Coulls v Bagot’s executor & Trustee Co ltd (1967) 119 CLR 460 By an agreement in writing, prepared without professional assistance, and headed “Agreement between C. and the O. Company”, C. granted to the company, in consideration of the sum of ? 5, the sole right for a specified period to quarry and remove stone from land owned by him and the company agreed to pay royalties at rates specified in the agreement. The agreement also contained provision for its extension and an authority by C. to the company to pay all moneys connected with the agreement to his wife and himself as joint tenants.
The agreement was signed by C. , by a person on behalf of the company and by the wife. Held, that the part of the document authorizing payment to C. and his wife in view of its terms did not constitute a legal or an equitable assignment of the debt to the wife and, further, not being supported by consideration, was not effective as an equitable assignment. Held, further, by McTiernan, Taylor and Owen JJ. , that the transaction into which the parties had entered was a contract between C. and the company, together with a revocable mandate from C. o the company to pay moneys to the wife, that this mandate was revoked by C. ‘s death, and that, accordingly, the moneys payable under the contract were thereafter payable to his executor; Barwick C. J. and Windeyer J. dissented on the ground that the transaction was a contract with both C. and his wife whereby the company agreed to make payments to them jointly. Per Barwick C. J. , Taylor, Windeyer and Owen JJ. , McTiernan J. not expressing an opinion: If the transaction were truly a contract whereby the company promised C. nd his wife to make payments to them jointly, the wife would be entitled to receive the payments after C. ‘s death, notwithstanding that she personally gave no consideration, and she would be able to enforce this right. The rights of B. and C. under a contract whereby A. promises B. for consideration supplied by B. to pay C. (a) in the case where the nature of the consideration given would have allowed the debtor to obtain specific performance and (b) where the consideration given was not of that nature, considered by Barwick C. J. and Windeyer J.
Beswick v. Beswick ,  Ch. 538 , considered. Observations also by Barwick C. J. and Windeyer J. upon the application of the doctrine of election to the interest, if any, conferred upon the wife by the agreement and a life interest in the income of a trust fund provided by C. ‘s will which contained the expression of C. ‘s wish that the land upon which the quarrying was being done should be appropriated to the fund. A house was bought by a husband as the matrimonial home and he had it transferred to himself and his wife as joint tenants.
The husband provided part of the purchase money out of his own moneys and planned to sell the former matrimonial home, which was his property, to provide the balance, but as a temporary measure he arranged for two mortgages over the newly-acquired property to secure loans which enabled him to complete its purchase. Both the mortgages were signed by both the husband and the wife, on whom they imposed joint and several liability for the mortgage debts. At the time of the purchase, the husband announced, in effect, that he was buying the house for his wife.
After the husband’s death, his executor, following demands by the mortgagees, paid off both mortgages. The executor then demanded indemnity or contribution from the widow. Held, that the executor had no right to indemnity or contribution. Dunlop Pneumatic Tyre Co Ltd v Selfridge ;amp; Co ltd  AC 847 The plaintiff (Dunlop) sought to establish and enforce a resale price maintenance (RPM) scheme. The plaintiff sold tyres to Dew ;amp; Co (a tyre dealer) which then sold to Selfridge on condition that Selfridge would not sell below the list price.
Selfridge failed to comply with the condition; the plaintiff sued for breach of contract. HELD: Although the promise made by Selfridge to Dew (not to sell below list price) had been made for the benefit of Dunlop under its RPM scheme, Dunlop was not entitled to enforce the contract against Selfridge because it was not a party to the contract. Trident General Insurance Co ltd v McNiece Bros Pty Ltd (1988) 165 CLR 107 Blue Circle Cement entered into a contract of insurance with Trident.
The insurance policy covered liability for accidents occurring during this construction and defined the ‘assured’ parties as including all Blue Circle’s contractors and sub-contractors (which included McNiece). McNiece subsequently became the principal contractor for work being carried out at the Blue Circle plant. A worker was seriously injured and recovered a judgment against McNiece who sought indemnity under the policy from Trident. Trident denied liability on the ground that McNiece was not a party to the insurance contract. McNiece succeeded at first instance in the SC of NSW.
