Chapter 16

1. 'The Contracts (Rights of Third Parties) Act 1999 was necessary to counter the legal "black hole" created by the privity doctrine.' Discuss.

See 16.1.3.

This question invites you to critically analyse one of the key justifications put forward by the Law Commission for the 1999 Act and, in doing so, survey and comment on the pre-existing common law 'exceptions' to the privity rule. The sub-issues you need to address include:

What actions could a promisee take to enforce a promise for the benefit of a third party? Are the restrictions on particular actions justifiable? Should promisee actions be more widely available?
What actions are potentially open to the third party beneficiary to claim directly against the promisor? Are the restrictions on particular actions justifiable? Should third party actions be more widely available?
A related question is 'whose loss is it?' (raised by question 2) The answer to this will determine the appropriate response to any 'black hole' problem, and so allow you to assess whether the 1999 Act was necessary to counter the legal 'black hole'. Might strengthening promisee actions be a preferable alternative?
Another related issue is the problem of double liability (question 2) which shows that the 'black hole' is not only filled but 'overflowing' as a result of the 1999 Act. To what extent is the promisor protected from double liability?
Your conclusion on the statement.

2. 'The question is who suffers loss when a contract for the benefit of a third party is breached. The promisor cannot be liable to both the promisee and the third party.' Discuss.

See 16.1.3 and 16.1.5.2 – 16.1.5.3.

This question covers much of the same territory as question 1 (see notes). Identifying where the loss lies determines who should have the action (whether the promisee or the third party) and how it might be measured.

What can be said in favour of locating the loss with the promisee? With the third party? Why should the law protect the third party from disappointment? You should consider the importance of being a promisee and of having provided consideration.
What does McAlpine v. Panatown say about the locus of loss?
In view of the promisor's potential common law actions (including the broad ground in Panatown), when might the promisor be vulnerable to double liability (i.e. also to the third party)?
How is the potential for double liability resolved by the 1999 Act? By the common law?
How might any outstanding problem of double liability be resolved?

3. 'The Contracts (Rights of Third Parties) Act 1999 has brought as many problems as it has solved.' Discuss.

See 16.1.3.

This question invites you to assess the 1999 Act. You must identify its achievements and its difficulties. The issues you should address include:

Identify the main achievements of the 1999 Act (primarily in favour of third parties).
What interpretational difficulties are contained in the 1999 Act (e.g. scope of sections 1(1) (b), 1 (2) and 2)?
To what extent does the 1999 Act respond to the reasons for reform set out by the Law Commission (e.g. complexity of common laws 'exceptions', protect the third party from reliance loss, upholding the parties' intentions)?
What is the impact of the 1999 Act on orthodox principles (e.g. requirement of consideration, recoverable loss must be that of the promisee, promissory estoppel)?

4. Has the Contracts (Rights of Third Parties) Act 1999 affected the requirement of consideration?

See 16.1.4.

The focus is on the impact of the 1999 Act on the traditional requirement of consideration and whether the impact is desirable. The sub-issues you may address include:

In what way does the 1999 Act contradict the consideration requirement? What, if anything, does this indicate about the future role of the consideration doctrine (you may be able to bring in developments from other areas, e.g. Williams v. Roffey)? Would any such development be desirable?
Approaching the question from the other end, should the consideration doctrine be reformed (if so, the 1999 Act is a positive step even if it is irreconcilable with the consideration requirement)?
Is there any way of reconciling the 1999 Act with the consideration requirement? Is the view of consideration necessary for this a desirable one?

5. Pat and Quentin agree that they would each pay half the cost of a round the world holiday for Rose when she passes her law degree. Subsequently, Pat and Quentin refuse to pay because they disapprove of Rose's new lifestyle. Rose is angry and disappointed. Can she sue?

See 16.1.3.3.

How can Rose get what she wants?

Does Rose have any non-statutory claims?
Does Rose qualify as a claimant under section 1 of the 1999 Act?
Does Rose's right crystallize before Pat and Quentin changed their mind?
Is Rose's claim reduced or negated (e.g. by the promisor's defences, set-offs or counterclaims or by the promisee's claim)?

6. Sam pays £5,000 for Toby to make some alterations to his daughter Una's business premises to make it suitable for a major marketing event. Toby excludes liability for consequential damages for breach. Toby botches the job and parts of the roofing and lighting fall down during Una's presentation. Una claims that she suffered £20,000 of loss comprising of: (a) damage to her existing premises; (b) loss of profits she would have generated had her presentation not degenerated into a complete farce; and (c) mental distress. Advise Sam and Una.

Does Sam have any action on behalf of Una or on his own behalf? Does Una have any common law actions against Toby? Can Una claim under the 1999 Act (go through the requirements methodically)? How should the claims be co-ordinated to avoid double recovery?
Would Una's claim under the 1999 Act be barred by the exemption clause (explain citing section number)? The presence of the exemption clause is likely to negate any duty of care owed by Toby to Una. What is the status of the exemption clause if Sam claims?
Can Una claim for this? Can this be incorporated into Sam's claim, say under the broad ground in Panatown (is the action available)?

7. Violet decides to improve the village hall owned by Worthy Parish Council for the benefit of the villagers of Worthy. Violet employs Xena to do the job for £30,000. Xena breaches the contract by delay, but says she can finish the job quickly if Violet increases the total price to £40,000. Violet has already paid Xena £25,000. Advise Violet assuming: (a) Violet hires another builder to finish the work for £20,000; (b) the villagers have finished the work; and (c) the work is left uncompleted.

See 16.1.3, 16.1.5 and 14.2.4.4.

Violet has suffered financial loss, can she claim for this (refer to Ruxley and Panatown)? Might Violet's damages be cut back for failure to mitigate her loss?
Violet has suffered no financial loss, has she suffered any non-financial loss for which she can claim (e.g. under Panatown)? Can the villagers or the Worthy Parish Council claim under the 1999 Act?
This was the situation in Panatown. Can the villagers or the Worthy Parish Council claim under the 1999 Act? Can Violet claim on behalf of the villagers? How is the potential for double recovery dealt with?

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