Knowledge (XXG)

Contracts (Rights of Third Parties) Act 1999

Source πŸ“

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have known this). This is only the default position; the act allows parties to insert clauses into the contract which allow them to rescind or alter the contract without the consent of the third party if they so choose. The courts can ignore the consent of the third party and allow the promisor and promisee to change the contract if the third party is mentally incapable, unfindable or if it is impossible to tell if the third party has truly consented. At the same time the courts may add conditions to that decision, such as requiring the promisor or promisee to pay the third party compensation.
559:. The act also excludes contracts for the transport of goods across national lines, as these fall under international trade laws, and terms in an employment contract which allow a third party to sue an employee. These were excluded for one of two reasons – either the position of third parties in those types of contract are too well established to be changed easily, or there are reasons of public policy that make it a bad idea to allow the involvement of third parties, such as contracts of employment. 587:, which require the parties to submit to specific arbitration procedures in the event of disputes. The Law Commission initially excluded arbitration clauses from the act, but later amended their draft bill so as to allow third parties to take advantage of arbitration proceedings. The provisions on arbitration clauses were not received well during the bill's passage through Parliament, and were described as "very messy", "a labyrinth" and "a mire". The Commission initially proposed that 523:) if the promisor breaches the contract. It does so in a very limited way, though – the promisor is only protected if he has first paid damages to the promisee, and the third party's claim comes after that. In addition the act only limits damages paid in this situation, it does not eliminate them. If the promisee brings an action against the promisor and wins, any damages paid to the third party in a subsequent action must take the previous damages paid to the promisee into account. 340:(the successor to the Law Revision Committee) published Consultation Paper No. 121 "Privity of Contract: Contracts for the Benefit of Third Parties", which proposed a similar change, and, in July 1996, the final report (No. 242), along with a draft bill, were published. The proposed changes were supported by the legal profession and academics alike. The bill was introduced to the 484:
the term under dispute. The Law Commission directly rejected the suggestion that the promisor should have every defence in a dispute with a third party that he would have in a dispute with the promisee (regardless of whether or not it could be applied to the disputed term). Part III is directly modelled on the similar section of the New Zealand
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dozens of sub-contractors with chains of contracts among them. This argument, and a proposal to exempt the construction industry from the act, was rejected by both the Law Commission and Parliament. The phrase "purport to confer a benefit" was originally found in the 1937 Law Commission paper, and was used in the New Zealand
172:, had been widely criticised by lawyers, academics and members of the judiciary. Proposals for reform via an act of Parliament were first made in 1937 by the Law Revision Committee in their Sixth Interim Report. No further action was taken by the government until the 1990s, when the Law Commission proposed a new draft 207:. The first rule was not contested, while the second was described as "one of the most universally disliked and criticised blots on the legal landscape". Originally, the second rule was not held to be valid. In the 17th century, a third party was allowed to enforce terms of a contract that benefited him, as shown in 499:, with the Law Commission saying that to apply the same rules would be "misleading and unnecessarily complex". This is because the counterclaim may be more valuable than the original claim, which would impose an obligation on the third party to pay the promisor money, something not appropriate under the 491:
The Act allows the promisor to list additional defences that can be used against the third party in the contract, which can be used to get around the Law Commission's decision not to give the promisor equal defences against both the third party and promisee by simply listing those additional defences
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Weakening the act's effect, section 7(3) prevents third parties from being "treated as a party to the contract" in relying on any other act. Equally section 7(2) gives to defendants (facing action from third parties) the ability to exclude liability for negligence, if reasonable other than for death
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Section 3 covers the defences available to the promisor if the third party brings an action against him. In a dispute between the promisor and the third party over a term, the promisor can rely on any defence he would have if the dispute was with the promisee, as long as the defence is applicable to
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A second argument used to undermine the doctrine of privity was to point out the large number of exceptions to the rule created by acts of Parliament, which seemed to indicate that Parliament itself had an issue with the doctrine. Critics also argued that with the large number of inconsistencies and
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The third party must be identified by name or as a member of a particular group, and does not need to exist when the contract was made. This can cause problems, however – if, for example, a party (party A) enters a contract to have another party (party B) construct a building, and A later sells the
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1 WLR 1468. It did not repeal or abolish these exceptions, however, and this allows the courts to accept cases based on the old common law exceptions as well as the 1999 act. The act specifically allows parties to exempt the provisions of the act from contracts, allowing them a way out if they so