On appeal to the Court of Appeal the court found there was no privity of contract and McNiece had not provided consideration to Trident. Nevertheless they found for McNiece on the ground that under insurance policies beneficiaries can sue on the policy despite no privity or consideration. Trident appealed to the High Court. Held: At least in relation to insurance policies, and almost certainly in relation to contract of indemnity generally, where the evidence is that third parties were in the contemplation of the principal, then those third parties can enforce the contract.
That was the case here – Trident was liable. Note: The High Court made it clear that it would recognise an extension of the boundaries of privity. More detail: Facts This case regarded a work site. Blue Circle Cement entered into a contract of insurance with Trident. The insurance policy covered liability for accidents occurring during this construction and defined the ‘assured’ parties as including all Blue Circle’s contractors and sub-contractors (which included McNiece). McNiece subsequently became the principal contractor for work being carried out at the Blue Circle plant.
A worker was seriously injured and recovered a judgment against McNiece who sought indemnity under the policy from Trident. Trident denied liability on the ground that McNiece was not a party to the insurance contract. History of proceedings Trial McNiece succeeded at first instance in the SC of NSW. First appeal On appeal to the Court of Appeal the court found there was no privity of contract and McNiece had not provided consideration to Trident. Nevertheless they found for McNiece on the ground that under insurance policies beneficiaries can sue on the policy despite no privity or onsideration. Trident appealed to the High Court. Held Mason CJ and Wilson J Their Honours noted (at 115) that” ‘This court has hitherto accepted that a third party cannot sue upon a contract and that a stranger to the consideration cannot maintain an action at law upon it’. They noted that the fundamental rules of privity of contract and the requirement that consideration move from the promisee have been ‘under siege’. Noted that in the US third parties (in most states) can sue directly on contracts made for their benefit by others.
But, despite calls for reform, the traditional rules have survived in the UK and by extension in Australia. There have been some statutory reforms like the Insurance Contracts Act 1984 (Cth) permitting third parties to insurance contracts made for their benefit to sue directly on the policy in some cases. Normally, however, the traditional rules apply and their Honours observed that the possibility of an action for damages (normally only nominal) ‘at the suit of the promisee for breach of the promise to benefit the third party is not a sufficient sanction to secure performance of the promise’.
Specific performance may be an available and suitable remedy in some cases but not all and the third party remains dependent on the promisee to enforce the promise on their behalf. On the specific question of whether the ‘old rules’ apply to policies of insurance their Honours considered that the old rules should not apply and McNiece should be entitled to succeed on the contractual claim. They noted that while an action based on estoppel might be possible, the rights of a respondent should not depend upon its ability to make out this claim.
More generally (obiter) they indicated that they would be in favour of a ‘simple departure from the traditional rules [which] would lead to third party enforceability of such a contract [one made for benefit of third party], subject to the preservation of a contracting party’s right to rescind or vary, in the absence of reliance by the third party to his detriment, and to the availability in an action by the third party of defences against a contracting party. …’ (at para 31) They concluded that McNiece was not a party to the contract and therefore as a general rule the doctrine of privity precluded it from enforcing the ontract. However, this was a special case – as McNiece was within the class of persons expressed to be insured by a public liability policy it could enforce the indemnity provided for in the contract. Brennan J (dissenting) Justice Brennan held that the privity doctrine precluded McNiece from enforcing the contract. Deane J Justice Deane applied the laws relating to trusts to assist McNiece. Dawson J (dissenting) Justice Dawson held that the privity doctrine precluded McNiece from enforcing the contract. Toohey J
His Honour confirmed the existing law on privity but expressed concern that the law was based on ‘shaky foundations’ in ‘in its widest form, lacks support both in logic or in jurisprudence’. However, he concluded that the law was capable of some flexibility. His Honour confined his reasoning to insurance contracts in respect of which he held that where policies of this nature were created for the direct benefit of a third party the third party may sue directly upon the policy, notwithstanding they are not a party to the contract. (para 21) ‘The proposition which I consider this Court should now indorse may be formulated along these lines.
When an insurer issues a liability insurance policy, identifying the assured in terms that evidence an intention on the part of both insurer and assured that the policy will indemnify as well those with whom the assured contracts for the purpose of the venture covered by the policy, and it is reasonable to expect that such a contractor may order its affairs by reference to the existence of the policy, the contractor may sue the insurer on the policy, notwithstanding that consideration may not have moved from the contractor to the insurer and notwithstanding that the contractor is not a party to the contract between the insurer and assured. Gaudron J McNiece could not recover in contract as a result of the operation of the privity doctrine. However, it could recover based on a claim of unjust enrichment: ‘In my view it should now be recognized that a promisor who has accepted agreed consideration for a promise to benefit a third party is unjustly enriched at the expense of the third party to the extent that the promise is unfulfilled and the non-fulfilment does not attract proportional legal consequences.
