PRIVITY AND CONTENTS OF CONTRACT
PRIVITY
OF CONTRACT
To whom does the obligation
in the contract extend?
General rule: no one but the
parties to a contract can be entitled to it , or bound by the contract.
Contract cannot confer
rights on third party
DUNLOP
PNEUMATIC TYRE v SELFRIDGE & CO. LTD
[1915] AC 847
Dunlop
a tyre manufacturer, sold its tyres to dealers who undertook to allows a 10%
discount from the plaintiff’s list price when reselling the tyres to
retailers.The dealer agreed that when he sold tyres to any retailer he would
obtain from then a written undertaking that they would observe the plaintiff’s
prices. Dew & Co, a dealer entered into a contract with Dunlop. It sold
tyres to selfridge & co, who undertook to abide by Dunlop’s requirement.
However, they later sold tyres below Dunlop’s recommended price.
Held
– the action failed. Only the parties to a contract could sue on the contract.
Dunlop had not provided any consideration for selfdrige’s promise and was not a
party to the contract between Dew and Selfdrige.
Contract
cannot impose liability on third party
PRICE V. EASTON
Easton made a contract with X that in return for X
doing work for him, Easton would pay Price £19. X did the work but Easton did
not pay, so Price sued. It was held that Price's claim must fail, as he had not
provided consideration.
CONTENTS
OF CONTRACT
TERMS
a. Express
Specifically
agreed by the parties either orally, in writing or both – it is straightforward
by just looking the contract document
b. Implied
Is
read into the contract by the court
Terms may be implied by:
1. Custom and usage
pertaining to a particular transactions
PRESTON CORPORATION SDN BHD v EDWARD LEONG & ORS [1982] 2 MLJ 30
The
issue here was whether on the basis of a trade usage, the respondents who were
a firm of printers could legitimately claim ownership of the film positives
used for the purposes of printing books.
At
the Federal Court Salleh abas F.J. relying on Halsbury’s Law of England
definition of trade usage said, ‘The characteristics of usage are notoriety,
certainty and reasonableness”. The claim by respondents was rejected because
none of the three characteristics was satisfied.
2. Statutory
provisions
Statutes
that implied terms into contract
- Sales
of Goods Act, 1957
- Hire
Purchase Act 1967
- National
Land Code 1965
3. The courts : based on the
intention of the parties
YONG UNG KAI v ENTING [1965] 2
MLJ 98
The
defendant entered into a written agreement with the plaintiff for the sale of
timber on land in which a tribe had communal customary rights. In order to cut
the timber a licence from the forests department was required. The written
agreement did not refer to the necessity of obtaining a licence. The defendant
did his best to get a licence but this was refused. The plaintiff claimed for
breach of Contract.
Held – there was an
implied term that the sale of the timber was to be subject to the obtaining of
the necessary licence. As the contract became impossible to perform because of
frustration the plaintiff entitled to the return of moneys advanced to the
defendant.
CONDITIONS
AND WARRANTIES
Terms
may be classified as either conditions or warranties. Whether a particular term
in a contract is a condition or a warranty depends on the intention of the
parties. The mere labeling of a term as a condition or a warranty is not
conclusive.
S.12(2) Sale Of Goods Act
1957 (SOGA)
condition
- ‘a stipulation essential to the main purpose of the contract, the breach
of which gives rise to a right to treat the contract as repudiated’.
S.12(3) SOGA
warranty
- ‘ a stipulation collateral to the main purpose of the contract, the breach
of which gives rise to claim for damages but not a right to reject the goods or
repudiate the contract.’
POUSSARD
v SPIERS AND POND
BETTINI
v GYE
ASSOCIATED
METAL SMELTERS LTD v THIAM CHEOW TOH [1971] 1 MLJ 271
EXEMPTION
CLAUSE
Defined
as ‘ a term of a contract that attempts either to modify the principal
obligation(s) arising out of the contract or to limit / exclude the liability
of a party which would otherwise arise as a result of a breach by that party…’.
Common in standard contract
- the operation of which depends on the construction of the contract.
In case of disputes- court
will interpret - contra proferentum.
If the clause is ambiguous -
will be interpreted to the disadvantage of the party who will benefit from
clause.
In case of negligence - need
clear and unambiguous words to exclude liability.
In case of serious /
fundamental breach - exemption clause will not cover the parties who made the
clause.
There are also some statutes
which modify the effect of the exemption clause to provide more protection to
consumers.
Also - exemption clause
cannot give benefit to third party nor make another party liable
In
Port Sweetenham’s case a by-law was held to be invalid as it did not only limit
but wholly excluded the liability of the Port Authority for the loss of any
goods caused by their own misconduct or negligence.
PORT
SWEETENHAM v T. W. WU & CO SDN BHD [1978]
2 MLJ 137
Ninety-three cases of pharmaceutical goods
had been unloaded at Port Klang and kept in the custody of the Port Authority
(appellants). Subsequently only twenty-nine cases were collected by the
respondents and some of the contents of the missing cases were recovered in
shops in Kuala Lumpur. The respondents brought an action against the appellants
for breach of contract and / or conversion of the remaining sixty-four cases.
The learned trial judge gave judgments to the respondents as the appellants
should prove that the goods had not been
lost because of their negligence or misconduct where the appellant
failed to do so. Their appeal to the Federal court was dismissed and appealed
to the Privy Council.
Held – By-law 91(1) of The Port Swettenham
authority By-laws 1965 is invalid as it is ultra vires s. 29(1) (g) of the Port
Authorities Act 1963, in so far as it purported to limit the Port Authority’s
liability in respect of a loss occurring with the actual fault or privity of
the authority: and also because it did not only limit but wholly excluded the
liability of the Port authority for the loss of any goods caused by their own
misconduct or negligence.
See you in part 6
PRIVITY AND CONTENTS OF CONTRACT
Reviewed by Kamaruddin Mahmood
on
11:45:00 PTG
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