Privity Private justice or public regulation Edited by PETER KINCAID Macquarie University Sydney Ashgate DARTMOUTH Aldershot Burlington USA Singapore Sydney
Contents Contributors Preface Acknowledgments. x xi xiii 1 Theoretical Issues Raised by the Privity Question 1 Private or Public Justice 1 Flexible v. Formal Reasoning 2 Pragmatism v. Principle 3 Nature and Source of a Third-Party Right 4 Rights and Duties: the Question of Focus 5 Remedies 6 2 Summaries of Essays 7 Chapter 3: Robert Flannigan, "Privity - The End of an Era (Error)" 7 Chapter 4 (Part A):, "Privity and Private Justice in Contract" 9 (Part B):, "Privity Reform in England" 10 Chapter 5: Sir Anthony Mason, "Privity - A Rule in Search of Decent Burial?" 11 Chapter 6: Catherine Mitchell, "Searching for the Principles behind Privity Reform" 13 Chapter 7: Roger Brownsword and Dale Hutchison, "Beyond Promissory Principle and Protective Pragmatism" 14 Chapter 8: Stephen A. Smith, "Contracts for the Benefit of Third Parties: in Defence of the Third-Party Rule" 16 Chapter 9: Melvin Aron Eisenberg, "The Third-Party Beneficiary Principle" 18 Chapter 10: John Gava, "Is Privity Worth Defending?" 19 Chapter 11: John Swan, "The Rights of Third Parties to Contracts: A Suggested Basis for Recognition" 20 Chapter 12: Simon Whittaker, "Reciprocity Beyond Privity" 22 Chapter 13: J.L.R. Davis, "Privity and Exclusion Clauses" 24 Chapter 14: Anthony Jon Waters, "Privity, Property, and Pragmatism"26
vi Privity: Private justice or public regulation 3 Privity - The End of an Era (Error) 28 Robert Flannigan The Early Cases 29 Privity or Consideration? 32 The Entrenchment of the Doctrine of Privity 34 The Modem Cases 38 Privity Pro and Con 40 Privity and Contract Theory 48 Conclusion 59 4a Privity and Private Justice in Contract 60 Introduction 60 The Law Commission's Proposals 61 The Law Commission's Justifications 63 Issues Raised by Justifications 71 Conclusion 80 4b Privity Reform in England 82 5 Privity - A Rule in Search of Decent Burial? 88 Sir Anthony Mason The Nature of the Privity Rule 88 The Purpose of the Privity Rule 88 Suggested Justifications for the Rule 91 The Rule is not Accepted or has been Modified Elsewhere 93 The Justification for Departing from the Rule 94 Other Reasons for Departing from the Rule 95 Trust of the Third-Party Promise 97 Complexity, Artificiality and Uncertainty 97 Adverse Consequences for Commercial Activities 98 Criticisms of the Case for Departing from the Rule 98 Other Criticisms of Reform 100 Conditions According to which Third-Party Enforcement is Permitted 102 Conclusion 103 6 Searching for the Principles Behind Privity Reform 104 Catherine Mitchell Introduction 104 The Proposals for Reform 108
Contents vii The Law Commission Proposals and the Orthodox Account of Contractual Obligation 109 Can the Orthodox Account Justify Third-Party Rights in Contract?... 114 The Crystallisation Test 120 The Law Commission and the Modem Account of Contractual Obligations 121 Conclusion 124 7 Beyond Promissory Principle and Protective Pragmatism 126 Roger Brownsword and Dale Hutchison 1. Introduction 126 2. From Bilateral to Trilateral Promissory Situations 128 3. The South African Regime 132 4. The New English Regime 142 5. Conclusion 145 8 In Defence of the Third-Party Rule 147 Stephen A. Smith 1. The Third-Party Rule Defined and Defended 148 2. The Real Problems in Privity Cases 155 3. The Law Commission's Reform Proposals 166 4. Conclusion 170 9 The Third-Party Beneficiary Principle 172 Melvin Aron Eisenberg Introduction 172 1. The Principle Governing Enforceability of Contracts by Third-Party Beneficiaries 173 2. Some Recurring Third-Party-Beneficiary Categories 185 Conclusion 198 10 Is Privity Worth Defending? 199 John Gava Functionalism and Contract 201 Functionalism and Legal History 203 Contract in the Marketplace 209 Can Judges be Good Functionalists? 215 Contract as Part of the Common Law Constitutional Heritage 222 Does it Matter that Contract does not Matter? 226 Contract and Turbo-Capitalism 229 Conclusion 232
viii Privity: Private justice or public regulation 11 The Rights of Third Parties to Contracts: A Suggested Basis for Recognition 233 John Swan 1. Introduction 233 2. The Practical Pattern 235 3. A Principle for Recognition? 246 4. Conclusion 257 12 Reciprocity Beyond Privity 259 Simon Whittaker 1. Leasehold Covenants 263 2. Transferring Contracts of Employment 265 3. Undisclosed Principals 269 4. Package Holidays 271 5. The Death of the Parties: Privity and Personal Representatives 273 6. Freehold Covenants 274 7. A General Principle of Benefit and Burden Beyond Privity? 277 Conclusion 281 13 Privity and Exclusion Clauses 284 J.L.R. Davis Introduction 284 The Benefit of an Exclusion Clause 285 The Burden of an Exclusion Clause 302 Conclusion 307 14 Privity, Property, and Pragmatism 309 Anthony Jon Waters 1. The History of the American Rule 310 2. Why the Need for a General Rule? 318 3. Can a Fuzzy Set of Reasons Constitute a Coherent Concoction? And Does It Matter? 320 4. Public and Private 325 5. The Nature of Contract 327 Conclusion 331
Contents ix Appendix: Contracts (Rights of Third Parties) Act 1999 337 Bibliography 343 Cases 351 Statutes 359 Index 360