Legal Principles and Key Points
- In the case of Beswick v Beswick  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
- 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  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.
- 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.
- 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.”
- By not letting C recover damages only as administratrix, it is repugnant to the justice system as a contract was formed and a clear breach of contract was established.