There are a number of established exceptions provided by statute, equity, and common law to overcome the social and commercial inconvenience strict adherence to the rule could cause.
a) Statutory
i) Married Womans Property Act 1882
This provides that where a husband takes out a life insurance policy for the benefit of their spouse or children. The contract can be enforced on the principles death by the beneficiary even though they are a third party.
ii) Road Traffic Act 1988
Makes it obligatory for motorists to insure their vehicle against liability for injury they may cause to other road users and in certain circumstances those injured may claim directly against the insurance company even though they are not a party to the contract with that company.
b) Common Law
i) Agency: the principle in agency is that ‘he who does an act through another does it himself’ thus if A contracts with B on behalf of C then the contract that results is between B and C.
The Eurymedon
An English company selling a drilling machine to a buyer in New Zealand. The seller entered into a shipping contract, with a firm to transport the machine. The carriers insisted on an exemption clause to exclude liability if machine was damaged. The buyer was aware of this and approved this clause. The carriers hired stevedores to unload the machine they dropped it causing considerable damage. The buyer couldn’t sue the carriers because of the exemption clause so sued the stevedores arguing that they weren’t covered by the exclusion clause. Held the stevedores were acting as agents of the carriers so were therefore covered by the contract.
ii) Collateral Contracts: Where a party makes a contract with others the courts will sometimes uses the device of finding a collateral contract between the two others to evade the privity rule.
Shanklin Pier Ltd v Detel Products Ltd
The plaintiff owned a pier and wanted it repainting. They contacted Detel and enquired about the qualities of the paint and were told is lasted 7-10 years. The plaintiffs employed contractors to do the painting and specified that Detel paint be used. The contractors completed the painting but the paint began to flake after only 3 months. The pier owners couldn’t sue the painters because they had one nothing wrong, so they sued Detel. But did they have a contract with Detel? Held there was a collateral contract between Detel and the plaintiffs. Detel had promised that the paint would last between 7-10 years and the pier owner’s request for the contractors to use Detel paint was consideration for that promise.
Thus a remedy was provided and in such avoided the issue of privity.
C) Equity
i) Restrictive Covenants on land
A restrictive covenant imposes a restriction on the use of land. Such restriction runs with the land so that they bind not only an immediate purchaser, but also any future purchaser.
Tulk v Moxhay
The garden area in the centre of Leicester square, London was by Turk to Elms, the contract contained a covenant not to build on the garden but to keep it for all time for the enjoyment of the residents in the square. Elms sold the land and Moxhay eventually became the owner, and although he knew of the covenant he had the intention to build on the land. Tulk succeed in obtaining an injunction to prevent this, despite not having contracted with Moxhay.
This particular case was based on the fact that Moxhay did know of the restriction, but latter cases followed, basing their argument on the outcome of this case, even when there was no knowledge of a restrictive covenant. This is obviously contrary to the rule of privity, but a necessary exception to bring about a just solution.
Smith & Snipes Hall Farm v River Douglas Catchment Board
A number of properties boarded onto a river, and agreed to maintain the riverbanks. This duty was passed on with the land and was enforceable against subsequent owners who had not realised that they had this duty.