#16127 - Privity - Contract Law

Facts: C married the promisor’s daughter. Prior to the wedding the promisor entered into an agreement with C’s father where they each promised to give C money, with a clause in the contract stipulating that C “has full power to sue the said parties in any Court of law or equity for the aforesaid sums”. The promisor failed to pay and C sued.
Held (QBD): The claim failed –
- “it is now established that no stranger to the consideration can take advantage of a contract, although made for his benefit” (Wightman J).
- “Consideration must move from the party entitled to sue upon the contract” because it would be “monstrous” to allow someone to sue for his own advantage but not for the purpose of being sued (Crompton J)
- Consideration must move from the promisee for an action to be maintained upon a promise; C argued that there was an exception – where consideration moves from a father for the benefit of his son, the natural love and affection between them gives the son the right to sue as if the consideration moved from himself. However, “natural love and affection are not a sufficient consideration” to found an action (Blackburn J)

1º Thus it seems that the reason the son couldn’t sue is less (1) he was not a party to the contract and more (2) consideration didn’t move from him:

C accepted that there was a general rule that an action must be brought by the person from whom consideration moved (though he argued for an exception for father/son), and this concession has been criticized as unnecessary, leading to the loss of a general third party right of action (Flannigan).
Nobody mentioned the NY CoA case of Lawrence v Fox¹, suggesting that the real basis of the decision was that C was a stranger to the consideration, not that he was a third party to the contract

So some argued that the privity rule is really no more than an application of the doctrine of consideration (Furmston), but the two doctrines were distinguished in Dunlop.

2º Thus, the rule that consideration must move from the promisee is closely linked with the privity rule, and discussion of the former often renders the latter obsolete. Only where the third party has provided consideration but is not party to the agreement that the need for a distinct privity rule arises (but can a third party provide “consideration” if no contract is made?).

3º One point of significance is that C’s father might not have sued the promisor himself because he had not, himself, honored his promise and paid his son. Lord Denning explained in Beswick that Tweddle “failed for the very good reason that the husband’s father had not done his part”. If he had done his part, then he would have been able to sue the promisor (but this is difficult because there is nothing in Tweddle to suggest that the father hadn’t paid).

|*Dunlop Pneumatic Tyre Co Ltd v Selfridge [1915] AC 847

Facts: X agreed to buy tires from C, tire manufacturer. C agreed to give X certain discounts in return for a promise from X not to sell to anybody at less than the list price except where X obtained from the buyer a similar promise to observe the list prices. D ordered tyres from X at a discount in return for such an agreement, and then breached the agreement. C sued D for breach of the undertaking.
Held: trial judge held for C, reversed by CoA because C was not a party to the contract, upheld by HL.
Haldane VC:
- Three principles:
  - Only a person who is a party to a contract can sue on it; a third party right of action can only be conferred by way of property (ex. Trust) and not contract in personam.
  - Consideration must move from the person trying to enforce the promise.
  - A third party can sue upon a promise if the promisee really contracted as his agent, but then again he must have given consideration either personally or through the agent.
- In this case the consideration (discount) was given by X, not as C’s agents, but as principals acting on their own account. This conclusion renders it unnecessary to decide whether C can claim that the bargain was made by X as C’s agent, but (obiter) two contracts (one made as principal and one as agent by the same person) can be comprised in the same paper, but they must be two contracts and not one single contract.
Lord Dunedin:
- This...

#16127 - Privity - Contract Law

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