Deck 4: Privity

Question 1

Aaron is looking after Brittany's house while she is away on vacation during the winter months. A week before she is to return, the heating in her house breaks down. Aaron calls Cheapfix Co to look at the problem. Cheapfix concludes that all the radiators on the top floor will have to be replaced. Aaron agrees with Cheapfix to have that done before Brittany returns. The job is completed in the weekend and Brittany returns to a nicely heated house. A month later, the central heating collapses and Brittany calls Quickfix Co to have a look at it. Quickfix informs her that the faulty installation of the new radiators on the top floor caused the system to overload and now all radiators will have to be replaced. The total damage Brittany has suffered from Cheapfix's faulty installation is £8,000. According to the traditional privity rule and the rules on damages for breach of contract:

A) only Aaron can claim damages from Cheapfix Co.
B) only Brittany can claim damages from Cheapfix Co.
C) both Aaron and Brittany can claim damages from Cheapfix Co.
D) neither Aaron nor Brittany can claim damages from Cheapfix Co.

Answer 1

D

Question 2

The enactment of the Contracts (Rights of Third Parties) Act 1999 (C(RTP)A) was intended to provide a third party with a direct right to enforce contractual terms made for his benefit although he is not the promisee and he has not given consideration for the promise. Which of the following statements is true?

A) C(RTP)A has abrogated the privity rule and replaced all avoidance devices previously applied by the courts to circumvent it.
B) C(RTP)A provides the promisee with a direct right to claim damages on behalf of the third party.
C) C(RTP)A is only one more exception to the privity rule. All previous avoidance devices are still valid.
D) C(RTP)A provides contracting parties with the possibility of imposing a burden on a third party.

Answer 2

C

Question 3

Section 1(1)(a) of C(RTP)A allows a third party to enforce a contractual term where the contract 'expressly provides that he may'. Section 1(1)(b) allows a third party to enforce a contractual term where the contract 'purports to confer a benefit on him', unless, according to section 1(2), 'the parties did not intend the term to be enforceable by the third party'. Which of the following statements is false?

A) Section 1(1)(b) only applies if a term can be implied to the effect that the parties intend to confer a legally enforceable right on the third party. The test of implied terms must be satisfied.
B) Section 1(1)(b) applies whenever the contract purports to confer a benefit on the third party.
C) Where the contract is silent on third-party action, section 1(2) will not dislodge section 1(1)(b).
D) The third party must be expressly identified although he need not be in existence at the time of the contract.

Answer 3

A

Question 4

Adrian is preparing a presentation for his boss on a new marketing strategy he has been asked to assess. During the weekend, his notebook computer breaks down but he has no time to buy a new one. He calls up a friend, Bill, and asks him to go to Computerworld and buy him a new notebook under his name. Bill purchases the notebook Adrian wants and tells the salesman at Computerworld to send the bill to Adrian. After a month, Adrian still has not paid the bill. Who can Computerworld sue for the outstanding amount?

A) Only Adrian.
B) Only Bill.
C) Both Adrian and Bill.
D) Neither Adrian nor Bill; the claim goes down 'a legal black hole'.

Question 5

Amy and Brendan are to be married. Brendan has recently bought a plot of land on which he hopes to build their dream home. As a wedding present, Amy's parents decide to arrange for the construction of the new home. Amy's father contracts A&B Builders Co to build a house on Brendan's land for Brendan's benefit. Brendan accepts the arrangement and goes on a shopping spree with Amy to buy furniture for their new home. Before Amy's father has secured the loans, he discovers that Brendan has been having an affair. He tells Amy and she calls the wedding off immediately. Amy's father calls A&B Builders Co and its owner, whose own daughter is planning to get married soon, agrees to a mutual discharge of the contract. Can Brendan enforce the contract made on his behalf?

A) No, he is not privy to the contract.
B) No, he has provided no consideration for the promise; it was a unilateral gift.
C) No, the contract was validly discharged by mutual agreement.
D) Yes.

Question 6

According to section 1(5) of C(RTP)A, a third party qualifying under section 1 can enforce a term of the contract and claim 'any remedy that would have been available to him in an action for breach of contract if he had been a party to the contract'. Since the third party's rights are derivative of the promisee's, the starting point is that the scope of his claim should coincide with that of the promisee's. However, there are a number of exceptions to this starting point. Which of the following statements is false?

A) The promisor can rely on any counterclaim against the promisee against the third party's claim.
B) The promisor can rely on any counterclaim he already has against the third party's claim.
C) The third party cannot appeal to section 2(2) of the Unfair Contract Terms Act 1977 (UCTA) to defeat exemption clauses which exclude negligence liability causing loss or damage (other than personal injury or death).
D) The third party cannot rely on the contract party's rights set out in the Law Reform (Frustrated Contracts) Act 1943 or the Misrepresentation Act 1967.

Question 7

Which of the following statements about the impact of C(RTP)A on the doctrine of consideration is true?

A) All of the options given are correct.
B) C(RTP)A has created an exception to the requirement that only a promisee who has given consideration can sue on the reciprocal promise.
C) C(RTP)A has no impact on the doctrine of consideration.
D) C(RTP)A has abolished the doctrine of consideration.

Question 8

In cases of damage to or loss of property in contracts for the carriage of goods or incomplete or defective performance in building contracts, the courts may apply what is know as the Albazero exception (established in Albacruz v. Albazero (1977)) where a third party is involved. What does this exception entail?

A) That the promisee can sue the promisor for his own loss arising out of the promisor's failure to confer a benefit on the third party.
B) That the third party can sue the promisor for his failure to confer a benefit on him as was agreed to between the promisee and the promisor.
C) That the promisee can sue the promisor on behalf of the third party for the loss the third party has suffered from the promisor's failure to confer a benefit on him.
D) That the third party can sue the promisor on behalf of the promisee for the loss the promisee has suffered from the promisor's failure to perform his obligations under the contract.

Question 9

Alissa has hired Beverly, a famous pastry chef, to design her wedding cake for her. Catherine plans to marry around the same time and had been hoping Beverly would make a wedding cake for her. Beverly tells Catherine she'll be busy with Alissa's order. Catherine offers Beverly twice as much as Alissa is prepared to pay for a cake. Beverly calls Alissa to inform her she will no longer be able to make her wedding cake. It is far too late for Alissa to find a replacement at this date. Alissa can claim damages from Beverly for breach of contract, but can she also claim damages from Catherine?