Notes of Cases
| Date | 01 November 1966 |
| Published date | 01 November 1966 |
| DOI | http://doi.org/10.1111/j.1468-2230.1966.tb02268.x |
Noms
OF
CASES
LAW REPORM
IN
TILE
COURT
OF
APPEAL
TIXE
history
of
the doctrine of privity of contract is wcll known.
Until
18G1,
the authorities conflicted
on
the question wlicther
a
person could cnforce
a
promisc for his bcnefit
in
a
contract to
which lic was not
a
party.'
Tweddle
v.
dtlcinson
was generally
thought to liavc decidcd this question against the third party,3
and in
1015
this view of the law (whether historically correct
or
not) was adopted by the House
of
Lords in
Dunlop
v.
Selfridge.'
Tlic doctrinc was much criticiscd and in two cases Lord Denning
attempted to undcrminc it or
to
dcny its cxistencc.s But these
attempts appcarcd to have failcd mhcn the House of Lords rc-
afnrmcd the doctrine in
Scruttons
v.
illidland Silicones.6
Later
decisions
of
the IIouse
of
Lords assumcd the continued existence
of thc doctrinc
'
and in one of them decidcd only this year
Lord
Reid said:
'(
No
doubt the principlc prevcnting
jus
quaesituni
tertio
has been firmly established for at least half
a
century; but
it docs not appear
to
me to bc
a
primcval
or
ncccssary principle
of
thc law
of
England. We must uphold it until
it
is altered
. .
But now the attack on the doctrinc
of
privity has been rencwcd in
Beswiclc
v.
13eswiclc.0
Pctcr Beswick was
a
coal mcrchant. He had
no
business
premises but only a lorry and some utcnsils.
In
19G2
he wanted
to retire and
also
to make provision for himself
and
for his wife
'
if slic survived him. IIe accordingly transferred the goodwill
of
his business,
as
well
as
the lorry and utensils, to his nephew. In
return the neplicw promiscd to cmploy Petcr Ucswick as consultant
for
life at
a
salary
of
E6
10s.
pcr week; and after his death to
pay
his widow
E5
per wcek
for
hcr life, this payment
('
to be chargcd
on
the said business." The nephew took ovcr the busincss, but
after Pctcr Bcswick's dcatli in
1068
he refused to make any but
the first of the wcckly paymcnts to the widow. In
10G4
the widow
took out letters of administration to Pctcr Beswick's estate and
1
13.
J.
P.,
70
L.Q.R.
4G7;
Scammell,
8
C.L.P.
134-185.
2
11861)
1
B.
&
S.
308.
,
--~,
~
-
3
c.g.,
Candy
v.
Ca&
(1884) 30
Ch.D.
G7
at
p.
GO.
4
[lo151
A.C.
84.7.
5
Sniillt
and
Snipes
IInll
Farm
Lld.
V.
Riuer
Douglas
Cntchmcnt
Board
[lo401
2
ILB.
500;
Driuc
Yoursclf
IIire
Co.
(London)
Lld.
v.
Strutt
[1054]
1
Q.D.
95n
6
ZiiEz]
A.C.
440.
7
c.g.,
lloolics
v.
Bnrnard
[1OG4]
A.C.
1129.
8
Ncpbicrti
v.
A.
?'onalinsor~
(Ilattlicrs)
Lid.
[l0GG]
2
W.L.R.
453,
4GOC;
[lOGG]
9
[19GG]
3
W.L.R.
396;
[lo661 3
All
E.R.
1;
pgo
rcfcrencos
iu
this
note
are
to
1
All
B.R.
418, 424A.
tho
latter
report.
VOL.
29
057
23
058
TEIE
MODERN
LAW
REVIEW
VOL.
29
then sucd the nephew,
as
administratrix and in her own right,
claiming arrears of annuity,
a
declaration that the nephew was
bound to pay in accordance with the agreement, and specific pcr-
formance of his undertaking to pay her the annuity. The Court
of
Appeal upheld her claim.
1.
At common
law
According to Lord Denning, the common law was that
a
third
party could not
“
as
a
rule
”
sue
‘‘
alone in his own name.”
lo
But the promisee could sue the promisor, and the third party
could
‘(
bring the action in the name of the contracting party, just
as
an assignee used to do.”
In
such an action the promisor has
no
defence and must pay
‘(
damages.” He cannot escape by the
“
shifty means
”
of
alleging that the damages
arc
“
nominal
”
but must pay the promisee
‘(
the money which should have been
paid to the third person
”;
and this money, when recovered, is
held
“
for the benefit of the third person.” The promisee cannot
keep it for himself
‘‘
because it belongs to the third person and
not to him
.
.
.”
l1
But now the promisee and the third party
can sue
us
co-plaintiffs; and if the promisee refuses to sue the
third party can simply join him
as
co-defendant.’l These views
are not expressly supported by Danckwerts
L.J.13
and are rejected
by Salmon
L.J.ld
They raise many difllculties.