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of contracts. It prevents parties to a contract rescinding it or altering it to remove or modify the terms that affect the third party if the third party has told the promisor that he "assents" to the term, or that he has relied on the contract (and the promisor knows this, or could be expected to
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If the third party brings an action, and the promisee does so afterwards then the promisee cannot claim any damages. This is because the Law Commission felt that if the third party claimed compensation for the breach, the promisee would have no interest in the dispute any more. This fails to take
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industry for its refusal to make an exception for complex construction contracts, and for the vagueness of the term "purports to confer a benefit". It is generally accepted, however, that it would be unfair to make an exception for a particular industry, and case law has clarified the meaning of
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The second situation, that a third party can enforce terms that "purport to confer a benefit on him", has been described by Meryll Dean as too broad, and one view put forward in the parliamentary debates was that it was "un-workable" in situations such as complex construction contracts involving
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The third party does not have to have suffered a detriment from his "reliance"; it is enough that he has simply relied on the contract. It must be the third party who relied on the term, rather than another party closely related to the third party. If the third party relies on the terms of the
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The second rule of privity, that a third party cannot claim benefits from a contract, was widely criticised by academics, members of the judiciary and legal professionals. One problem was that the rule made no exceptions for cases where it was obviously intended for the third party to claim a
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into account situations where the promisee has suffered personal loss from the breach of contract. If the promisee brings an action first then the third party is prohibited from doing so, unless the promisee's action fails, in which case the third party is free to pursue his own claim.
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exceptions with the doctrine of privity, it was a "bad" law, as it provided no reliable rule; the way that the law works in theory is hugely different from how it is enforced in the courts. The doctrine is also not found in many other legal systems, such as that of the
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Assenting is considered complete when the third party "communicates" his assent to the promisor, which can be done in a variety of ways, including by post. The contract may specify the communication method(s), and if it does, any other method is not valid.
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The historical doctrine of privity consisted of two rules. The first was that a third party may not have obligations imposed by the terms of a contract, and the second was that a third party may not enforce a contract for which he has not provided
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wrote that "t is said that it serves only to defeat the legitimate expectations of the third party, that it undermines the social interest of the community in the security of bargains and it is commercially inconvenient".
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Although the topic is not discussed in the Law Commission's report or the bill itself, it is generally considered that the third party has no rights against the promisee, regardless of his rights against the promisor.
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An exception to the "purports to confer a benefit" basis for enforceability involves contracts that include language barring third parties from applying the rule. Another exception applies to contracts between
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The act had various consequences – as well as allowing third parties to enforce terms it also made a number of exceptions to the basic rule unnecessary, such as claiming on behalf of another party as seen in
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be specifically excluded from the act. During the bill's passage through Parliament, however, this exclusion disappeared, and the act's explanatory notes assume that the act covers jurisdiction clauses.
655:"purports to confer a benefit". It is also now routine in commercial contexts for enforcement by third parties to be excluded under the terms of the contract, as permitted by section 1(2) of the Act. 281:, where an uncle gave his nephew a business, on the condition that the nephew would pay the uncle a certain amount per week, and in the event of the uncle's death, give a lesser amount to his widow. 567:
Section 7(1) confirms that any exceptions to the rule of privity which existed prior to the 1999 act remain valid. This confirms the act does not supersede impliedly earlier protection of the law.
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The reaction from the judiciary, legal profession and academia was largely supportive of the act; the doctrine of privity had long been thought unfair. The act has been criticised somewhat by the
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Section 9 takes into account the differences between English and Northern Irish law, and modifies how the act should be interpreted in Northern Ireland. Particularly it replaces the use of the
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If a third party chooses to enforce the terms of a contract, he can do so against the promisor and has the right to any remedy that would be available if he was party to the contract, such as
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Section 4 preserves the right of the promisee to enforce any term of the contract. This allows the promisee to sue for any losses to themselves, but not for losses of the third party.
