everybody, who played a significant role in the successful
completion of my dissertation.

(Student Signature)

Gaurav Upmanyu
 Introduction

The main principle highlighted by this concept of Privity of Contract is regarding the rights of
third parties in a contract. Thought the position in various countries is now similar, if not the
same, it was not the same when the rule came into being. The most important questions to be
considered were whether a third party could acquire rights, or incur obligations, to a contract to
which he or she is not a party?

These questions were highly prevalent in England from 17th to 20th century. Under Common
Law, the answer to these questions was no. It was developed by the end of 19th century that third
parties were necessarily strangers to contract and hence could neither acquire the rights nor incur
obligations upon any party to a contract to which they themselves were not a party. “The
doctrine of privity means that a contract cannot, as a general rule, confer rights or impose
obligations arising under it on any person except the parties to it.”

The student in this study hence tries to establish how the above mentioned position was achieved
and the conditions and the scenario that paved the path for the current position of the third
parties, especially after the Rights of Third Parties Act of 1999.

After establishing the position in England, the student tries to discuss the position of the concept
of Privity, in detail, in the Country of India, mostly with the help of landmark case laws,
changing the course of the rule despite of the very high influence of the English Laws and
cultures on the Indian laws. Then, the student tries to look into the position held by this concept
in other major countries of the world.

If A makes a contract with B, he comes under a legal obligation to pay damages if he fails to
keep his promise. The enforceability or liability as regards this contract lies firmly in the hands
of A and B to the exclusion of others, this is the foundation of the doctrine of privity of contract.

The doctrine of privity of contract is that a contract cannot confer rights or impose those
obligations arising under it, on any person except the parties to it. The term “parties” may seem
simple enough but there are situations where it may become doubtful as to exactly who the
parties are and resultantly, who, in the eyes of the law should be liable or should be compensated
in event of inevitable breaches that may occur from time to time.
Dutton V Poole (1678) 2 Lev 210

A son made a contract with his father for his father to not cut down an oak woodland. As
consideration for this, the son would make a payment to his sister of £1000 once she had
married. The money gained from the woodland would have been paid to the sister. The father
died before the sister was married and the son subsequently refused to pay his sister the money
as was previously agreed, at the time of her marriage. The sister sued her brother for the amount
that was originally promised between the father and son.

Dutton v Poole (1678) is and early and landmark decision in the Court of Chancery.1

It established the rule that privity of contract ,2 and lack of consideration preclude third party suit
for breach of a contract. The case has recently been adopted in the House of Lords case Beswick
v Beswick

1
Vernon V. Palmer, The Paths to Privity: The History of the Third Party Beneficiary Contracts. (The Lawbook
Exchange, Ltd., 1992) p75.
2
Dutton v Poole (1678) 2 Lev 210]]
Facts

A son made a contract with his father for his father to not cut down an oak woodland. As
consideration for this, the son would make a payment to his sister of £1000 once she had
married. The money gained from the woodland would have been paid to the sister. The father
died before the sister was married and the son subsequently refused to pay his sister the money
as was previously agreed, at the time of her marriage. The sister sued her brother for the amount
that was originally promised between the father and son.

Issue

The concept of privity of contract had not been fully established at this stage and therefore this
decision had significant importance to the broader subject. The court had to understand whether
the daughter could be considered to be privy to the contract between the father and son regarding
the payment. Within this, it was vital for the court to establish whether the daughter had given
consideration for the promise that was made by the son, to his father, to pay the daughter the sum
of money upon her marriage.

Held

The court found in favour for the sister on the basis that the relationship between the father and
the daughter had made the sister a party to the agreement, even if she was not included at the
time the contract was agreed. The relationship between father and daughter was found to extend
the consideration that the father gave in the promise to the children. (Scroggs CJ)
Privity of contract

The doctrine of privity of contract is a common law principle which provides that a contract
cannot confer rights nor impose its obligations upon any person who is not a party to the
contract.

