GROUP 1

TOPIC: PRIVITY OF CONTRACT

1. The courts were slow to embrace the doctrine of privity of contract until the justification
became self-evident. Nevertheless, the courts have developed exceptions to the rule ahead of
statutory intervention. Remarkably, a Nigerian court in a particular case applied an exception
created under Section 11 of Married Women's Property Act 1882 of England relying on
common law and equity to enforce contracts of insurance made for the benefit
of named spouse and children.
a. In the light of the above statement, discuss the evolution of the doctrine of privity of contract
and the particular exception referred to in the above statement.
b. Analyze any other two exceptions of your choice.
c. Advance a justification why Nigeria should or should not follow the approach of Britain in
Contracts (Rights of Third Parties) Act 1999.

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 LIST OF PARTICIPANTS

1. Abayomi Ninilola Theodora - 230601080

2. Aka Oluwasijuwomi Zainab - 230601106
3. Adedokun Salamat Adenike - 230601140
4. Adegoke Precious Oyindamola - 230601015
5. Abisuga Gbolahan - 230601054
6. Adah Samson - 230601083
7. Adegbite Fawaz Alexander - 230601157
8. Iyiola Doyinsola Deborah - 230601037
9. Abdulganiyu Ganiya Boluwatife - 230601086
10. Abatan Oluwafunmike Mercy - 230601044
11. Abayomi Adebola Aminat - 230601108
12. Toye Odunayo Mercy - 230601129
13. Oguejiofor Esther Ogochukwu - 230601071
14. Adedugbe Ademiposi - 230601039
15. Adebayo Damilola Eno - 230601142

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a) The doctrine of privity of contract, a cornerstone of common law, maintains that only parties
to a contract may enforce its terms or be bound by its obligations. This means that only those
who are parties to a contract can sue to enforce its terms and only those who have provided
consideration can sue on the contract.

The evolution of the doctrine traces back to cases such as Dutton v. Poole where a son could
enforce a promise made to his father based on familial duty. However, as contract law
developed, courts favored consistency and certainty in contract enforcement more. By the late
18th century, stricter interpretations arose, as seen in Price v. Easton, where a third party's
right to enforce a promise was denied and in Tweddle v. Atkinson, where the court held that a
son, though an intended beneficiary, could not enforce a contract between his father and father-
in-law.

The strictness of privity reached its peak in the landmark case of Dunlop Pneumatic Tyre Co.
Ltd. v. Selfridge Ltd.. In this case, Dunlop, a manufacturer, could not enforce a price
maintenance agreement against Selfridge, a retailer, because there was no direct contractual
relationship between them. The case firmly entrenched the doctrine of privity in English law,
emphasizing that only parties to a contract can sue or be sued on it. And while the majority
denied a third party claim based on lack of consideration, Viscount Haldane’s dissenting opinion
argued that privity was a fundamental principle in itself. This case established that privity was a
distinct principle separate from consideration.

This case upheld the doctrine of privity but highlighted its limitations, providing leeway for later
reforms, such as the introduction of the Married Women’s Property Act 1882. Section 11 of
this provision allowed spouses and children named as beneficiaries in life insurance policies to
enforce the contract, despite not being direct parties. By creating a statutory trust, the law
circumvented the privity barrier, ensuring that the policy's benefits reached the intended
recipients. The Act represented a significant step towards recognizing the rights of third-party
beneficiaries in specific contexts, blending common law with equitable principles to achieve
fairness.

The notable Nigerian case illustrating this exception is Akene v. British American Insurance
Co. (Nigeria) Ltd.. Here, the plaintiff sought to recover the insured sum under a policy taken
out by his late father. The insurance company, invoking privity, argued that the plaintiff had no
enforceable right, as he was not a party to the contract. The court, however, found that the policy
created a trust in the plaintiff's favor, allowing him to sue as a beneficiary. This judgment

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reflects the courts' reliance on equitable doctrines, even in the absence of a statutory provision
equivalent to Section 11 of the Married Women’s Property Act.

b) The doctrine of privity has long been criticized for its rigidity, prompting the development of
exceptions to prevent inequitable outcomes. Key exceptions include agency, assignment,
interference with contractual rights, and others. However, this essay will focus on covenants
running with land and collateral contracts, examining their significance and application.