Although exceptions to and qualifications of the rules of privity and consideration and the doctrines of trust and estoppel operate in certain circumstances to preclude any unjust enrichment, the exceptions, qualifications and doctrines should not be seen as reasons to impede the development of legal principle which will obviate all possibility of unjust enrichment. Rather, their existence should be seen as demonstrating the necessity for the recognition of such an obligation. ‘ (para 10) Vandepitte v Preferred Accident Insurance Corporation of New York Facts: Jean Berry, a minor, was driving a car which was owned by her father.
She was involved in an accident with E. J. Vandepitte (Alice’s husband) while Alice was in the car and she was injured. It was found that there was money owing to the appellant for her injuries so E. J. Vandepitte issued an execution to R. E. Berry (Jean’s father) for the balance. He refused to pay so Vandepitte, under the provisions of the Insurance Act sued the insurance company directly. Vandepitte was successful at the Supreme Court of British Columbia and at the Court of Appeal for British Columbia but this was overturned by the Supreme Court of Canada and Vandepitte appealled to the Judicial Committee of the Privy Council.
Preferred Accident Insurance argues that there was no contract between them and Jean Berry, only between them and the father. Vandepitte argues that there was a relationship created both in agency and in trust. Issue: Is there either an agency or trust relationship which entitles the plaintiff to recover from the insurance company? Decision: Appeal DISMISSED with costs. Reasons: The Council deals with both of the plaintiff’s arguments; they find there is no agency as: 1. there was no intention on the part of R.
E. Berry to include Jean on the policy, 2. there was no authority from Jean to insure on her behalf, 3. Jean never accepted any insurance made on her behalf, and 4. there was no consideration given. On the issue of a trust relationship the Council again states that to create a trust there must be clear intention to create a trust by R. E. Berry and no evidence was adduced to establish the creation of such a trust. Ratio: * A cestui que trust can sue on a contract made by the trustee for their benefit. Cestui que trusts: “the one who trusts” or the person who will benefit from the trust and will receive payments or a future distribution from the trust’s assets) * There must be clear intention to create a trust in order for a trust relationship to be found. Australian Consumer Law s271 271 Action for damages against manufacturers of goods (1) If: (a) the guarantee under section 54 applies to a supply of goods to a consumer; and (b) the guarantee is not complied with; an affected person in relation to the goods may, by action against the manufacturer of the goods, recover damages from the manufacturer. 2) Subsection (1) does not apply if the guarantee under section 54 is not complied with only because of: (a) an act, default or omission of, or any representation made by, any person other than the manufacturer or an employee or agent of the manufacturer; or (b) a cause independent of human control that occurred after the goods left the control of the manufacturer; or (c) the fact that the price charged by the supplier was higher than the manufacturer’s recommended retail price, or the average retail price, for the goods. 3) If: (a) a person supplies, in trade or commerce, goods by description to a consumer; and (b) the description was applied to the goods by or on behalf of the manufacturer of the goods, or with express or implied consent of the manufacturer; and (c) the guarantee under section 56 applies to the supply and it is not complied with; an affected person in relation to the goods may, by action against the manufacturer of the goods, recover damages from the manufacturer. 4) Subsection (3) does not apply if the guarantee under section 56 is not complied with only because of: (a) an act, default or omission of any person other than the manufacturer or an employee or agent of the manufacturer; or (b) a cause independent of human control that occurred after the goods left the control of the manufacturer. 5) If: (a) the guarantee under section 58 or 59(1) applies to a supply of goods to a consumer; and (b) the guarantee is not complied with; an affected person in relation to the goods may, by action against the manufacturer of the goods, recover damages from the manufacturer. 