LAW 447 Lecture Notes - London Drugs, Tort, The Seller
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Lecture 7 – September 20
Privity of Contract
- there are certain legislative regimes that abolish privity (Business Practices and Consumer
Protection Act; PPSA in certain contexts)
- The SGA doesn’t abolish privity
There are two types of privity; horizontal and vertical
- Horizontal privity, A + B have a contract, A not liable to C
- Vertical privity, A + B and B + C have a contract then A is not liable to C
Readings ch 3 + ch 4 (s.22 + 23)
Lyons
- Contract was between the mother and seller, the main damage to the child cannot be claimed in
contract because the child was not a party to the contract
Vertical privity
Manufacturer k retailer k consumer
- The rights in personam at each level are different from each other
- Ie. if the manufacturer sells to the retailer the in personam right can be ‘merchantable quality’;
when you sell it further to someone else then the in personam right created is a newly created
right even though it looks quite similar. The in rem right that is passed on is not new – the
ownership is not new, it is passed on from person to person
- However the consumer has acquired the rights of the retailer to sue the manufacturer – could
acquire the rights, assignment of the in personam rights
o In Quebec this happens automatically
- There are two types of assignment, the common law assignment (now statute) and equitable
assignment
Privity in any event is a novel doctrine – this was about the same time the rules on consideration were
confirmed (1840s).
- The common law can do some work (Fraser River) – the SCC took steps to get around privity of
contract – prof thinks this wasn’t a huge step, more like a baby step: this case was a LLC in the
insurance contract that basically benefits the tortfeasor; the tortfeasor was using the LLC to
protect itself – can you use a term in someone else’s contract to defend yourself from a claim by
somebody who is actually a party to the contract
o Relying on its earlier decision in London Drugs the court says yes you are allowed to use
that defence even if you are not part of the contract – it is a very limited change to privity
because it doesn’t let you use the LLC as a sword, just as a defence.
Chabot
- Number of tricks that the court did in spite of reasonably clear language in the statute
- The court basically said there was no possible way that the consumer had consented to an
alteration of their rights
- An example of what the court can do to work around the privity problems