Explore the landmark decision in Beswick v. Beswick (1968), a critical case for law students interested in contract law, specifically concerning the privity of contract and the rights of third parties.

  • In the case of Beswick v Beswick [1968] A.C. 58, it was ruled that a third party to a contract could not sue to enforce independent standing in spite of the fact that the contract was intended for their benefit.
  • Legal principles: This landmark case deals with the doctrine of privity of contract and the specific performance of a contract.

Doctrine of privity of contract: Section 56(1) of the Law of Property Act 1925

   “A person may take an immediate or other interest in land or other property, or the benefit of any condition, right of entry, covenant or agreement over or respecting land or other property, although he may not be named as a party to the conveyance or other instrument …”

Specific performance of a contract

“Where damages would be inadequate compensation for the breach of an agreement, the contractor may be compelled to perform what he has agreed to do by a decree of specific performance.“

Facts of the Case Beswick v Beswick

  • C’s husband, B, entered into a contract with D, his nephew, to transfer the trade and goodwill of his entire coal business.
  • The agreement was made on two conditions: First, D would employ B as his advisory consultant at £6.10 a week; Second, after B’s death, D would pay an annuity of £5 per week to his wife upon his death.
  • After B’s death, D paid his wife, C, once and then refused to pay her anymore.
  • To recover the annuity, C brought an action against D, in the capacity that she was the administratrix of the legal estate of her husband and claims of specific performance of the contract.

Issues in Beswick v Beswick [1968] A.C. 58

  • First, if C as the third party to the contract was entitled to receive money from D.
  • Second, if C, as the administrator, was entitled to specific performance of the agreement. 

Held by the House of Lords

  • The claim did not address the personal capacity of C as she was the third party, so she could not enforce the claim in the said field,
  • C, as the administrator, was not limited to the nominal damages of the loss of an estate but, as per the contract, was entitled to specific performance of the agreement.

Lord Reid

  • Rejected Lord Denning’s decision in the Court of Appeal, that C had legal standing to sue D to enforce the benefits of the contract.

Privity of contract

  • C could not sue purely in her personal capacity because the Law of Property Act was a consolidating act; therefore, it was not enough to be construed as changing the law.
  • If a contract confers the direct intention to benefit the third party, it shall only be enforceable if it’s in the third party’s name. Since D had not made himself a trustee, C does not have an equitable right and D is not bound to recover the money for her.

Specific Performance

  • C has the right to sue as the administratrix of the assets but not as the beneficiary of the contract.
  • “Only nominal damages could be given since the estate did not suffer any loss due to the breach, hence specific performance is required.”

Significance of Beswick v. Beswick

Beswick v. Beswick (1968) is a pivotal case in the development of contract law, specifically addressing the doctrine of privity of contract and the enforcement rights of third parties. The case’s outcome has had a profound impact on subsequent case law and legislation:

  1. Dunlop Pneumatic Tyre Co Ltd v. Selfridge & Co Ltd (1914): Before Beswick, Dunlop established the principle that only parties to a contract could sue to enforce its terms. Beswick challenged this by highlighting the inequities that could result, particularly for third parties who stand to benefit from a contract.
  2. Contracts (Rights of Third Parties) Act 1999: Beswick v. Beswick directly influenced this legislation, which marked a significant reform in English law by allowing third parties to enforce contractual terms if the contract expressly allows it, or if the contract confers a benefit on them.
  3. Woodar Investment Development Ltd v. Wimpey Construction UK Ltd (1980): This case further explored the limitations and applications of the principle established in Beswick, considering the extent to which third parties can claim rights under a contract. It reinforced the notion that the intention of the parties plays a critical role in determining enforceability by third parties.

Through these legal developments, Beswick v. Beswick has been instrumental in shaping modern contract law, particularly in how it deals with the rights of third parties and the previously rigid rules of privity. The case has led to a broader understanding and a more flexible approach, allowing for a fairer and more practical application of contract law.

Exam Questions and Answers

Below, you will find answers to the most commonly asked questions based on this case.

How have the principles set out in Beswick v. Beswick influenced the application of the Contracts (Rights of Third Parties) Act 1999?

The Contracts (Rights of Third Parties) Act 1999 was heavily influenced by the equitable concerns highlighted in Beswick v. Beswick, specifically the need to protect third parties’ rights. Since its enactment, the application of the Act has allowed third parties expressly named or implicitly intended to benefit from a contract to enforce its terms. A notable case that applies these principles is Nisshin Shipping Co Ltd v. Cleaves & Company Ltd (2004), where the court upheld the rights of third parties to enforce charter party agreements, aligning with the intention to provide more comprehensive rights as envisioned by Beswick.

What are the limitations of third-party rights under the current law post-Beswick and post-1999 Act?

Under the current UK law, specifically the Contracts (Rights of Third Parties) Act 1999, third-party rights are limited to cases where the contract explicitly states that the third party may enforce a term, or the term confers a benefit on them. However, these rights do not apply if the contract includes a term that excludes or modifies their right. Additionally, the parties to the contract retain the power to amend or cancel the contract without the third party’s consent, unless the contract expressly states otherwise. This limitation ensures that the original contracting parties maintain control over the agreement’s terms, as demonstrated in Prudential Assurance Co Ltd v. Ayres (2007).

Are there significant cases where the Beswick decision has been challenged or refined regarding third-party rights?

Since the landmark Beswick v. Beswick case, its principles have been both challenged and refined, particularly through the application of the Contracts (Rights of Third Parties) Act 1999. One significant case is Avraamides v. Colwill (2006), where the court refined the interpretation of “expressly identified” in the Act, concluding that the identification of the third party does not need to be by name but must be clear from the contract. This case and others like it show the ongoing evolution and clarification of third-party rights, ensuring that the application of these rights is consistent with both statutory requirements and the evolving needs of contract law practice.

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