6) If an affected person in relation to goods has, in accordance with an express warranty given or made by the manufacturer of the goods, required the manufacturer to remedy a failure to comply with a guarantee referred to in subsection (1), (3) or (5): (a) by repairing the goods; or (b) by replacing the goods with goods of an identical type; then, despite that subsection, the affected person is not entitled to commence an action under that subsection to recover damages of a kind referred to in section 272(1)(a) unless the manufacturer has refused or failed to remedy the failure, or has failed to remedy the failure within a reasonable time. 7) The affected person in relation to the goods may commence an action under this section whether or not the goods are in their original packaging. Australian Consumer Law s54 54 Guarantee as to acceptable quality (1) If: (a) a person supplies, in trade or commerce, goods to a consumer; and (b) the supply does not occur by way of sale by auction; there is a guarantee that the goods are of acceptable quality. (2) Goods are of acceptable quality if they are as: (a) fit for all the purposes for which goods of that kind are commonly supplied; and (b) acceptable in appearance and finish; and (c) free from defects; and (d) safe; and (e) durable; s a reasonable consumer fully acquainted with the state and condition of the goods (including any hidden defects of the goods), would regard as acceptable having regard to the matters in subsection (3). (3) The matters for the purposes of subsection (2) are: (a) the nature of the goods; and (b) the price of the goods (if relevant); and (c) any statements made about the goods on any packaging or label on the goods; and (d) any representation made about the goods by the supplier or manufacturer of the goods; and (e) any other relevant circumstances relating to the supply of the goods. (4) If: a) goods supplied to a consumer are not of acceptable quality; and (b) the only reason or reasons why they are not of acceptable quality were specifically drawn to the consumer’s attention before the consumer agreed to the supply; the goods are taken to be of acceptable quality. (5) If: (a) goods are displayed for sale or hire; and (b) the goods would not be of acceptable quality if they were supplied to a consumer; the reason or reasons why they are not of acceptable quality are taken, for the purposes of subsection (4), to have been specifically drawn to a consumer’s attention if those reasons were disclosed on a written notice that was displayed with the goods and that was transparent. 6) Goods do not fail to be of acceptable quality if: (a) the consumer to whom they are supplied causes them to become of unacceptable quality, or fails to take reasonable steps to prevent them from becoming of unacceptable quality; and (b) they are damaged by abnormal use. (7) Goods do not fail to be of acceptable quality if: (a) the consumer acquiring the goods examines them before the consumer agrees to the supply of the goods; and (b) the examination ought reasonably to have revealed that the goods were not of acceptable quality. Beswick v Beswick  AC 58 Facts: Peter Beswick was a coal merchant.
He agreed to sell his business to his nephew, the respondent, if he paid him a certain sum of money for as long as he lived, and then to pay his wife (the appellant) ? 5 per week for the rest of her life after he died. He died, and the nephew only paid his aunt once before stating that no contract existed between them. She was also the administratrix of her husband’s will. Mrs. Beswick was unsuccessful at trial and successful at appeal, which John Joseph Beswick appealed. Issue: Is Mrs. Peter Beswick able to sue her nephew either in her own personal capacity, as the executrix of the will, or both? Decision: Appeal DISMISSED. Reasons: The House of Lords decide that the aunt has no right to sue her nephew in her own capacity as she was not a party to the contract.
This overturns Denning’s findings in the lower court allowing third parties to sue for benefits that were guaranteed to them under a contract. However, in her capacity as the administratrix she is able to sue him for the specific performance of his promise that was made in the contract. Ratio: * Third parties cannot sue for breach of contract when they were not a party to the contract, even if they were named as a benefactor of the contract. * Executors of wills can sue for specific performance of promises made in contracts with the deceased person. Jackson v Horizon Holidays  1 WLR 1468 Court of Appeal Mr Jackson booked a 28 day holiday in Ceylon for himself and his family through Horizon Holidays.
The hotel turned out to be unsatisfactory for various reasons relating to cleanliness and provision of services. The trial judge made an award for the disappointment suffered by Mr Jackson, but stated he could not take into account the disappointment suffered by his wife and children since they were not party to the contract. Mr Jackson appealed. Held: Mr Jackson was able to recover for the disappointment suffered by his wife and children. This amounts to an exception to the rule of privity of contract based on the decision in Beswick v Beswick (1968) AC 88. Alfred McAlpine Construction Ltd v panatown Ltd  1 AC 518 The Facts Panatown was part of a group of companies based in England, the Unex Group.
