LAWS104 Lecture Notes - Lecture 12: Selfridges, Specific Performance, Equitable Remedy
12 Jun 2018
School
Course
Professor
W – Privit and Contracts in Contet
Privity
The Privity Rule
- It is the question of who is entitled to enforce the contract and/or sue
- Tweddle v Atkinson Tyre Co Ltd v Selfridge & Co (1861)
- According to the privity rule, if the contract is between two people, it is said they are the
ol oes pri to the otrat, the are the ol oes ho a efore it or lai daages
in breach. Reasonable to assume that no one else is bound by it.
- But some contracts can confer a benefit to a third party.
- Example – uer is gettig soethig fro a seller, the uer has to pa the sellers rother
- agreed to confer a benefit on the brother. The brother has no legal standing to sue the
buyer if the buyer fails to pay. Only the seller can enforce the contract and sue the buyer to
pay.
o Oe optio is that the seller sues for daages for the uer ot paig the sellers
brother – sellers loss – measure of damages – the differee etee the sellers
position and the contract being performed, and his position before the breach – he
has suffered no loss. Breach would be proved but would only get nominal damages.
It is possible for an indirect loss, and then you could get more than nominal
daages. It is ot possile for hi to reoer the rothers loss.
o The second alternative is that he can seek to enforce the contractual obligation,
order for specific performance. Specific performance is an equitable remedy – so it is
discretionary and can be refused on a variety of grounds. Biggest hurdle is that
equity will only order it if damages would be inadequate.
- Dunlop Pneumatic Tyre Co Ltd v Selfridge & Co [1915] AC 847
o Dunlop (manufacturer of tires), entered into a contract with a wholesaler, one term
was that if the wholesaler supplied it to the retailer, the wholesaler promised to not
sell it under a particular price (reasonable).
o The manufacturer was trying to control the price of the tires – then it was okay,
toda it ist.
o The wholesaler entered into a contract with a retailer on similar terms, that the
retailer would not sell it below a certain price – the retailer entered into a contract
with others and did sell it under the price.
o The manufacturer did not like this and sued the retailer. Manufacturer failed – the
retailed (Selfridge) was not liable to Dunlop, because Dunlop had not given
consideration to the wholesale – Dunlop was not privy between the wholesaler and
the retailer, only the wholesale could sue.
- Example – a manufacturer makes a product, and it is faulty – there is contract for the
manufacturer to supply to the wholesaler, the wholesaler supplies to the retailer, and the
retailer supplies to the consumer.
o Each party is in a contract to one another, but only from whom they buy and sell
from, the consumer does not have a contract with the manufacturer.
o Law of negligence in torts is as exception
find more resources at oneclass.com
find more resources at oneclass.com
o But in contracts, because of the privity rule, no consumer has contractual rights
against the manufacturer who is responsible for the defect – common law can only
sue the immediately proceeding party.
- Coulls v Bagot’s Executor & Trustee Co Ltd 19
o Joint promisee rule – look back to consideration notes – its i there
o The close doctrinal relationship between privity and consideration is in this case –
the fundamental rule is that it must move from the promisee – the third party
(widow) provided no consideration for the promise that had been breached.
o Widow could not enforce the promise – can only be done by someone party to the
contract.
- Privity has a problem – there is no incentive to seek damages or specific performance for
someone who has breached. Seeking specific performance would be likely to fail – until
Beswick and Beswick [1968]
- Beswick and Beswick [1968] AC 58
o He sold something to his nephew, the remainder of the purchase price from nephew
to uncle was to be paid off over time.
o The uncle would stay on as consultant.
o If the uncle died, the nephew would pay the lump sum to the widow.
o The uncle died, and the purchase price had noy been fully paid off – the nephew
refused to pay the outstanding amount to the widow
o The widow was expecting the benefit – she also represented the uncle who had died
as his administrator (not executive)
o She sued the nephew for specific performance for the continuing payments – she is
not party to the contract
o Court held that were damages are nominal, they could be inadequate in cases like
these from the perspective of justice.
o Contracts to pay money or transfer property to a third person are usually contracts
for breach of which damages would be inadequate – especially were damages would
only be nominal
o Courts held it would be unjust to order for nominal damages which was originally
the case – the party in breach does not have to pay or perform – amounting to a
denial of justice.
o Thus, damages are inadequate, and specific performance should be ordered where
the requirements are satisfied.
Privity and Consideration
- The measure of damages
- The adequacy of damages
- Beswick and Beswick [1968] AC 58
- Trident General Insurance Co Ltd v McNiece Bros Pty Ltd (1988) 165 CLR 107
o Insurance contract between Blue Circle and Trident Insurance – Blue Circle is a
construction company doing a large project. There was an insurance contract for this
– covered any injuries or deaths suffered by Blue Circle employees as well as
employees for other associated companies. Blue Circle had a series of sub contracts
to other parties, one being McNiece Bros – they were aware of this and expected to
be covered by the policy.
find more resources at oneclass.com
find more resources at oneclass.com
Document Summary
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