The premise is that only parties to contracts should be able to sue to enforce their rights or claim
damages as such. However, the doctrine has proven problematic due to its implications upon
contracts made for the benefit of third parties who are unable to enforce the obligations of the
contracting parties. In the UK, the doctrine has been substantially weakened by the Contracts
(Rights of third Parties) Act 1999

Third-party rights

Privity of contract occurs only between the parties to the contract, most commonly contract of
sale of goods or services. Horizontal privity arises when the benefits from a contract are to be
given to a third party. Vertical privity involves a contract between two parties, with an
independent contract between one of the parties and another individual or company.

If a third party gets a benefit under a contract, it does not have the right to go against the parties
to the contract beyond its entitlement to a benefit. An example of this occurs when a
manufacturer sells a product to a distributor and the distributor sells the product to a retailer. The
retailer then sells the product to a consumer. There is no privity of contract between the
manufacturer and the consumer.

This, however, does not mean that the parties do not have another form of action: for instance, in
Donoghue v. Stevenson – a friend of Ms. Donoghue bought her a bottle of ginger beer, which
contained the partially decomposed remains of a snail. Since the contract was between her friend
and the shop owner, Mrs. Donoghue could not sue under the contract, but it was established that
the manufacturer was in breach of a duty of care owed to her. Accordingly, she was awarded
damages in the tort of negligence for having suffered gastroenteritis and "nervous shock".
History

Prior to 1861 there existed decisions in English Law allowing provisions of a contract to be
enforced by persons not party to it, usually relatives of a promisee, and decisions disallowing
third party rights. The doctrine of privity emerged alongside the doctrine of consideration, the
rules of which state that consideration must move from the promisee. That is to say that if
nothing is given for the promise of something to be given in return, that promise is not legally
binding unless promised as a deed. 1833 saw the case of Price v. Easton, where a contract was
made for work to be done in exchange for payment to a third party. When the third party
attempted to sue for the payment, he was held to be not privity to the contract, and so his claim
failed. This was fully linked to the doctrine of consideration, and established as such, with the
more famous case of Tweddle v. Atkinson. In this case the plaintiff was unable to sue the
executor of his father-in-law, who had promised to the plaintiff's father to make payment to the
plaintiff, because he had not provided any consideration to the contract.

The doctrine was developed further in Dunlop Pneumatic Tyre v. Selfridge and Co. Ltd. through
the judgment of Lord Haldane.

Privity of Contract played a key role in the development of negligence as well. In the first case of
Winterbottom v. Wright (1842), in which Winterbottom, a postal service wagon driver, was
injured due to a faulty wheel, attempted to sue the manufacturer Wright for his injuries. The
courts however decided that there was no privity of contract between manufacturer and
consumer.

This issue appeared repeatedly until MacPherson v. Buick Motor Co. (1916), a case analogous to
Winterbottom v Wright involving a car's defective wheel. Judge Cardozo, writing for the New
York Court of Appeals, decided that no privity is required when the manufacturer knows the
product is probably dangerous if defective, third parties (e.g. consumers) will be harmed because
of said defect, and there was no further testing after initial sale. Foreseeable injuries occurred
from foreseeable uses. Cardozo's innovation was to decide that the basis for the claim was that it
was a tort not a breach of contract. In this way he finessed the problems caused by the doctrine of
privity in a modern industrial society. Although his opinion was only law in New York State, the
solution he advanced was widely accepted elsewhere and formed the basis of the doctrine of
product liability.
Exceptions

Common law exceptions

There are exceptions to the general rule, allowing rights to third parties and some impositions of
obligations. These are:

• Collateral Contracts (between the third party and one of the contracting parties)

• Trusts (the beneficiary of a trust may sue the trustee to carry out the contract)

• Land Law (restrictive covenants on land are imposed upon subsequent purchasers if the
covenant benefits neighbouring land)

• Agency and the assignment of contractual rights are permitted.

• Third-party insurance - A third party may claim under an insurance policy made for their
benefit, even though that party did not pay the premiums.

• Contracts for the benefit of a group where a contract to supply a service is made in one
person's name but is intended to sue at common law if the contract is breached; there is no
privity of contract between them and the supplier of the service.