1.
Lord Dcnning seems to regard the third party’s right as
based on a sort
of
implied assignment from the promisee. This
raises the question: what rights
has
the promisee in the event of
the promisor’s default?
If
his remedy were an action for damages,
it would, with respect, not be quite accurate
to
say that the
common law has never allowed the promisor to
“
escape
”
by
alleging that the damages were nominal
:
this precise allegation
succeeded in West v. Houghton.16 But where the promise
is
to
pay money the proper remedy does not seem to be an action
for
‘‘
damages
”
at all, but an action for the agreed sum. The crucial
question, therefore,
is
whether the promisee could have sucd
for
the agreed sum. Cleaver
v.
Mutual Reserve Fund Life Association
lb
10
I1
11
13
14
16
10
7D.
6H.
See
p.
10D.
18G.
(1870)
4
C.P.D. 107;
cf.
Leoclt
v.
Harqcs
(1699)
Cro.Eliz.
619,
652;
contrast
Anon.
(1646)
Style
6,
sub
nom.
Bafeald
V.
Collard,
Alloyn
1.
Williston,
Contracls,
rcv. ed.,
EL
875, and McCormick,
Damages,
p.
00,
state that
generally the promisee is only entitled
to
nominal damagoa; Corbin,
Contracts,
8.
812,
states that in such
D
case the promisee
is
entitled to
a
decrco
of
specific
performance.
[I8021
1
Q.B.
147; criticiacd by Ames,
Lectures
820,
aug eating that
a
restitu-
tionar remedy would be more appropriatc.
But
althoiigf there
ia
much to
be
said
Lr
this view, tho rcstitiitionary remedy would havo becn useless in
Beswick
v.
Bcswick
bemuse of the rule of English low that the remedy only
opcrntcs where the failuro of consideration
ia
total.
7D.-l?.
Nov.
1966
NOTES
OF
CASES
659
supports an affumative answer.
In
that case the third party’s
right to sue was barred by public policy;
it
should not affect the
right of the promisee that the third party’s claim is barred on a
different ground, namely, privity. But granted that the promisee
can
SUC,
docs
it
follow that the money
‘‘
belongs
”
to the third
party? The technical objcction that at common law money
usually
“
belongs
”
to the payee need not bc laboured. But even
if the statement means the promisee is liable to account to the
third party, what support for
it
is there in the authorities cited?
These
are,
in chronological order,
Robertson
v.
Wait,I7
Lloyds
v.
Ziarper
and
Re Schebsman.lg
The first two of these were cases
of trust, and by general consent there was
no
trust in
Beswiclc
v.
Beswick.
And the citation of
Re Schebsman
is puzzling, since
the money there
was
never in the hands of the promisee at all,
nor
did the promisor have to be sued for it. The decision
was
that
if the promisor paid the third party the latter could keep thc money.
And the reason for this was either that the presumption of advancc-
ment operated in favour of the third party
or
that
it
was
an
essential term of the bargain (important to both promisor and
promisee) that thc money should
go
to the third party.
In
the
absence of such factors, the assumption underlying most modern
authorities
on
the subject is that,
as
between promisee and third
party, the former is entitled to the money unless there is
a
trust.1°
Nor
is any authority cited for the view that the third party can
simply join
a
recalcitrant promisee
as
co-defcndnnt
or
that the
doctrine of privity is
“
nt
bottom
.
.
.
only
a
rule
of
procedure.”
‘l
Finally, there is the objection that at common law the way to a
jus
qunesitum tertio
nppears to be barred by two decisions of the
House of Lords. Lord Denning distinguished these by saying that
in them the third party had
“
no legitimate interest
’’
in
enforcing
the promise.
In
Dunlop
v.
Selfridge
the third party was
‘(
sceking
to enforce the maintenance of prices to the public disadvantage
”
na;
in
Scruttons
v.
Midland Silicones
he was
“
seeking
to
exempt him-
self from his just liability.”
23
But these are, with respect, very
questionable distinctions.
Is
it
possible, over fifty years after the
event, to assert categorically that the price maintenance agrce-
ment in
Dunlop
v.
Selfridge
was
“
to the public disadvantage
”?
Does not the
work
of the Restrictive Practices Court show that this
is
a
question of immense complexity?
Is
it
right that the steve-
dores in the
Midland Silicones
case had
“
no
legitimate interest
’’
in protection from liability, when persons in similar positions
are
17
(1853)
5:
Ex.
200.
18
(1880)
16 Ch.D.
200.
19
[lO44] Ch. 83.
zo
e.g.,
Ilo
Sinclair‘s
Life
Policy
[l938] Ch.
708;
tho
wholo
rensoning
of
Rs
21
119661
3
All
E.R.
OD.
22
OB.
23
OF.
Scliebsman
is
based
on
tho
same
assumption.
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