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intervened, and the report was not acted on; even as late as 1986 the assumption was that Parliament would not act, and any reform would come from judicial sources (in particular, the
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Over the next 200 years, different judges provided different decisions as to whether or not a third party could enforce a contract that benefited them. The dispute ended in 1861 with
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contract, which are then breached, he can not only claim damages for any loss he suffered from relying on the contract but also for "standard" damages, such as loss of profit.
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found that a third party had no rights to enforce a contract that benefited him. This ruling was quickly reversed, and decisions immediately after used the original rule.
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Section 5 helps protect the promisor from double liability (having to pay two sets of damages for the same breach, one to the third party and one to the
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on the legal landscape". The second rule of the doctrine of privity, that a third party could not enforce a contract for which he had not provided
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Andrews, Neil (2001). "Strangers to justice no longer: the reversal of the privity rule under the Contracts (Rights of Third Parties) Act 1999".
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which prohibits the placing of a burden or obligation on a third party. Again, the parties to the contract can insert a clause overriding this.
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building to C who finds that it has structural problems, C has no cause of action against B because he was not named in the original contract.
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Section 1 of the act overrides the old common law rule that a third party could not enforce the terms of a contract, as established in
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argued that in a situation where the promisor felt that the second rule had been wrongly applied by a statement in the contract, the
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Roe, Thomas (2000). "Contractual Intention under Section 1(1)(b) and 1(2) of the Contracts (Rights of Third Parties) Act 1999".
446:, who prepared the Law Commission's report, said that the third party does not acquire rights against the promisee, something 254:
stated that only a person who was party to a contract could sue on it. This version of the doctrine is commonly known as the
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Section 6 creates exceptions to the scope of the act. While the act applies to standard contracts and contracts made by
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MacMillan, Catharine (2000). "A Birthday Present for Lord Denning: The Contracts (Rights of Third Parties) Act 1999".
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which subject all such provisions with a counterparty consumer to the contract to the condition of reasonableness.
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on 11 November 1999, coming into force immediately as the Contracts (Rights of Third Parties) Act 1999.
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Contract law and practice: the English system with Scottish, Commonwealth, and Continental comparisons
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Dean, Meryll (2000). "Removing a blot on the landscape – the reform of the doctrine of privity".
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Carson, Veronica; Michael Clode (2000). "The end of privity of contract in the United Kingdom?".
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as a birthday present due to his fight to overturn the doctrine of privity. It was moved to the
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Palmer, Vernon V. (1989). "The History of Privity – The Formative Period (1500–1680)".
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The first legislative proposal to reform the doctrine of privity was made in 1937; the
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The Act takes a different attitude for the defences available to the third party in
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Dolphin Maritime & Aviation Services Ltd v Sveriges Angartygs Assurans Forening
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An Act to make provision for the enforcement of contractual terms by third parties.
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in 1991, and presented their final report in 1996. The bill was introduced to the
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The legislation uses the pronouns "he" and "him" in this section and elsewhere.
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on 3 December 1998, and, during its second reading, was jokingly offered to
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The doctrine came under criticism from many academics and judges, including
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Flannigan, Robert (October 1987). "Privity – the end of an era (error)".
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Jacobs, Edward (1986). "Judicial reform of privity and consideration".
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Hughes, Martin (2000). "Contracts (Rights Of Third Parties) Act 1999".
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or personal injury; it disapplies the protection of s.2(2) of the
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and "thereby one of the most universally disliked and criticised
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Butterworths Journal of International Banking and Financial Law
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Bridge, Michael (2001). "Privity of contract; Third parties".
