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Lloyd's Maritime and Commercial Law Quarterly

REFORMING PRIVITY OF CONTRACT: LAW COMMISSION REPORT NO. 242

Andrew Burrows*

The Law Commission has recently recommended reform of the “privity of contract” rule, which prevents a person who is not a party to a contract from enforcing it. The Commission argues that the privity rule in its present form is not only unjust to third parties but operates to defeat the intentions of contracting parties. Reform has taken place in many other common law countries, and third party rights are widely recognized in other European countries. The Law Commission’s recommendations are designed to ensure that the bargain that the parties have agreed to can be upheld in the courts, and will produce a fairer and simpler law of contract for the benefit of businesses and consumers alike.

1. Introduction

When I was lecturing on Contracts in Manchester, and giving tutorials on Contracts in Oxford, I regarded the legislative reform of privity of contract as a straightforward matter. Having grappled with the details of reform over recent months, I now regard it as far from straightforward. On a personal level, some of the difficulties no doubt reflect the fact that, on arrival at the Law Commission, there is a steep learning curve in dealing with such matters as instructing Parliamentary Counsel or drafting Explanatory Notes to accompany a draft Bill. But the central problem, which I had never previously had to face up to, is that when it comes to the details of a reform of privity—as opposed to the questions of whether there should be reform or as to what the general scheme of the reforming statute should be—it is extremely difficult to strike the right balance between a reform that is sufficiently certain to satisfy the demands of those for whom certainty in contract law is of paramount importance, and one which at the same time allows the judges sufficient flexibility to achieve a sensible and just result across a wide range of difficult fact situations. Linked to this is that reforming such a central doctrine of contract law not only potentially has farreaching knock-on effects, but also requires the reformer to be confident of his ground across the full gamut of contracts. While the issues raised are essentially ones of general principle, we found ourselves dealing with specialist questions relating to bills of exchange, carriage of goods by sea, arbitration agreements, the international carriage of cargo by air, construction contracts, and so on.
My central aim in this paper is to explain the main features of the reform proposed in our Report.1 But this paper also represents a call to the legal community to consider

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