LEGALITY AND PRIVITY OF CONTRACT

In the peacock v en case there were 4 parties wessex

This preview shows page 4 - 5 out of 5 pages.

In the Peacock v. E&N case there were 4 parties Wessex Management Ltd., West Steel Corp., Parkin and Brown who entered into a contract with E&N Railway to purchase land owned by E&N. West Steel was a tenant on the property at the time of this contract and there was a term in the offer to purchase the land from E&N that if contract doesn’t complete then West Steel would remain a tenant for two months and at the end of the lease West Steel was to leave the premises neat, clean and bare. Wessex made an agreement with the plaintiff Peacock whereby Peacock would pay the deposit of $85,000 on the contract with E&N and in exchange Wessex would issue him shares in the corporation. The contract to purchase the land from E&N was frustrated due to fire on the premises. Under the terms of the contract West Steel would remain a tenant and had the obligation to clean up the mess caused by the fire. West Steel failed to do this and so E&N was forced to clean up the property itself at a cost of $29,000. This amount was deducted from the deposit of $85,000. Peacock claims that the money is his and that it is not subject to any reduction of the amount of $29,000 by E&N, under a lease that he was not a party to.
Image of page 4

Subscribe to view the full document.

Peacock brought an action against E&N for the recovery of his deposit of $85,000. For Peacock to win he has to satisfy the court on a balance of probabilities that he was a contracting party with the defendants for the purchase of the property. E&N contends that Peacock was a stranger to the contract – he was not a party to it – and therefore under the rule of privity he cannot sue. Peacock says he was a party to the contract because he is a shareholder of Wessex. The court explains that Wessex is a separate legal person apart from shareholders and that the contract E&N made was with Wessex and not Peacock. The court said that Peacock was not a contracting party with E&N for the purchase of the property and therefore there was no privity of contract between him and E&N. Accordingly, his action fails. There are, of course, exceptions to the Privity Rule! One exception is in business law which allows for the assignment of a contractual right or an account receivable. Another is for the negotiation or assignment of a negotiable instrument. Another exception that we will explore is one developed by the House of Lords in Donoghue v. Stevenson. This case is the basis of an action in Tort law for negligence and it allows the plaintiff to sue in circumstances where the defendant owed him/her a duty of care irrespective of a contract existing between the parties. The Rule of Privity is the rule that takes us out of contract law and into the next section of the course that examines the ASSIGNMENT of contractual rights and the NEGOTIATION of negotiable instruments that give rise to a “chose in action” or the right to sue. It also takes us into TORT law where the law is that one party can sue another WITHOUT A CONTRACTUAL RELATIONSHIP between them if the defendant owed a DUTY OF CARE to the plaintiff not to be negligence or careless.
Image of page 5
  • Spring '10
  • elaine
  • prima facie case, Peacock, strong  prima facie, E&N

{[ snackBarMessage ]}

Get FREE access by uploading your study materials

Upload your study materials now and get free access to over 25 million documents.

Upload now for FREE access Or pay now for instant access
Christopher Reinemann
"Before using Course Hero my grade was at 78%. By the end of the semester my grade was at 90%. I could not have done it without all the class material I found."
— Christopher R., University of Rhode Island '15, Course Hero Intern

Ask a question for free

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