Privity of Contract

Hi

Try this link and, if you’re still not sure what’s happening, get back to me

https://www.jstor.org/stable/1091320

OK?

As the subject line states, the case involves the principle of privity of contract – only the parties to a contract have any legal rights accruing to them under that contract

The main contract / trading relationship was between J and X (to use the same nomenclature as is cited in the link) and J owes X some £1,800

X asks J to pay £500 of the £1,800 to X’s little brother S, a student in England. J agrees to do so and writes direct to S promising that J will pay S £500

Subsequently, the account between J and X is settled in full, but J still hasn’t paid S the £500, so S sues J

In an exception to the principles of privity, the beneficiary of a fund held by a third party is entitled to sue the holder of that fund … and that’s the situation that we now face. S claims that J holds (held!) a fund of money on behalf of S and now S wishes to receive that money

And the Court agreed with S

As an aside, should J not be able to sue X for the return of the £500 overpayment that J has paid to X? But (and it’s not clear) was the settlement between J and X the payment of only the net amount of £1,300 and J is now refusing to pay S on the grounds of ‘S cannot sue me because of the doctrine of privity of contract’

If settlement between J and X was the full £1,800, J should now be looking to recover the £500 from X if J is ordered to pay S £500 – otherwise X has become unjustly enriched

If the settlement were for the net £1,300 and J is now refusing to pay S (the scenario that I have always understood it to be) then continuing failure to pay S would mean that J is enjoying unjust enrichment

Of course, if the amount paid to X was only £1,300 and J is refusing to pay £500 to little brother, what is there to prevent X from suing J for the remaining £500?

It seems that the issue at hand is ‘unjust enrichment’ and who has the right to sue whom given the restrictions inherent in the doctrine of privity of contract

My understanding is that S, the little brother, was able to sue on the exception grounds mentioned above – that X was the holder of a fund of money and that S was the beneficiary of that fund

Is that better