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Case                                Facts                                                       Court heldTweddle v Atkins...
provisions in it which limit liability, (secondly) the bill of lading makes it clear that                                 ...
The fact that the stevedores were already obliged to carry out the unloading                                              ...
The issue before the court was whether Mr               persons themselves from suing for damages. It is the only way in w...
work would cost £800,000. The Court of Appeal by a                                   majority held the assignment was inva...
The Court concluded that the narrow ground would be inapplicable in anundisclosed principal situation as the very existenc...
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Week 12 cases


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Week 12 cases

  1. 1. Case Facts Court heldTweddle v Atkinson (1861) The groom father, John Tweddle, agreed with the The courts ruled that a promisee cannot bring an action unless the consideration bride’s father, William Guy, to pay the groom, William from the promise moved from him. Consideration must move from party entitled Tweddle, £200. William Guy died, and the estate to sue upon the contract. No legal entitlement is conferred on third parties to an would not pay. So William Tweddle sued. His suit was agreement. Third parties to a contract do not derive any rights from that not successful as it was held no stranger to the agreement nor are they subject to any burdens imposed by it. consideration can take advantage of a contract, although made for his benefit.Dunlop Pneumatic Tyre Co Ltd vSelfridge & Co Ltd [1915] Dunlop made tyres. It did not want them sold cheaply Viscount Haldane based his argument on three fundamental principles in law. but to maintain a standard resale price. It agreed with First, the doctrine of privity requires that only a party to a contract can sue. its dealers (in this case Dew & Co) not to sell them Second, the doctrine of consideration requires a person with whom a contract not below its recommended retail price. It also bargained under seal is made is only able to enforce it if there is consideration from the for dealers to get the same undertaking from their promisee to the promisor. Third, the doctrine of agency requires that the principal retailers (in this case Selfridge). If retailers did sell not named in the contract can only be sued if the promisee was contracted as an below the list price, they would have to pay £5 a tyre agent. in liquidated damages to Dunlop. Dunlop thus was a In application to the facts, Haldane could not find any consideration between third party to a contract between Selfridge and Dew. Dunlop and Selfridge, nor could he find any indication of an agency relationship When Selfridge sold the tyres at below the agreed between Dew and Selfridge. Consequently, Dunlops action must fail. price, Dunlop sued to enforce the contract by injunction and claimeddamages. Selfridge argued it could not enforce the burden of a contract between itself and Dew, which Selfridge had not agreed to. At trial, the judge found in favour of Dunlop. In appeal the damages and injunction were reversed, saying that Selfridge was not a principal or an agentand thus was not bound. The issue put to the court was whether Dunlop could get damages from Selfridge without a contractual relationshipScruttons Ltd v Midland Silicones Scruttons Ltd was shipping a load of crates through a At first blush, it was clear to the Court that the stevedores could not be exemptedLtd [1962] carrier. In the contract between the two parties there by the exemption clause as there was no privity of contract. The Court looked at was a limitation of liability clause for £500 per box. whether there was a bailment relationship but found none. The case turned on the The goods were damaged in transit due to the application of the Elder, Dempster case which suggested that privity could be negligence of the stevedores. The stevedores were circumvented. Lord Reid proposed that the stevedores could be covered under the under contract with the shipping company which contractual clause through agency if certain pre-conditions were satisfied. contained an exclusion clause. Midland were unaware of the relationship between the carriers and the “ I can see a possibility of success of the agency argument if (first) the bill of stevedores. lading makes it clear that the stevedore is intended to be protected by the
  2. 2. provisions in it which limit liability, (secondly) the bill of lading makes it clear that the carrier, in addition to contracting for these provisions on his own behalf, is also contracting as agent for the stevedore that these provisions should apply to the stevedore, (thirdly) the carrier has authority from the stevedore to do that, or perhaps later ratification by the stevedore would suffice, and (fourthly) that any difficulties about consideration moving from the stevedore were overcome. And then to affect the consignee it would be necessary to show that the provisions of the Bills of Lading Act 1855 apply.”New Zealand Shipping Co Ltd v A At issue was the liability for damage to a drilling HELD Lord WilberforceM Satterthwaite& Co Ltd, The machine that was being shipped from the UnitedEurymedon [1975] Kingdom to New Zealand. The damage was caused by He affirmed the general proposition that a contract between two parties cannot the negligence of the stevedores, the company be sued on by a third person even though expressed to be for that persons responsible for unloading the ship. The question was benefit. However this does not rule out agency contracts. Lord Reid in Midland whether the stevedores could take advantage of Silicones Ltd v Scruttons Ltd [1962] AC 446 set four conditions for the validity of certain exemption and limitation clauses in the Bill of such an agency contract in this situation: Lading, the contract of carriage. The Bill of Lading was expressed to extend the protection of these 1. The bill of lading makes it clear that the stevedore is to be protected by the clauses to servants and agents of the carrier limitations provisions. (including the stevedores) on whose behalf the carrier was deemed to be acting as agent or trustee 2. The bill of lading makes it clear that the carrier is contracting as agent for the stevedore. 3. The carrier has authority from the stevedore to act as agent, or perhaps later ratification by the stevedore would suffice. 4. Any difficulties about consideration moving from the stevedore are overcome. In this case only point 4 is in question. There can be little doubt that in the commercial reality of this situation that relations were entered into for financial gain, ie there was consideration. Nevertheless, as in many common situations, eg auctions, train tickets, offers for rewards, it is difficult to fit this complex of relations into the classical offer and acceptance with identifiable consideration. Demonstrating that English law, having committed itself to a technical and schematic doctrine of contract, in application takes a practical approach, making it difficult to reconcile theory and practice. In this case the bill of lading should be considered a unilateral contract, in which the shipper offers exemptions to the carrier and/or any contractors of the carrier who carry out the contract. As in Carbolic Smoke Ball the offer is accepted by action.
