Exclusion clauses
Exclusion clauses

Start this free course now. Just create an account and sign in. Enrol and complete the course for a free statement of participation or digital badge if available.

Free course

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.


Take your learning further

Making the decision to study can be a big step, which is why you'll want a trusted University. The Open University has 50 years’ experience delivering flexible learning and 170,000 students are studying with us right now. Take a look at all Open University courses.

If you are new to University-level study, we offer two introductory routes to our qualifications. You could either choose to start with an Access module, or a module which allows you to count your previous learning towards an Open University qualification. Read our guide on Where to take your learning next for more information.

Not ready for formal University study? Then browse over 1000 free courses on OpenLearn and sign up to our newsletter to hear about new free courses as they are released.

Every year, thousands of students decide to study with The Open University. With over 120 qualifications, we’ve got the right course for you.

Request an Open University prospectus371