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Nisshin Shipping Co Ltd v Cleaves & Company Ltd & Ors
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Reforming Privity of Contract: Law Commission Report No. 242
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Section 7: Supplementary provisions relating to third party
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Section 1: Right of third party to enforce contractual term
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Law Reform (Husband and Wife) (Northern Ireland) Act 1964
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and their clients to write wills, something governed by
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Section 5: Protection of promisor from double liability
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Contracts (Rights of Third Parties) Act 1999 S.2(1)(a)
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Dunlop Pneumatic Tyre Co Ltd v Selfridge & Co Ltd
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has also suggested. A different stance is taken in
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Contracts (Rights of Third Parties) Act 1999 S.3(2)
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Contracts (Rights of Third Parties) Act 1999 S.2(1)
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Contracts (Rights of Third Parties) Act 1999 S.1(5)
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Contracts (Rights of Third Parties) Act 1999 S.1(3)
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Contracts (Rights of Third Parties) Act 1999 S.1(2)
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Contracts (Rights of Third Parties) Act 1999 S.1(1)
604:in Part VI with the Northern Irish equivalent, the 539:, it does not apply to contracts made as a part of 139: 132: 125: 115: 105: 100: 90: 76: 66: 56: 1879: 1663: 608:. Section 9 also repeals sections 5 and 6 of the 1445:Contracts (Rights of Third Parties) Act 1990 S.9 1327:Contracts (Rights of Third Parties) Act 1990 s.4 1488:Goode, Royston Miles; McKendrick, Ewan (2020). 458:Section 2: Variation and rescission of contract 507:Section 4: Enforcement of contract by promisee 409:Nisshin Shipping Co Ltd v Cleaves & Co Ltd 673: 8: 870:"House of Lords Hansard, Vol. 595, Col. 605" 719:Contracts (Rights of Third Parties) Act 1999 462:Section 2 of the Act governs changes to and 244:Dunlop Pneumatic Tyre v Selfridge and Co Ltd 150:Contracts (Rights of Third Parties) Act 1999 33:Contracts (Rights of Third Parties) Act 1999 32: 1492:(6 ed.). London: Penguin Books. 3.89. 864: 862: 427:before it was adopted for the English act. 160:that significantly reformed the common law 1670:(15th ed.). Oxford University Press. 1626:Journal of International Financial Markets 680: 666: 658: 31: 1844:(6th ed.). Oxford University Press. 1432: 1430: 1384: 1382: 1380: 1378: 1376: 1374: 1350: 1348: 1346: 1344: 1342: 1240: 1238: 479:Section 3: Defences available to promisor 1465: 1463: 1453: 1451: 1314: 1312: 1281: 1279: 1277: 1201: 1199: 1141: 1139: 1137: 1135: 999: 997: 1547: 1364: 1362: 1360: 1302: 1300: 1153: 1151: 1116: 1114: 1041: 1039: 1011: 1009: 942: 940: 909: 907: 905: 903: 901: 858: 606:Companies (Northern Ireland) Order 1986 1938:United Kingdom Acts of Parliament 1999 1863:(11th ed.). Sweet & Maxwell. 1490:Goode and McKendrick on commercial law 96:England and Wales and Northern Ireland 1781:The American Journal of Legal History 921: 919: 818:Wrotham Park Ltd v Parkside Homes Ltd 398:. After the act was first published, 271:benefit, such as the young couple in 134:Text of statute as originally enacted 7: 1745:(7th ed.). Palgrave Macmillan. 