  3. 3. The fact that the stevedores were already obliged to carry out the unloading through a contract with the carrier does not prevent these same actions being consideration in a contract with the shipper. The shipper gains the benefit of a direct obligation which it can enforce. An additional argument in favour of this interpretation is that it is consistent with US law. Commercial considerations should have the same force on both sides of the Pacific.Shanklin Pier Ltd v Detel Products Shanklin Pier Ltd hired a contractor to paint Shanklin McNair Js judgment read:Ltd [1951] Pier. They spoke to Detel Products Ltd about whether a particular paint was suitable to be used, and Detel “This case raises an interesting and comparatively novel question whether or assured them that it was, and that it would last for at not an enforceable warranty can arise as between parties other than parties to the least seven years.[1] On the basis of this conversation main contract or the sale of the article in respect of which the warranty is alleged Shanklin Pier Ltd instructed the contractors to use a to have been given.... I am satisfied that, if a direct contract of purchase and sale of particular paint, which they did. The paint started to [the paint] had then been made between the plaintiffs and the defendants, the peel after three months, and Shanklin Pier attempted correct conclusion on the facts would have been that the defendants gave to the to claim compensation from Detel Products plaintiffs the warranties substantially in the form alleged in the statement of claim. In reaching this conclusion, I adopt the principles stated by Holt CJ in Crosse v Gardner and Medina v Staughton that an affirmation at the time of sale is a warranty provided it appear on evidence to have been so intended. If, as is elementary, the consideration for the warranty in the usual case is the entering into of the main contract in relation to which the warranty is given, I see no reason why there may not be an enforceable warranty between A and B supported by the consideration that B should cause C to enter into a contract with A or that B should do some other act for the benefit of A “Jackson v Horizon Holidays Ltd Mr Jackson booked a four week family holiday in Lord Denning MR held that Mr Jackson could recover damages of £600 for[1975] Ceylon for himself, his wife and their three defective performance and £500 for disappointment or ‘mental distress’ for children with Horizon Holidays Ltd. The cost of the himself and his family. holiday was £1,200. Mr Jackson stressed that the “It would be a fiction to say that the contract was made by all the family… and holiday was to be of the highest standard. In the that he was only an agent for them. Take this very case. It would be absurd to say event the holiday was very disappointing. Amongst that the twins of three years old were parties to the contract or that the father was other things the childrens room was mildewed, making the contract on their behalf as if they were principals.’ Or trust, and the there was fungus growing on the walls, the toilet truth was that he was making a contract for their benefit. was stained, the shower was dirty and there was He quoted Lush LJ in Lloyd’s v Harper (1880) 16 ChD 290, 321 and said that no bath. Mr Jackson sued Horizon Holidays Ltd for although there were suggestions that he meant you can sue for a disappointed breach of contract and claimed damages for himself, his wife and his children. benefit to a third party if you are a trustee, he ‘did not think so… I think they should be accepted as correct, at any rate so long as the law forbids the third
  4. 4. The issue before the court was whether Mr persons themselves from suing for damages. It is the only way in which a just Jackson could recover damages on behalf of his result can be achieved.’ [Otherwise] ‘is no one to recover from them except the wife and his children since they were not parties to one who made the contract for their benefit? He should be able to recover the the contract. expense to which he has been put, and pay it over to them. Once recovered it will money had and received to their use.” Lord Denning MR also held that the family might even, if desired, be joined as plaintiffs, that the initial award of £1100 was ‘about right’, and opined that other instances where a good claim may exist include a vicar contracting for a coach trip for the choir and a host booking a restaurant dinner for himself and his friends. James LJ and Orr LJ concurred, but did not really explain their reasonsLinden Gardens Trust Ltd vLenesta Sludge Disposals Ltd The lessee of a building used a JCT standard form The House of Lords held that a true construction of clause 17(1) prohibited[1994] contract to hire Lenesta to remove asbestos. Clause assignment without consent and that since a party to such a contract might have a 17(1) said "The employer shall not without written genuine commercial interest in ensuring that contractual relations with the party consent of the contractor assign this contract." he selected were preserved, there was no reason for holding the contractual Lenesta subcontracted another firm to do the job. prohibition on assignment as being contrary to public policy. More asbestos was soon found, and a third business In the second case because the development was, to the knowledge of the parties, was contracted. Then the building lease was assigned likely to be occupied or purchased by third parties, damage to a subsequent