LAW 1503 Lecture Notes - Lecture 4: Apparent Authority, Specific Performance, William Deane
23 May 2018
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PRIVITY, AGENCY AND ASSIGNMENT
The Doctrine of Privity
• The doctrine of privity of contract states that only a person who is a party to a
contract can enforce the contract (to gain a benefit) or incur obligations
(burdens) under it. Thus, whilst a third party may benefit from a contract, to sue or
be sued one must be a party to the contract.
o Applied in Coulls v Bagot's Executor and Trustee Co Ltd (1967) 119 CLR 460.
• Also ruled that simply signing a contract does not make you party to it.
o Wilson v Darling Island Stevedoring & Lighterage Co Ltd (1956) 95 CLR 43
Exceptions (to confer benefit)
Agency
arrangement
LAW: The Privity rule is inapplicable where one party involved in the
formation of the contract acts as an agent for the third party
beneficiary Trident v McNiece
STEPS for PLAINTIFF: As established in (Pola v Commonwealth
Bank of Australia (Sundberd J, 19 December 1997, unreported), 12.
the agent must have proven actual or ostensible authority from
the principle to enter into the transaction on their behalf
o As per Harris v Burrell and Family, that authority must be actual
(express) or ostensible (implied)
o may be express (words of the parties, circumstance)
o or implied (from prior habits; previous dealings between
parties where the agent has repeatedly been permitted to
perform similar acts),
o provided that a reasonable person would understand
consent to exist.
o Further, the agent must have clearly purported to act on
behalf of the principle, not solely for themselves (Carminco
Gold & Resources Ltd v Findlay & Co Stockbrokers
(Underwriters) Pty Ltd [2007] FCAFC 194, [25].)
o Ensures the other contracting party is aware that the contract is
in fact between themselves and the person the agent is acting
on behalf of
DEFENDANT: Would likely argue that a reasonable person would
not understand consent to exist/ would not realise the agent was
contracting on behalf of the principle
Enforcement
as the
promisee
Damages
LAW: Contractual damages are in place to compensate the
damages suffered by the Promisee. So when the beneficiary is the
one suffering the loss, and not the Promisee, the Promisee will only
receive nominal damages
o Executors of wills can sue on behalf of deceased (Beswick)
o BUT Where the promisee holds contractual rights for a 3rd
party on trust, promisee can recover all that the 3rd party could
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have recovered as if the contract had been made with the 3rd
party.
Specific Performance
LAW: According to Beswick v Beswick, the Promisee (A) may obtain
order for specific performance against promisor (B) in favour of third
party C
o Executors of wills can sue for specific performance of promises
made in contracts with the deceased
Beswick v Beswick [1968] AC 58
o Or Promisee must be willing and able to sue on behalf of
the 3rd party (C).
PROBLEMS FOR PLAINTIFF: when seeking specific performance,
any damages for a failure to confer a benefit on P would be
measured according to promisee’s loss, rather than P’s: Coulls v
Bagot’s
• Only available when court agrees damages are inadequate.
General rules of SP: Not provided for contracts requiring
personal service, supervision by court etc.
CONCLUSION: If P were to seek enforcement of the promise, then
the damages they would receive would reflect the loss of the
promisee
Inferring a
trust (equity)
LAW: A contractual right is a form of property, which can be held on
trust for a beneficiary
o Trident v McNeice establishes 2 ways in which a trust may be
inferred. The more strict approach requires that both parties
have had a discussion that suggests an intention for a trust
(express trust). The broader approach is that taken by Deane
J: ‘intention should be inferred if it clearly appears that it was
the intention of the promisee that the 3rd party should himself
be entitled to insist on performance of the promise and receipt
of the benefit and if trust is, in the circumstances, the
appropriate legal mechanism for giving effect to that intention’
PLAINTIFF will argue for the broader approach discussed by Deane
J as it is easier to satisfy. The intention element required form this
approach needs to be express; Or can be implied, and ascertained
by reference to the language of the parties, construed in its context,
nature of the agreement, circumstances at the time of formation
PLAINTIFF would get two main benefits from arguing for a trust.
o Firstly, the measure of damages will be calculated according to
their loss, rather than the promisee’s (as in enforcement),
o secondly, P can require the promisee to enforce the contract. If
the promisee refuses, P may sue the promisee for breach
of trust, as well as the promisor for breach of contract
CONCLUSION: if P is successful in establishing a trust, they will be
able to sue for damages based on their loss
Estoppel
If P cannot circumvent the doctrine of privity then the promisor may
be estopped from relying on lack of privity
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