688:Cases and main statutes on covenants 1533:[2003] EWHC 2602 (Comm) 777:Morrells of Oxford Ltd v Oxford UFC 492:the promisor would like access to. 180:in December 1998, and moved to the 1517:[2009] EWHC 716 (Comm) 266:Criticism of the original doctrine 141:Revised text of statute as amended 25: 1842:An Outline of the Law of Contract 882:. 3 December 1999. Archived from 579:Section 8: Arbitration provisions 880:Parliament of the United Kingdom 583:The Act allows the insertion of 406:would be on him to prove it. In 158:Parliament of the United Kingdom 50:Parliament of the United Kingdom 43: 1886:(2nd ed.). Hodder Arnold. 551:, or contracts governed by the 419:supported Treitel's reasoning. 1787:(1). Temple University: 3–52. 697:Smith and Snipes Hall Farm Ltd 643:Jackson v Horizon Holidays Ltd 573:Unfair Contract Terms Act 1977 1: 184:on 14 June 1999. It received 1905:. Kluwer Law International. 486:Contracts (Privity) Act 1982 425:Contracts (Privity) Act 1982 352:on 14 June, and it received 1764:(5th ed.). Routledge. 1762:Contract Law in Perspective 596:Section 9: Northern Ireland 127:Status: Current legislation 1954: 195: 29:United Kingdom legislation 1901:Whincup, Michael (2006). 1859:Treitel, Guenter (2003). 1583:10.1017/S0008197301000150 836: 826: 814: 807: 795: 785: 773: 763: 751: 739: 727: 715: 705: 693: 42: 37: 1611:Burrows, Andrew (1996). 982:McKendrick (2007) p. vii 925:McKendrick (2007) p. 137 829:Law of Property Act 1925 788:Law of Property Act 1925 766:Law of Property Act 1925 708:Law of Property Act 1925 616:Scope and implementation 92:Territorial extent  1822:10.1111/1468-2230.00299 1760:Mulcahy, Linda (2008). 1723:10.1111/1468-2230.00288 1700:Journal of Business Law 1639:Journal of Business Law 1604:10.3366/elr.2001.5.1.85 1478:McKendrick (2007) p.155 1368:McKendrick (2007) p.154 1336:McKendrick (2007) p.160 1318:McKendrick (2007) p.153 1285:McKendrick (2007) p.152 1205:McKendrick (2007) p.151 1184:McKendrick (2007) p.149 1129:McKendrick (2007) p.147 1024:Flannigan (1987) p. 569 1003:Flannigan (1987) p. 572 955:Flannigan (1987) p. 565 946:Flannigan (1987) p. 564 809:Easements Reform (2008) 799:Re Dolphin’s Conveyance 557:articles of association 1882:Unlocking Contract Law 1878:Turner, Chris (2007). 541:negotiable instruments 323:Law Revision Committee 198:Privity in English law 1810:The Modern Law Review 1571:Cambridge Law Journal 1424:Furmston (2007) p.593 1063:MacMillan (200) p.721 1033:Treitel (1983) p. 458 531:Section 6: Exceptions 356:on 11 November 1999. 227:Court of King's Bench 1933:English contract law 1648:Law Quarterly Review 1592:Edinburgh Law Review 1436:Andrews (2001) p.364 1388:Andrews (2001) p.363 1354:Andrews (2001) p.362 1306:Andrews (2001) p.361 1244:Stevens (2004) p.303 1232:Treitel (2003) p.658 1223:Burrows (1996) p.544 1214:Stevens (2004) p.304 1157:Andrews (2001) p.360 1120:Andrews (2001) p.355 1081:Andrews (2001) p.353 1015:Jacobs (1986) p. 466 991:Mulcahy (2008) p. 95 973:Turner (2007) p. vii 964:Mulcahy (2008) p. 94 589:jurisdiction clauses 436:specific performance 306:Arthur Linton Corbin 85:Lord Irvine of Lairg 1469:Turner (2007) p.380 1415:Hughes (1999) p.439 1406:Whincup (2006) p.84 1166:Whincup (2006) p.83 1054:Hughes (1999) p.431 1045:Turner (2007) p.379 620:The act applies in 585:arbitration clauses 501:doctrine of privity 162:doctrine of privity 34: 1072:Bridge (2001) p.85 602:Companies Act 1985 553:Companies Act 1985 378:Tweddle v Atkinson 275:, or the widow in 273:Tweddle v Atkinson 235:Tweddle v Atkinson 1912:978-90-411-2521-7 1893:978-0-340-94196-6 1771:978-0-415-44432-3 1710:Modern