The Unex Group owned a piece of land in Cambridge, England, through another company in the group, Unex Investment Properties Ltd (‘UIPL’). Unex wanted to develop this land. Instead of UIPL entering into the construction contract, Panatown entered into it with McAlpine to build an office building on UIPL’s land. This is the root of Panatown’s (and Unex’s) problem. Unex chose Panatown as the contracting party because the group avoided VAT (the English equivalent of GST) this way. It should be noted that none of the Law Lords saw this as objectionable. This was legitimate tax avoidance and not tax evasion. This fact had nothing to do with Panatown’s woes.
The building contract was in a modified JCT standard form with contractor’s design (1981 Ed) and the contract sum was a little under ? 10. 5m. On the same day Panatown and McAlpine entered into the building contract, McAlpine, under an obligation in the building contract, executed a duty of care deed (‘DCD’) in favour of UIPL. Under the DCD, McAlpine assumed a duty of care to UIPL, and its assignees, in respect of the building contract. McAlpine undertook that they would exercise all reasonable care, skill and attention in respect of all matters which lay within the scope of their responsibilities under the building contract. The purpose of the DCD was to give purchasers of the building from the Unex Group undoubted causes of action for latent defects to the building.
The widespread use of DCDs, or collateral warranties, as they are usually called, derives from the change in the tort law which occurred in 1990 when the House of Lords departed from Anns v Merton London Borough  2 All ER 492 in Murphy v Brentwood DC  2 All ER 908. In Murphy, the House of Lords held that a contractor has no liability in tort to subsequent purchasers for latent defects. The DCD was therefore designed to reclaim, for subsequent purchasers in contract, rights which had previously been accorded in tort. Both Panatown and McAlpine agreed that there were significant defects in the foundations and steel frame of the building.
The defects were serious and the building may have had to be demolished and rebuilt. The damages claimed by Panatown ran into many millions of pounds. McAlpine denied any breach of contract and under the arbitration clause in the construction contract, arbitration proceedings were commenced. In the arbitration McAlpine sought a preliminary award that Panatown was not entitled to recover substantial damages under the building contract on the ground that Panatown did not own the building and hence did not suffer any loss. (McAlpine’s argument was that UIPL may have suffered loss as the building owner but Panatown did not. The loss Panatown was claiming in the arbitration was UIPL’s loss. The arbitrator heard this as a preliminary issue and found in Panatown’s favour. McAlpine appealed to the High Court which found in favour of McAlpine. The Court of Appeal reversed the High Court and the House of Lords reversed the Court of Appeal giving McAlpine the final victory. HELD: It held, as an exception to the general rule of damages, that in a contract for the carriage of goods by sea the consignor could recover substantial damages from the carrier where the consignor (but not the consignee) had privity of contract with the carrier. This result was allowed even though the goods were no longer owned by the consignor or at his risk.
The consignor and the carrier had contemplated at the outset that title to the goods would pass before the contract of carriage was performed. The consignor is accountable to the consignee for the damages. Elder, Dempster & Co Ltd v Paterson, Zochonis & Co ltd  AC 522 Issue: The question was asked whether, as a defence to a shipper’s action in tort for negligently stowing cargo, shipowners could rely on an exclusion clause in the bills of lading, despite the fact that the contract of carriage was between the shipper and the charterer. Held: They could do so. The House accepted the principle of vicarious immunity, underwhich a servant or agent performing a contract is entitled to any immunity from liability which his employer or principal would have had.
Although the shipowners may not have been privy to the contract of carriage (between shipper and charterer) they took possession of the goods on behalf of, and as agents for, the charterers and so could claim the same protection as their principals. Midland Silicones Ltd v Scruttons Ltd  AC 446 Facts The facts were that a carrier had entered into a contract ( known as a bill of lading ) with the owner of some drums of chemicals (the plaintiff ) to transport them by ship. The goods were unloaded from the ship by a firm of stevedores (the defendants ) who were engaged for this purpose by the carrier. Both the bill of lading and the contract between the carrier and the stevedores contained a clause limiting liability to $500.
The stevedores negligently damaged the goods whilst unloading them and sought to rely upon an exclusion clause contained in the bill of lading as a defence to the plaintiff’s action for damages against them in the tort of negligence. Could the stevedores have the benefit of the exclusion clause in the bill of lading ? Decision The House of Lords that the defendants (a third party) could not have the benefit of the clause because : * there was no privity of contract, and * the clause in the bill of lading only referred to the liabilities of the carrier London Drugs Ltd v Kuehne & Nagel International Ltd 3 SCR 299 Facts: London Drugs delivered a transformer to the respondents for storage until it was to be used. In transfer, two employees of Kuehne & Nagel (Bassart and Vanwinkel) negligently dropped the machine causing $33,000 of damage.
