Description
The doctrine of privity in the common law of contract provides that a contract cannot confer rights or impose obligations arising under it on any person or agent except the parties to it.
Privity of Contract
1
Privity of Contract
2
Case: Three Party Contract
B and C get into an agreement where B will write a book for C and C will pay Rs. 10, 000 to A. B wrote a book for C but C failed to give the money to A. A is claiming to recover Rs. 10, 000 from C.
Decide.
3
Case: Book Writing Project
A, B and C get into an agreement. Under the agreement, B will write a book for C, and C will pay Rs. 10, 000 to A. B wrote a book for C but C failed to give the money to A. A is claiming to recover Rs. 10, 000 from C.
4
Case: Dunlop Tyres
Dunlop Pneumatic Tyre Co. Ltd. had a price list for its products. It sold tyres, with discounts, to Dew & Co. The contract also required that Dew & Co. do not re-sell the tyres at below the scheduled price. In the event of a sale to a trade customer, Dew & Co. would take a written undertaking that the tyres would not be further re-sold at below the scheduled price. Dew and Co. sold the tyres to Selfridge & Co. Ltd. Selfridge gave a written undertaking that it would not sell to the customers, those tyres at below the scheduled price. Further, it undertook to pay £5 for each tyre sold in breach of this contract, to Dunlop Limited. Selfridge sold some of the tyres at below the scheduled price to its customers. Dunlop moved the court to restrain Selfridge and claim damages. 5
Judgement: Dunlop Case
In the law of England certain principles are fundamental. One is that only a person who is a party to a contract can sue on it. Our law knows nothing of a … right … conferred on a stranger to a contract as a right to enforce the contract …A second principle is that if a person with whom a contract not under seal has been made is to be able to enforce it consideration must have been given by him to the promisor or to some other person at the promisor's request.
6
Summary
The position of British law:
1. Strangers to a contract have no rights even if the contract is for their benefit. 2. Consideration must move from the person who is claiming rights in a contract. It is not adequate for the consideration to move from another person.
7
Indian Law on Privity
The Indian law has retained that strangers to a contract have no rights even if the contract is for their benefit. The Contract Act, however, has dispensed the requirement that the consideration must move from a party to a contract to claim benefit. It can come from ‘any person’.
8
Case: Book Writing Project
A, B and C get into an agreement. Under the agreement, B will write a book for C, and C will pay Rs. 10, 000 to A. B wrote a book for C but C failed to give the money to A. A is claiming to recover Rs. 10, 000 from C.
In the British law A has no rights as no consideration has moved from him. In the India law A has rights as C has received consideration, even if it is not from A.
9
Case: Distribution Channel
M is a manufacturer, supplying its goods to the distributor D, who in turn sells it to the wholesaler W. The wholesaler sells it to the retailer R who sells an article to a buyer B. The goods bought by B has a manufacturing defect.
B claims against the manufacturer in a court. Decide.
10
Case: Distribution Channel
M is a manufacturer, supplying its goods to the distributor D, who in turn sells it to the wholesaler W. The wholesaler sells it to the retailer R who sells an article to a buyer B. The goods bought by B has a manufacturing defect.
B claims against the manufacturer in a court. Decide. B can have claims only against R as B is not privy to the others including the manufacturer, M.
11
Case: Deficient Banking Service
S receives a cheque from a person towards payment for goods supplied. The service provided by the bank in encashing the cheque is deficient and inadequate. S moves against the court against the deficient service of the bank. Decide.
12
Case: Deficient Banking Service
S receives a cheque from a person towards payment for goods supplied. The service provided by the bank in encashing the cheque is deficient and inadequate. S moves against the court against the deficient service of the bank. Decide. S has no claims against the banks as he is not privy to the bank.
13
doc_937408361.ppt
The doctrine of privity in the common law of contract provides that a contract cannot confer rights or impose obligations arising under it on any person or agent except the parties to it.
Privity of Contract
1
Privity of Contract
2
Case: Three Party Contract
B and C get into an agreement where B will write a book for C and C will pay Rs. 10, 000 to A. B wrote a book for C but C failed to give the money to A. A is claiming to recover Rs. 10, 000 from C.
Decide.
3
Case: Book Writing Project
A, B and C get into an agreement. Under the agreement, B will write a book for C, and C will pay Rs. 10, 000 to A. B wrote a book for C but C failed to give the money to A. A is claiming to recover Rs. 10, 000 from C.
4
Case: Dunlop Tyres
Dunlop Pneumatic Tyre Co. Ltd. had a price list for its products. It sold tyres, with discounts, to Dew & Co. The contract also required that Dew & Co. do not re-sell the tyres at below the scheduled price. In the event of a sale to a trade customer, Dew & Co. would take a written undertaking that the tyres would not be further re-sold at below the scheduled price. Dew and Co. sold the tyres to Selfridge & Co. Ltd. Selfridge gave a written undertaking that it would not sell to the customers, those tyres at below the scheduled price. Further, it undertook to pay £5 for each tyre sold in breach of this contract, to Dunlop Limited. Selfridge sold some of the tyres at below the scheduled price to its customers. Dunlop moved the court to restrain Selfridge and claim damages. 5
Judgement: Dunlop Case
In the law of England certain principles are fundamental. One is that only a person who is a party to a contract can sue on it. Our law knows nothing of a … right … conferred on a stranger to a contract as a right to enforce the contract …A second principle is that if a person with whom a contract not under seal has been made is to be able to enforce it consideration must have been given by him to the promisor or to some other person at the promisor's request.
6
Summary
The position of British law:
1. Strangers to a contract have no rights even if the contract is for their benefit. 2. Consideration must move from the person who is claiming rights in a contract. It is not adequate for the consideration to move from another person.
7
Indian Law on Privity
The Indian law has retained that strangers to a contract have no rights even if the contract is for their benefit. The Contract Act, however, has dispensed the requirement that the consideration must move from a party to a contract to claim benefit. It can come from ‘any person’.
8
Case: Book Writing Project
A, B and C get into an agreement. Under the agreement, B will write a book for C, and C will pay Rs. 10, 000 to A. B wrote a book for C but C failed to give the money to A. A is claiming to recover Rs. 10, 000 from C.
In the British law A has no rights as no consideration has moved from him. In the India law A has rights as C has received consideration, even if it is not from A.
9
Case: Distribution Channel
M is a manufacturer, supplying its goods to the distributor D, who in turn sells it to the wholesaler W. The wholesaler sells it to the retailer R who sells an article to a buyer B. The goods bought by B has a manufacturing defect.
B claims against the manufacturer in a court. Decide.
10
Case: Distribution Channel
M is a manufacturer, supplying its goods to the distributor D, who in turn sells it to the wholesaler W. The wholesaler sells it to the retailer R who sells an article to a buyer B. The goods bought by B has a manufacturing defect.
B claims against the manufacturer in a court. Decide. B can have claims only against R as B is not privy to the others including the manufacturer, M.
11
Case: Deficient Banking Service
S receives a cheque from a person towards payment for goods supplied. The service provided by the bank in encashing the cheque is deficient and inadequate. S moves against the court against the deficient service of the bank. Decide.
12
Case: Deficient Banking Service
S receives a cheque from a person towards payment for goods supplied. The service provided by the bank in encashing the cheque is deficient and inadequate. S moves against the court against the deficient service of the bank. Decide. S has no claims against the banks as he is not privy to the bank.
13
doc_937408361.ppt