Law Review 1677:978-0-19-928756-7 1660:Furmston, Michael 1499:978-0-14-199188-7 1457:Dean (2000) p.149 1397:Carson (2000) p.2 1262:Dean (2000) p.148 1145:Dean (2000) p.145 1099:Dean (2000) p.144 913:Dean (2000) p.143 850: 849: 743:Halsall v Brizell 622:England and Wales 545:bills of exchange 278:Beswick v Beswick 146: 145: 38:Act of Parliament 16:(Redirected from 1945: 1916: 1897: 1885: 1874: 1855: 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Commons 327:Second World War 210:Provender v Wood 182:House of Commons 121:11 November 1999 111:11 November 1999 93: 47: 46: 35: 21: 1953: 1952: 1948: 1947: 1946: 1944: 1943: 1942: 1923: 1922: 1919: 1913: 1900: 1894: 1877: 1871: 1861:Law of Contract 1858: 1852: 1836: 1807: 1778: 1772: 1759: 1753: 1737: 1706: 1697: 1684: 1678: 1666:Law of Contract 1658: 1645: 1636: 1623: 1610: 1589: 1568: 1564: 1559: 1558: 1553: 1549: 1544: 1539: 1527: 1523: 1511: 1507: 1500: 1487: 1486: 1482: 1477: 1473: 1468: 1461: 1456: 1449: 1444: 1440: 1435: 1428: 1423: 1419: 1414: 1410: 1405: 1401: 1396: 1392: 1387: 1372: 1367: 1358: 1353: 1340: 1335: 1331: 1326: 1322: 1317: 1310: 1305: 1298: 1293: 1289: 1284: 1275: 1270: 1266: 1261: 1257: 1252: 1248: 1243: 1236: 1231: 1227: 1222: 1218: 1213: 1209: 1204: 1197: 1192: 1188: 1183: 1179: 1174: 1170: 1165: 1161: 1156: 1149: 1144: 1133: 1128: 1124: 1119: 1112: 1107: 1103: 1098: 1094: 1089: 1085: 1080: 1076: 1071: 1067: 1062: 1058: 1053: 1049: 1044: 1037: 1032: 1028: 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London: 854:References 628:, but not 555:, such as 464:rescission 417:High Court 387:solicitors 360:Provisions 262:doctrine. 239:121 ER 762 192:Background 72:1999 c. 31 58:Long title 18:CRTPA 1999 844:covenants 821:1 WLR 798 452:Scots law 413:EWHC 2602 317:Formation 302:Lord Reid 214:Hetley 30 1840:(1983). 1741:(2007). 1662:(2007). 1632:(2): 61. 758:2 AC 310 700:2 KB 500 647:choose. 630:Scotland 521:promisee 396:2 AC 207 256:original 68:Citation 1830:1097262 1731:1097046 875:Hansard 831:s 84(1) 790:s 78(1) 768:s 79(1) 710:s 56(1) 223:1 Vent. 156:of the 1909:  1890:  1867:  1848:  1828:  1801:845785 1799:  1768:  1749:  1729:  1674:  1496:  802:Ch 654 780:Ch 459 746:Ch 169 722:s 1(1) 415:, the 308:, and 248:AC 847 1826:JSTOR 1797:JSTOR 1727:JSTOR 1542:Notes 1531: 1515: 537:deeds 260:basic 166:blots 101:Dates 1907:ISBN 1888:ISBN 1865:ISBN 1846:ISBN 1766:ISBN 1747:ISBN 1672:ISBN 1617:HMSO 1494:ISBN 892:2009 842:and 838:see 624:and 404:onus 304:and 174:bill 148:The 1818:doi 1789:doi 1719:doi 1652:103 1600:doi 1579:doi 547:or 333:). 258:or 154:Act 1929:: 1824:. 1814:63 1812:. 1795:. 1785:33 1783:. 1725:. 1715:63 1713:. 1691:14 1689:. 1650:. 1628:. 1615:. 1594:. 1575:60 1573:. 1462:^ 1450:^ 1429:^ 1373:^ 1359:^ 1341:^ 1311:^ 1299:^ 1276:^ 1237:^ 1198:^ 1150:^ 1134:^ 1113:^ 1038:^ 1008:^ 996:^ 939:^ 918:^ 900:^ 872:. 861:^ 612:. 543:, 488:. 300:, 296:, 289:. 83:, 1915:. 1896:. 1873:. 1854:. 1832:. 1820:: 1803:. 1791:: 1774:. 1755:. 1733:. 1721:: 1680:. 1630:2 1619:. 1606:. 1602:: 1596:5 1585:. 1581:: 1502:. 894:. 681:e 674:t 667:v 20:)

Index

CRTPA 1999
Parliament of the United Kingdom
Long title
Citation
Lord Chancellor
Lord Irvine of Lairg
Royal assent
Commencement
Text of statute as originally enacted
Revised text of statute as amended
Act
Parliament of the United Kingdom
doctrine of privity
blots
consideration
bill
House of Lords
House of Commons
royal assent
Privity in English law
consideration
Provender v Wood
Hetley 30
Bourne v Mason
1 Vent.
Court of King's Bench
Tweddle v Atkinson
121 ER 762
Dunlop Pneumatic Tyre v Selfridge and Co Ltd
AC 847

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