09_Privity - Contracts 01 Privity PART IX PRIVITY I A...

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Contracts 01 – Privity P ART IX P RIVITY I I NTRODUCTION A The Doctrine of Privity Exam note: the doctrine of privity is highly likely to comprise a hybrid theoretical question on the mid-year examination. Who is entitled to enforce a contract is determined by the doctrine of privity. Under the doctrine, those who are not direct parties to the contract are prevented from enforcing the terms of the contract ( Tweedle v Atkinson ). The common law position is that only parties to the contract are bound by, and entitled to enforce, the rights and obligations that the contract imposes. B Exceptions There are ways of circumventing this common law rule, which can at times operate unfairly. These include: Action by the promisee (only if not expressly ruled out) Arguing that the person attempting to enforce the provisions is a party to the contract ( Coulls v Bagot’s Estate ) Situation specific exceptions ( Trident per Mason CJ and Wilson J) Estoppel (elements need be satisfied) Agency ( Port Jackson ) Trust ( Trident per Deane J) Tort ( Hawkins v Clayton ) Restitution/unjust enrichment ( Trident per Gaudron J; sufficient to identify possibility) Trade Practices Act 1974 (Cth) s 52 (misleading and deceptive conduct) Assignment and novation These exceptions have arisen, in part, due to criticism of the doctrine of privity as leading to unfair outcomes and expressly contravening the intentions of the parties. After all, if it is the will of the parties to incur obligations to a third party, how can it be against their will to allow that third party to enforce the rights granted to it under the contract? II M ETHODS OF C IRCUMVENTION A Action by the Promisee Where a party upon whom benefits have been conferred wishes to enforce those rights, but is barred from doing so by the doctrine of privity, they may be able to convince someone who is a party to the contract to enforce the contract for the third party. © Jaani Riordan 2004 Page 1 of 19 http://www.jaani.net/
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Contracts 01 – Privity A successful action on the contract by one of its parties could result in an order for specific performance to deliver the benefit to the third party as it was provided for by the contract if the expectation damages to be provided would be inadequate. However, the commencement of the action is contingent upon the person who is party to the contract being willing to undertake the (often costly and burdensome) proceedings. In the event that they are unwilling to enforce on behalf of the third party, another avenue will need to be pursued. B Establishing a Party to the Contract To avoid the operation of privity doctrine, an alleged ‘third-party’ may argue that he or she is in fact a party to the contract ( Coulls v Bagot’s Executor ). Coulls v Bagot’s Executor:
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09_Privity - Contracts 01 Privity PART IX PRIVITY I A...

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