There was a clause in the contract stating that the “warehouseman’s liability was limited to $40” unless specifically stated otherwise. No further statements had been made. The employees were found liable in trial, but their appeal was allowed at the Court of Appeal and London Drugs appealed to the Supreme Court. Issue: 1. Did the employees owe London Drugs a duty of care? 2. Were the employees covered under the limitation of liability clause? Decision: Appeal DISMISSED. Reasons: Iacobucci, writing for the majority, finds that the employees did owe a duty of care, and that they were negligent. Therefore the only issue is whether they are excluded from liability under the limitation clause.
The main obstacle to this finding is the doctrine of privity of contract; Iacobucci states that the only reason to reject the employee’s claim is a strict adherence to this doctrine. He holds that when the parties signed the contract they knew of the clause, and knew that employees of the company would be handling the material. He also says that this change to the doctrine of privity is only incremental, and not large enough to require legislative support. In this case he says that to allow the employees to benefit from the limitation coincides with the agreement of the parties when they signed the contract. Further, there are policy reasons to allow the exclusion – particularly that employees do not expect to be found liable when there are clauses that specifically state that they are excluded.
He sets out a two-step test that must be satisfied in order for employees to be excluded from liability: 1. the limitation of liability clause must, either expressly or impliedly, extend its benefit to the employee(s) seeking to rely on it; and 2. the employees must have been acting in the course of their employment and must have been performing the very services provided for in the contract between their employer and the other party when the loss occurred. If both of these provisions are met, then the employees are excluded from liability. They are met in this case, and therefore the employees can benefit from the limitation clause. New Zealand Shipping Co Ltd v A M Sattertwaite ;amp; Co Ltd  AC 154 Facts:
Ajax Machine Tool Co. Ltd. manufactured and consigned a drill to A. M. Satterthwaite ;amp; Co. Ltd. A bill of lading was issued by agents for the Federal Steam Navigation Co. Ltd. which contained a clause stating: 1. no liability for the carrier or servants/agents to the consignee, 2. all claims must be within one year (Carriage of Goods by Sea Act), and 3. not accountable for damages in excess of ? 100 unless the goods were insured for that value. The stevedores were New Zealand Shipping (of which the Federal Steam Navigation Co. was a subsidiary) and they unloaded the drill and in the course of unloading damaged the drill due to negligence.
Satterthwaite brought action three years after the damage and NZ Shipping claimed they were not liable as they were covered by the clause in the bill of lading. Issue: Does the limited liability clause in the bill of lading apply to the stevedores? Decision: Appeal allowed with costs to the appellant, liability clause applies. Reasons: Wilberforce, writing for the majority, lays out a test for agency: 1. if the party is meant to be covered by provisions; 2. if the promissor is clearly acting as agent for the party; and 3. if the promissor has authority to do this; then consideration moves from party through agent to promissee. Applying this to the case it is clear that the subsidiary relationship between the parties answers yes to each of these questions.
Satterthwaite agreed to exempt carrier and agents from liability in the bill of lading and commercial realities must mean that this covers the whole carriage from loading to discharge. This is essentially a “unilateral” contract which becomes bilateral with the specific performance of loading the goods. These acts constituted consideration for an agreement between Satterthwaite and NZ Shipping and therefore NZ Shipping would be subject to the exemption conditions of the bill of lading. Wilberforce makes it clear that this decision is in the interest of ensuring an efficient global market; the owners should have been insured since they knew the true value of the goods. Ratio: Test for agency – if: 1. party is meant to be covered by provisions; 2. romissor is clearly acting as agent for the party; and 3. promissor has authority to do this; then consideration moves from party through agent to promissee. Tulk v Moxhay (1848) 41 ER 1143 Brief Fact Summary: The Plaintiff, Tulk (Plaintiff), had sold Leicester Square by deed containing. The Defendant, Moxhay (Defendant), a subsequent purchaser sought to build upon the land. Plaintiff brought a bill for injunction. Synopsis of Rule of Law: Since a covenant is a contract between the vendor and the vendee, it may be enforced against a subsequent purchaser who has notice of the contractual obligation of his vendor, even though it does not run with the land.
