The Contracts (Rights of Third Parties) Act 1999 (c 31) is an Act of the Parliament of the United Kingdom that significantly reformed the common law Doctrine of Privity and "thereby [removed] one of the most universally disliked and criticised blots on the legal landscape".
The company accepted liability, but claimed that they should not have to pay damages to the family as the doctrine of privity meant they were not allowed to sue on the contract.
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 doctrine of privity which prohibits the placing of a burden or obligation on a third party.
The bill was introduced to the House of Lords on 3 December 1998, and, during its second reading, was jokingly offered to Lord Denning as a birthday present due to his fight to overturn the doctrine of privity.
The doctrine of privity was significantly reformed by the Contracts (Rights of Third Parties) Act 1999, which received the Royal Assent on 11 November 1999 and "thereby [removed] one of the most universally disliked and criticised blots on the legal landscape".
Trusts have been used as a way around the original doctrine of privity.
As executrix she would be acting as a representative of Mr Beswick, and the doctrine of privity would not apply.
This is known as a "trust of the promise", and, while artificial, it bypassed the doctrine of privity.
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.
At the same time, Section 7(1) ensures that any exceptions to the rule of privity which existed prior to the 1999 Act remain valid.
