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Privity and third party rights — SQE1 Contract question

A worked single-best-answer question on privity and third party rights, with why each wrong option is wrong — the way SQE1 traps candidates.

Privity and third party rights

Ruth contracted with Hartley Builders Ltd for the construction of an extension to the house owned by her daughter, Zara. Ruth paid the full price. The contract stated: 'The works are carried out for the benefit of Zara Patel, the owner of 12 Mill Lane.' Nothing else in the contract dealt with who could enforce it. The extension was built defectively and Zara wishes to sue Hartley.

Which of the following best describes whether Zara can enforce the contract against Hartley?

  1. AZara cannot enforce the contract, because she is not a party to it and the doctrine of privity prevents third parties from suing.
  2. BZara can enforce the contract only if it expressly states that she may enforce its terms.
  3. CZara can enforce the relevant term, because the contract purports to confer a benefit on her, identifies her by name, and nothing indicates that the parties did not intend her to be able to enforce it.
  4. DZara cannot enforce the contract, because she did not provide any consideration for Hartley's promise.
  5. EZara cannot sue, but Ruth can recover damages on Zara's behalf for the full cost of the defects.
Show answer and reasoning
C is the best answer. Under the Contracts (Rights of Third Parties) Act 1999 s 1(1)(b), a third party may enforce a term that purports to confer a benefit on them, unless on a proper construction the parties did not intend the term to be enforceable by them (s 1(2)). The third party must be expressly identified by name, class or description (s 1(3)). Zara is named and the term is expressly for her benefit.

Rule: A third party may enforce a contractual term that purports to confer a benefit on them and identifies them, unless the parties did not intend it to be enforceable by them.

  • A The Contracts (Rights of Third Parties) Act 1999 creates an exception to privity in these circumstances. (wrong rule)
  • B Under s 1(1)(b) a term purporting to confer a benefit is enough, unless s 1(2) applies. (wrong rule)
  • D A third party need not provide consideration to enforce a term under the 1999 Act. (wrong rule)
  • E Ruth may have a claim, but Zara herself can sue under the 1999 Act, which is the question asked. (answers a different question)

Source: Contracts (Rights of Third Parties) Act 1999, s 1(1)(b), (2) and (3)

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