some mechanisms are adopted by the courts such as agency trust tort and

Some mechanisms are adopted by the courts such as

This preview shows page 12 - 14 out of 14 pages.

- some mechanisms are adopted by the courts such as agency, trust, tort and estoppel to circumvent the doctrine to ensure the justice prevails - however it is still inadequate to resolve the difficulties caused by the doctrine and thus statutory reform is required in order to create third party rights in contract law Introduction: - The general rule of the doctrine of privity is that no benefit can be conferred to a 3rd party, who is not a party to the contract. - Lord Diplock in Swain v Law Society [1983] has regarded this as “an anachronistic shortcoming and a reproach to English private law”. - The particular problem created is that the privity rule denies the contracting parties from fulfilling their intention to benefit a 3rd party. - A number of Commonwealth countries had undertaken statutory reform of this privity rule and recognised 3rd party rights in contract law. For example, the enactment of Contracts ( Rights of Third Parties ) Act 1999 by English Parliament; HC in Australia and SC in Canada had created exceptions to the privity rule. - In Malaysia, the Contract Act is silent to the doctrine of privity of contact. However, the privity rule is deeply entrenched in the legal systems as the Malaysia courts had applied the doctrine in a variety of cases involving variety of situations. - In Kepong Prospecting Ltd v Schmidt [1968] , it was held that the English principle of privity of contract is applicable in Malaysia. This was relied on later cases such as Fima Palmbulk Services Sdn Bhd v Suruhanjaya Pelabuhan Pulau Pinang & Anor[1988] and Rozhah Enterprise Sdn Bhd Arab Malaysian Finance Bhd [2009]. - In Rozhah Enterprise , a director failed to repay the loan and the plaintiff sued the defendant company who acted as the guarantor in order to enforce the guarantee. The defendant sought to counterclaim the plaintiff’s action based on two letters, which stated the plaintiff agreed to restructure the remaining outstanding payment, reduced the loan’s interest rates and extended the repayment due date, where the plaintiff failed to comply with. The plaintiff attempted to strike out the counterclaim on the basis that the defendant had no locus standi to counterclaim as
Image of page 12
it was not a party to the loan agreement. The COA rejected the plaintiff’s argument because the agreement involved was a guarantee agreement where the defendant’s liability was dependent on the amount owed by the director. Thus, the defendant had the locus standi to bring the counterclaim which if successful, would reduce the amount of its liability. - The Malaysian Parliament had created ac hoc exceptions to the privity rule such as in statutes, i.e. Insurance Act 1996 (Act 533) involving life insurance contracts where the insured’s spouse and children are the beneficiaries; Road Transport Act 1987 ( Act 333) involving compulsory motor insurance policy for road accidents; CLA 1956 (Revised 1972) (Act 67) in relation to assignments; Bills of Exchange Act 1949 ( Revised 1978) (Act 599) for situations involving defective negotiable instruments by a 3rd party and Consumer Protection Act 1999 (Act 599)
Image of page 13
Image of page 14

You've reached the end of your free preview.

Want to read all 14 pages?

  • Winter '17
  • Daniel

What students are saying

  • Left Quote Icon

    As a current student on this bumpy collegiate pathway, I stumbled upon Course Hero, where I can find study resources for nearly all my courses, get online help from tutors 24/7, and even share my old projects, papers, and lecture notes with other students.

    Student Picture

    Kiran Temple University Fox School of Business ‘17, Course Hero Intern

  • Left Quote Icon

    I cannot even describe how much Course Hero helped me this summer. It’s truly become something I can always rely on and help me. In the end, I was not only able to survive summer classes, but I was able to thrive thanks to Course Hero.

    Student Picture

    Dana University of Pennsylvania ‘17, Course Hero Intern

  • Left Quote Icon

    The ability to access any university’s resources through Course Hero proved invaluable in my case. I was behind on Tulane coursework and actually used UCLA’s materials to help me move forward and get everything together on time.

    Student Picture

    Jill Tulane University ‘16, Course Hero Intern

Stuck? We have tutors online 24/7 who can help you get unstuck.
A+ icon
Ask Expert Tutors You can ask You can ask You can ask (will expire )
Answers in as fast as 15 minutes
A+ icon
Ask Expert Tutors