Facts: The Plaintiff sold Leicester Square with the restriction that it be maintained in a certain form as a public “pleasure ground”. The deed restriction was covenant for heirs and assigns requiring that the land be maintained as a square garden. The Plaintiff continued to own homes and live around the square after its sale. In 1808, the person who originally purchased Leicester Square from the plaintiff had notice of the covenant contained in the deed. Forty years later, the property was sold to the Defendant, Moxhay. Moxhal sought to build upon the land on the square. Plaintiff brought a bill for injunction to stop any construction. Issue: Can a covenant restricting a property to a specific use be enforced against a subsequent purchaser?
Held: Whether or not the covenant runs with the land, such an agreement could properly be enforced in equity because the one who purchases the land from Tulk had notice of that covenant. Defendant, Moxhal could not stand in a different situation from the owner from whom he purchased the property. Discussion: An equitable servitude is enforceable by injunction with no regard to privity, so long as the promise is intended to run and the subsequent purchaser has actual or constructive knowledge of the covenant. Lord Strathcona SS Co v Dominion Coal Co  AC 108 Port Line v Ben Line Steamers Ltd  2 QB 146 Contracts (right of third parties) Act 1999 UK Right of third party to enforce contractual term. 1)Subject to the provisions of this Act, a person who is not a party to a contract (a “third party”) may in his own right enforce a term of the contract if— (a)the contract expressly provides that he may, or (b)subject to subsection (2), the term purports to confer a benefit on him. (2)Subsection (1)(b) does not apply if on a proper construction of the contract it appears that the parties did not intend the term to be enforceable by the third party. (3)The third party must be expressly identified in the contract by name, as a member of a class or as answering a particular description but need not be in existence when the contract is entered into. 4)This section does not confer a right on a third party to enforce a term of a contract otherwise than subject to and in accordance with any other relevant terms of the contract. (5)For the purpose of exercising his right to enforce a term of the contract, there shall be available to the third party 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 (and the rules relating to damages, injunctions, specific performance and other relief shall apply accordingly). (6)Where a term of a contract excludes or limits liability in relation to any matter references in this Act to the third party enforcing the term shall be construed as references to his availing himself of the exclusion or limitation. 7)In this Act, in relation to a term of a contract which is enforceable by a third party— * “the promisor” means the party to the contract against whom the term is enforceable by the third party, and * “the promisee” means the party to the contract by whom the term is enforceable against the promisor. Contracts (Privity) Act 1982 NZ 4 Deeds or contracts for the benefit of third parties Where a promise contained in a deed or contract confers, or purports to confer, a benefit on a person, designated by name, description, or reference to a class, who is not a party to the deed or contract (whether or not the person is in existence at the time when the deed or contract is made), the promisor shall be under an obligation, enforceable at the suit of that person, to perform that promise:
Provided that this section shall not apply to a promise which, on the proper construction of the deed or contract, is not intended to create, in respect of the benefit, an obligation enforceable at the suit of that person. Property law Act 1969 WA s11 11 . Persons taking who are not parties (1) A person may take an immediate or other interest in land or other property, or the benefit of any condition, right of entry, covenant or agreement over or respecting land or other property, although he is not named as a party to the conveyance or other instrument that relates to the land or property. (2) Except in the case of a conveyance or other instrument to which subsection (1) applies, where a contract expressly n its terms purports to confer a benefit directly on a person who is not named as a party to the contract, the contract is, subject to subsection (3), enforceable by that person in his own name but — (a) all defences that would have been available to the defendant in an action or proceeding in a court of competent jurisdiction to enforce the contract had the plaintiff in the action or proceeding been named as a party to the contract, shall be so available; (b) each person named as a party to the contract shall be joined as a party to the action or proceeding; and (c) such defendant in the action or proceeding shall be entitled to enforce as against such plaintiff, all the obligations that in the terms of the contract are imposed on the plaintiff for the benefit of the defendant. 