Privity and relationship to doctrine of consideration

The meaning of privity of contract doctrine is that only persons who are parties to a contract are entitled to take action to enforce it. A person who stands to obtain a benefit from the contract (a third party beneficiary) is not entitled to take any enforcement action if he or she is denied the promised benefit. For example, B promised by A, for consideration moving from B, to pay C $ 100.Here A and B are parties to the contract or can also be said as privy to the contract. If there is a breach by other parties, they can sue each other. C is not a party to the contract and cannot sue A is A fails to pay C the sum of $ 100.Dunlop Pneumatic Tyre Co Ltd v Selfridge & Co(1915)AC 847,is the classic authority for the doctrine. In 853,Viscount Haldane says that Certain principles are fundamental in the law of England. Only a person who was party to a contract can sue on it.

                           Next is the privity and its relationship to the doctrine of consideration Doctrine of consideration says that we observed the rule that consideration must move from a promise. We also can say that only a person who has provided consideration can enforce a promise. In the matter that we mentioned above its say that one could have argued that C could not sue on the basis that C had not provided any consideration for A’s promise to pay C the sum of $ 100.Here we may ask whether there is a distinction between the privity and consideration rules. In this matter, there are lot of different opinions because some says that the rules are in fact one rule differently expressed and some argue that the two rules are distinct.

                            Remedies Against a Promisor in Breach Of promise To A Third Party. In this matter we are concerned with the remedies that can be pursued against a promisor who is in breach of his or her promise to a third party. Briefly, we may say that C has no right of action against A. This is because C is only a third party and not privy to the contract. A can sued by B because B is the promise under the contract and a party to the contract. Here we can mentioned about two possible remedies. They are damages at common law and specific performance in equity:

Damages at Common Law

B will always win the case because of the remedy of common law damages for breach of contract will always be granted to a plaintiff. The main critical issue here is the critical issue is the measure of damages that will be recovered.The basic principle for the assessment of damages for breach of contract is the critical understanding of the position of B.Those damages seeks to make suitable payment or to make up for loss or injury the plaintiff for the loss suffered as a result of the breach. If no loss is suffered then a existing award of damages is made in favour of the plaintiff. If real loss is suffered, an award of substantial damages is made in favour of the plaintiff. In other side, in most cases the measure of damages recovered will be nominal, in gives little reason for B to pursue common law damages. 

The fact that B cannot sue to recover as damages the measure of C’s loss from A’s breach of contract was recently confirmed by four members of the House of Lords in Alfred McAlpine Construction Ltd V Panatown Ltd(2001) 1 AC 518 at 522,563,575. The fifth Law Lord, Lord Goff was, at 538-539, 544, more skeptical, suggesting that it was an extraordinary defect in the law that B should have no remedy for common law damages against A. 

Specific Perfomance In Equity

Specific performance will not always be granted to a plaintiff upon proof of a breach of contract unlike the common law damages. There are many grounds upon which a court will refuse specific performance. Foe example,the remedy will be refused if common law damages would be an adequate remedy.

The Case Of Trident General Insurance V McNiece Bros

The most important High Court decision on privity had been made in the case of Trident General Insurance Co Ltd v McNiece Bros Pty Ltd(1988) 165 CLR 107. In this case they mainly talk about the facts,the different views on the status of the doctrine of privity set out by judges of the High Court,the approaches of the conservative judges, Brennan, Deane and Dawson JJ to the status of privity.In Winterton Constructions Pty Ltd v Hambros Australia Ltd(1991)101 ALR363 Gummow J, after a long analysis of Trident concluded, at 368 as following: 

At best ... there is support by three only of their Honours for the proposition ... that the old rules do not apply in their full vigour. 

His Honour was, of course, referring to Mason CJ, Wilson, Toohey JJ.  


General Law Exceptions to the Doctrine of Privity

To overcome the doctrine of privity,we have some general law principles which enable a third party such as C in our example.They are not true exceptions because they rely upon establishing the elements of other established legal doctrines. Rather they constitute means of circumventing the doctrine of privity because these other legal principles apply on the facts of the given case. Some of the key exceptions are: 


   The rule that were discussed here is that if either the agent or the principles one of the contracting parties contracts as an agent but not both,then they can sue to enforce the contract. In the above example, if B is C’s agent then either B or C can enforce the contract against A. In these cases it is immaterial as to whether A knew that B was C’s agent. 

A particular situation where agency principles arise is with contracts for the carriage of goods. Typically the situation will be where a carrier includes in the contract an exclusion clause and the exclusion clause is expressed to be for the benefit of not only the carrier but third parties that might be engaged by the carrier for the purpose of transporting the goods. A common example in the cases is in shipping contracts, where the third party is the stevedore who unloads the goods at the port of destination.  



Based on the promissory estoppels principles,a third party able to seek relief against a promisor.According to Trident at 145 as per Deane J, to win the third party need to be establish the elements of promissory estoppels.According to Trident,Mason CJ,Wilson J at 123-124,its says that estoppels could be established on the facts of the case but it is not necessary  for them to decide the issue on the basis that they decided the case on other grounds 



    The principle of unjust enrichment is the principle that underpins the remedy. The  most important quality of the principle is that it need a defendant to make fair and just restoring derived at the expense of a plaintiff. 

In the Trident case, Deane J at 145-146, point out that the principle could possibly be the basis for a third party to seek relief. According to Gaudron J in 176 at Trident,  gives her decision in favour of McNiece Bros based on the principle of unjust enrichment.If we do action based on unjust enrichment,that means that it is not based on the contract but independent itself. 

The action based upon unjust enrichment is not based on the contract but independent of it.At the same time, normally it’s be similar in content and duration with the promisor’s However, usually it will correspond in content and duration with the promisor’s promise.