i. Covenants running with the land, commonly seen in property law, bind not just the original
parties but also future landowners. This ensures continuity and predictability in land use.
The landmark case Tulk v. Moxhay cemented this principle when the court upheld a
restriction on building that benefitted neighboring properties, stressing the enduring nature
of such obligations. For a covenant to run with the land, two requirements must be met: (1)
the original parties must intend for the covenant to bind subsequent owners, and (2) the
covenant must directly relate to the land, benefiting its use or value. For instance, in
Formby v. Barker, a covenant failed because no retained land benefitted from the
restriction. Conversely, cases like Smith v. River Douglas Catchment Board affirm that
when a clear connection to the land exists, the benefit may extend beyond the original
parties. Nonetheless, exceptions to enforceability exist. For example, a bona fide purchaser
for value without notice is not bound by a covenant, and failure by the original owner to
retain land that benefits from the covenant renders it unenforceable.
ii. Collateral contracts, another notable exception, operate alongside primary contracts,
allowing third parties to enforce promises integral to the main contract. Shanklin Pier v.
Detel Products Ltd exemplifies this: although Shanklin Pier was not party to the primary
contract between contractors and Detel, Detel’s direct assurance about the paint's durability
formed a collateral contract. Similarly, in De Lassalle v. Guildford, the landlord's
assurance about a property’s condition created a collateral contract, enabling the tenant to
recover damages when the assurance proved false. These cases illustrate how collateral
contracts mitigate the limitations of privity, offering fairness to third parties. A defining
feature of collateral contracts is the promissory nature of the statement relied upon. This
was clarified in J.J Savage & Sons Pty Ltd v. Blakney, where a statement about a boat’s
engine speed was deemed an opinion rather than a promise, failing to create a collateral
contract.

These exceptions demonstrate the courts’ flexibility in addressing privity’s limitations,

balancing contractual obligations with equitable outcomes.

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c) The Contracts (Rights of Third Parties) Act 1999 revolutionized the traditional privity
doctrine in the UK, granting third parties rights to enforce contracts under specific conditions.
Section 1 of the Act allows enforcement where a contract expressly provides for it or intends to
confer a benefit on a third party, provided they are identifiable by name, class, or description.
This approach reflects the realities of modern commercial transactions, where contracts often
impact individuals beyond the original parties.

Adopting similar legislation in Nigeria would enhance fairness for third-party beneficiaries.
Courts have often relied on alternative doctrines like trust and assignment to mitigate the
harshness of privity, as seen in Gregory v. Parker. The Act, however, would create a direct
avenue for third parties to enforce contracts, providing clarity and upholding the intent of
contracting parties. For instance, in Nigeria Airways Ltd v. Sahatu Bakari, where privity
denied a claimant justice, such legislation could have granted the necessary legal standing.
Similarly, Okolo v. Union Bank of Nigeria Ltd underscores the need for reform in sectors like
insurance and construction, where third parties frequently bear the brunt of contractual breaches.

Globally, countries like Australia and Singapore have adopted similar reforms, recognizing the
interconnectedness of modern trade. Aligning Nigeria’s contract laws with international
standards would enhance its appeal to foreign investors and facilitate smoother trade relations.
Nigeria could become a more attractive destination for global business if third-party rights are
clearly codified, reducing transactional risks and fostering trust.

Yet, concerns about ambiguity and litigation risks warrant caution. Allowing third-party
enforcement could increase disputes over contractual terms, as seen in Ossai v. NNPC, where
questions about third-party rights led to complex legal interpretations. Expanding these rights
without clear safeguards risks overwhelming Nigeria’s already burdened judiciary. Moreover,
Nigeria’s socio-economic landscape differs significantly from Britain’s. Cases like UBA Plc v.
Ayeni highlight the importance of tailoring legal principles to local realities, ensuring reforms
do not exacerbate existing inefficiencies.

In conclusion, while the UK Act offers a promising template, its adoption in Nigeria must be
cautious and tailored. Reforms should balance third-party rights with contractual certainty,
minimizing litigation while fostering fairness. With appropriate safeguards, such legislation
could modernize Nigeria’s contract law, ensuring justice for all parties involved.