Exclusion clauses
Exclusion clauses

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Exclusion clauses

3.3 Privity of contract

In some cases issues have arisen over whether someone who is not a party to the contract can rely on an exclusion clause contained in it. At common law the doctrine of privity usually prevents a third party from relying on the terms of a contract.

The original position in relation to exclusion clauses was confirmed by the House of Lords in Scruttons Ltd v Midland Silicones Ltd [1962] AC 446, where the defendant (which supplied workpeople to load and unload ships) was sued for damages resulting from its negligent handling of goods. Lord Reid (at p. 473) stated:

Although I may regret it, I find it impossible to deny the existence of the general rule that a stranger to a contract cannot in a question with either of the contracting parties take advantage of provisions of the contract, even where it is clear from the contract that some provision in it was intended to benefit him.

Therefore, the defendant could not take advantage of an exclusion clause in the contract between the owner of the goods and the owner of the ship.

Following Scruttons, there were a number of different devices employed in cases to try and avoid this decision. However, the passing of the Contracts (Rights of Third Parties) Act 1999 means that, in many such cases, third parties now rely on s1(6) of this Act. It states that a third party can rely on an exclusion clause, providing the other requirements of the Act are met.

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