to Linden Gardens. Linden Gardens sued the owner was foreseeable. Because of the specific contractual provision that rights of contractors for negligence and breach of contract. The action were not assignable without the defendants consent, the parties could lessee assigned its right of action to Linden Gardens, properly be treated as having entered into the contract on the basis that the first and more asbestos was found, without Lenesta ever plaintiffs would be entitled to enforce against the defendants contractual rights on having consented. The Court of Appeal found the behalf of those third parties who would suffer from defective performance of the assignment was effective. Lenesta appealed. contract but were unable to acquire rights under it. Accordingly, the first plaintiffs In a second joined case, St Martins Property Corp were entitled to substantial damages for any breaches of the contract by the Ltd had been granted a 150 year lease on a site from a defendants. council where they began a shop development, and in Lord Browne-Wilkinson adapted the concept of Lord Diplock in The 1974 used the JCT standard contract with the same Albazero[1] whereby goods expected to be passed through several hands might clause 17 to hire Sir Robert McAlpine as a builder. give a right to the third parties to sue the original seller for defects. They assigned their interest and the benefits of the contracts to another company, without Sir Robert McAlpineLtds consent. Then in 1981 it was found that the building work was defective, and remedial
  5. 5. work would cost £800,000. The Court of Appeal by a majority held the assignment was invalid but that St Martins Property Corp Ltd was entitled to damages.Alfred McAlpine Construction Ltd McAlpine, a construction company, contracted with Panatown not entitle to recover damages(by a 3-2 majority)v Panatown Ltd (No 1) [2001] Panatown for a construction carried out on land owned by X (Panatown’s sister company). Panatown terminated the contract on the ground of McAlpine’s Panatown was not entitled to recover susbtantial damages on either failure in performance, which resulted in defective ground work that required substantial repairing cost. On the first ground (“narrow ground”), it was held unanimous that Panatown sought damages against McAlpine on two because there was already a DoC deed between McAlpine and X, there grounds: was no justification for Panatown to recover damages on behalf of X when X had its own cause of action against McAlpine. Otherwise it might 1. It is entitled to recover damages in respect of introduce new problems such as double liability. a loss sustained by a 3rd party, namely X On the second ground (“broader ground”), there was an even split of 2. It suffered a loss of bargain which entitled it decision with the fifth judge (Lord Clyde) favoringPanatown’s argument to recover substantial damages, although the in principle but not on the facts. loss was not financial Lord Clye: “...where A contracts with B to pay a sum of money to C and B fails to do so. The loss to A is in the necessity to find other funds to pay to C and provided that he is going to pay C, or indeed has done so, he should be able to recover the sum by way of damages for breach of contract form B.” However, in the present case because there was already a deliberate course adopted by Panatown such that X would have its own right of action against McAlpine in case of breach, Lord Clyde thus did not consider this case an exception to the general rule of privit Family Food Court v Seah Boon n this case, the Court of Appeal considered the question of whether an agent could Lock [2008] recover substantial damages for losses suffered, not personally by him, but only by his undisclosed principal who had not intervened. The Court noted that the English courts had formulated two exceptions (referred to as “the narrow ground” and “the broad ground”) to the general rule that a plaintiff could only recover nominal damages for a breach of contract where he had suffered no loss, which, could possibly avail the agent in a situation involving an undisclosed principal. The narrow ground allowed a plaintiff to recover substantial damages on a third party’s behalf, and it applied where it was in the contracting parties’ contemplation that the proprietary interest in the contractual subject matter might be transferred from the plaintiff to a third party after the contract had been entered into. The broad ground allowed the plaintiff to recover substantial damages for his own loss on the basis that the plaintiff had an interest in the contract being performed (i.e., the performance interest).
  6. 6. The Court concluded that the narrow ground would be inapplicable in anundisclosed principal situation as the very existence of the undisclosed principalwould be unknown to the defendant to begin with. As for the broad ground, theCourt noted that there were both arguments for and against its application to anundisclosed principal situation, but was of the opinion that there was no need todetermine conclusively which set of arguments should prevail. In most cases, thecivil procedure rules relating to joinder of parties (see O 15 rr 4 and 6 of the Rulesof Court (Cap 322, R 5, 2006 Rev Ed)) would render the potential difficulties vis-à-vis the extent of damages recoverable by an agent a moot point as the court couldsimply order the undisclosed principal to be joined as a party to the proceedingsand award the full measure of damages to it.