3) Unless the contract referred to in subsection (2) otherwise provides, the contract may be cancelled or modified by the mutual consent of the persons named as parties thereto at any time before the person referred to in that subsection has adopted it either expressly or by conduct. Property law Act 1974 Qld s55 (1) A promisor who, for a valuable consideration moving from the promisee, promises to do or to refrain from doing an act or acts for the benefit of a beneficiary shall, upon acceptance by the beneficiary, be subject to a duty enforceable by the beneficiary to perform that promise. (2) Prior to acceptance the promisor and promisee may, without the consent of the beneficiary, vary or discharge the terms of the promise and any duty arising from it. (3) Upon acceptance” a) the beneficiary shall be entitled in the beneficiary’s own name to such remedies and relief as may be just and convenient for the enforcement of the duty of the promisor, and relief by way of specific performance, injunction or otherwise shall not be refused solely on the ground that, as against the promisor, the beneficiary may be a volunteer; and (b) the beneficiary shall be bound by the promise and subject to a duty enforceable against the beneficiary in the beneficiary’s own name to do or refrain from doing such act or acts (if any) as may by the terms of the promise be required of the beneficiary; and (c) the promisor shall be entitled to such remedies and relief as may be just and convenient for the enforcement of the duty of the eneficiary; and (d) the terms of the promise and the duty of the promisor or the beneficiary may be varied or discharged with the consent of the promisor and the beneficiary. (4) Subject to subsection (1), any matter which would in proceedings not brought in reliance on this section render a promise void, voidable or unenforceable, whether wholly or in part, or which in proceedings (not brought in reliance on this section) to enforce a promissory duty arising from a promise is available by way of defence shall, in like manner and to the like extent, render void, voidable or unenforceable or be available by way of defence in proceedings for the enforcement of a duty to which this section gives effect. 5) In so far as a duty to which this section gives effect may be capable of creating and creates an interest in land, such interest shall, subject to section 12, be capable of being created and of subsisting in land under any Act but subject to that Act Law of Property Act 2000 NT s56 Contracts for the benefit of third parties (1) A promisor who, for valuable consideration moving from the promisee, promises to do or to refrain from doing an act or acts for the benefit of a beneficiary is, on acceptance by the beneficiary, subject to a duty enforceable by the beneficiary to perform that promise. (2) Prior to acceptance by a beneficiary referred to in subsection (1), the promisor and promisee may, without the consent of the beneficiary, vary or discharge the terms of the promise and any duty arising from it. 3) On acceptance by a beneficiary referred to in subsection (1): (a) the beneficiary is entitled in the beneficiary’s own name to the remedies and relief that are just and convenient for the enforcement of the duty of the promisor and relief by way of specific performance, injunction or otherwise is not to be refused only on the ground that, as against the promisor, the beneficiary may be a volunteer; (b) the beneficiary is bound by the promise and subject to a duty enforceable against the beneficiary in the beneficiary’s own name to do or refrain from doing any act that is required of the beneficiary by the terms of the promise; (c) the promisor is entitled to the remedies and relief that are just and convenient for the enforcement of the duty of the eneficiary; and (d) the terms of the promise and the duty of the promisor or the beneficiary may be varied or discharged with the consent of the promisor and the beneficiary. (4) Subject to subsection (1), a matter that, in proceedings not brought in reliance on this section: (a) would render a promise void, voidable or unenforceable, whether wholly or in part; or (b) is available by way of defence to enforce a promissory duty arising from a promise, renders the promise void, voidable or unenforceable or is available by way of defence to enforce the promissory duty in like manner and to the like extent as if in proceedings for the enforcement of a duty to which this section gives effect. 5) To the extent that a duty to which this section gives effect may be capable of creating and creates an interest in land, the interest is, subject to section 11, capable of being created and of subsisting in land under an Act (but subject to that Act). Insurance Contracts Act 1984 (Cth) s48 (1) Where a person who is not a party to a contract of general insurance is specified or referred to in the contract, whether by name or otherwise, as a person to whom the insurance cover provided by the contract extends, that person has a right to recover the amount of the person’s loss from the insurer in accordance with the contract notwithstanding that the person is not a party to the contract. 2) Subject to the contract, a person who has such a right: (a) has, in relation to the person’s claim, the same obligations to the insurer as the person would have if the person were the insured; and (b) may discharge the insured’s obligations in relation to the loss. (3) The insurer has the same defences to an action under this section as the insurer would have in an action by the insured. Marine Insurance Act 1909 (Cth) s20(2) (2) A mortgagee, consignee, or other person having an interest in the subjectmatter insured may insure on behalf and for the benefit of other persons interested as well as for his or her own benefit.