Attempts have been made to evade the doctrine by implying trusts (with varying success),
constructing the Law of Property Act 1925 s. 56(1) to read the words "other property" as
including contractual rights, and applying the concept of restrictive covenants to property other
than real property (without success).

1. in case of trust/beneficiary

2. in case of family arrangement

3. in case of acknowledgment of debts

4. in case of assignment of contract.

Statutory exceptions

In the United Kingdom, the Contracts (Rights of Third Parties) Act 1999 provided some reform
for this area of law which has been criticised by judges such as Lord Denning and academics as
unfair in places. The act states:

1. (1) Subject to the provisions of this act, a person who is not a party to a contract (a "third
party") may in his own right enforce a term of the contract if-

(a) the contract expressly provides that he may, or

(b) subject to subsection (2), the term purports to confer a benefit on him.

(2) Subsection (1)(b) does not apply if on a proper construction of the contract it appears that the
parties did not intend the term to be enforceable by the third party.

This means that a person who is named in the contract as a person authorised to enforce the
contract or a person receiving a benefit from the contract may enforce the contract unless it
appears that the parties intended that he may not.

The Act enables the aim of the parties to be fully adhered to. In Beswick v Beswick, the
agreement was that Peter Beswick assign his business to his nephew in consideration of the
nephew employing him for the rest of his life and then paying a weekly annuity to Mrs. Beswick.
Since the latter term was for the benefit of someone not party to the contract, the nephew did not
believe it was enforceable and so did not perform it, making only one payment of the agreed
weekly amount. Yet the only reason why Mr. Beswick contracted with his nephew was for the
benefit of Mrs. Beswick. Under the Act, Mrs. Beswick would be able to enforce the performance
of the contract in her own right. Therefore, the Act realises the intentions of the parties.

The law has been welcomed by many as a relief from the strictness of the doctrine, however it
may still prove ineffective in professionally drafted documents, as the provisions of this statute
may be expressly excluded by the draftsmen.
Third-party beneficiaries

In Australia, it has been held that third-party beneficiaries may uphold a promise made for its
benefit in a contract of insurance to which it is not a party (Trident General Insurance Co Ltd v.
McNiece Bros Pty Ltd (1988) 165 CLR 107). It is important to note that the decision in Trident
had no clear ratio, and did not create a general exemption to the doctrine of privity in Australia.

Queensland, the Northern Territory and Western Australia have all enacted statutory provisions
to enable third party beneficiaries to enforce contracts, and limited the ability of contracting
parties to vary the contract after the third party has relied on it. In addition, section 48 of the
Insurance Contracts Act 1984 (Cth) allows third-party beneficiaries to enforce contracts of
insurance.

Although damages are the usual remedy for the breach of a contract for the benefit of a third
party, if damages are inadequate, specific performance may be granted (Beswick v. Beswick
[1968] AC 59).

The issue of third-party beneficiaries has appeared in cases where a stevedore has claimed it is
covered under the exclusion clauses in a bill of lading. In order for this to succeed, three factors
must be made out:

• The bill of lading must clearly intend to benefit the third party.

• It is clear that when the carrier contracts with the consignor, it also contracts as an agent
of the stevedore. That is, either the carrier must have had authority by the stevedore to act on its
behalf, or the stevedore must later ratify (endorse) the actions of the carrier.

• Any difficulties with consideration moving from the stevedores must be made out.

The last issue was explored in New Zealand Shipping Co Ltd v. A M Satterthwaite & Co Ltd
[1975] AC 154, where it was held that the stevedores had provided consideration for the benefit
of the exclusion clause by the discharge of goods from the ship.

New Zealand has enacted the Contracts Privity Act 1982, which enables third parties to sue if
they are sufficiently identified as beneficiaries by the contract, and in the contract it is expressed
or implied they should be able to enforce this benefit.
 BIBLIOGRAPHY

Books

1. Chen-Wishart, M. (2015) Contract law. Fifth edition. Oxford, United Kingdom: Oxford
University Press

2. Duxbury, Robert (2011) Contract law. 2nd ed. London: Sweet & Maxwell