Privata in Construction Contract: Treaty Confidentiality Doctrine Essay

The private of contract doctrine was recognized in the cases of Dunlop Pneumatic Tyre Co. Ltd. v. Selfridge & Co. Ltd. (1915) and the case of Beswick v Beswick (1966)¹ under the English common law .Under these cases the third parties were not recognized as party to the contract and therefore, they had no right to enforce it. The effect of the doctrine was to limit the legal rights to any other person who might be affected by the terms of the contract but not directly mentioned in the contract. The law of contract on the doctrine of privity of contract asserts that you cannot have rights under the contract nor can the contract charge you with any responsibility if you are not party to it².

However, only those people who are party to the contract according to the English common law can be able to enforce the terms of the contract. The parties to the contract have the right to enforce the contract in the event of infringement of its terms by any one of them. The UK Act with regard to the private of contract³ has recognized the third parties who have been mentioned in the contract either expressly or impliedly. The commission has been charged with responsibility of amending the doctrine of private of contract to recognize the rights of third parties who have been mentioned in the contract. They can be able to enforce the contract before the court of law in the event of breach of the contract as provided under the UK Act. However, the parties to the contract must have intended the third parties to derive some benefits when they were including them in the contract⁴.

The UAE Civil Code limited the powers of the sub-contractors from suing the main contractors’ employer if there was a breach of the contract. The employer cannot bear any responsibility or obligation with regard to other sub-contractors. This therefore, limits the rights of the third parties from enforcing the contract against employer⁵. The UAE Civil Law therefore, recognizes only the party to the contract. According to Article 254 of the UAE Civil Code the party to the construction contract can enter a clause stipulating that the third parties will have a right to enforce the contract if their rights are infringed⁶.

Article 254 of the UAE Civil Code states that

1. It shall be permissible for a person to contract in his own name imposing a condition that rights are to inure to the benefit of a third party if he has a personal interest, whether material or moral, in the performance thereof.
2. Such a condition shall confer upon the third party a direct right against the undertaker for the performance of that condition in the contract enabling him to demand the performance thereof unless there is a contrary agreement and such undertaker may rely as against the beneficiary on any defenses arising out of the contract.
3. Individual making this condition may also demand the performance of the condition in favor of the beneficiary, unless it appears from the contract that the beneficiary alone has such a right.

Consequently, the construction industry laws did not recognize third parties who were not privy to the contract⁷. The construction laws recognized only those who were party to the contract directly. If a father wanted to construct a house for his son and the builder who has been awarded that contract of completing that job fails the son cannot sue the builder. It is important to note that the son is the beneficiary to this contract but according to the privity of contract he is considered to be a third party to the contract. This limits his power to sue the builder since he cannot enforce the contract against the builder. This limits his power to sue the builder since he cannot enforce the contract against the builder⁸. This changed after the Rights of Third Parties Act was passed in 1999⁹.

The case has been totally different when it comes to complex construction contracts. In the complex construction contracts the privity of contract clauses has quite different effects. This is due to the complexity of the situation owing to the fact that these constructions involve a lot of people carrying different construction job within the same building. These may be electricians, plumbers, and those who are involved in carrying out construction of the building. The result is that there are so many engineers who are involved and therefore, one engineer cannot be able to enforce the contract against another who is carrying on a different project or just a part of the project. This has been made possible due to the fact that many of these building projects get funds from the government or from a central place¹⁰.

Privity of contract doctrine in the construction rule has limited the beneficiary to the contract from initiating court proceedings. The beneficiary could not invoke the action of court with regard to the breach of the contract by either failing to perform or doing a substandard job¹¹. However, the UK Act allows the beneficiaries from making a decision whether to remain outside the terms of the contract or to be included. Many people in most cases opt to be included in the terms of the contract in order to have powers of enforcing the contract if any person fails to perform according to the agreement.

The rights of the party Act 1999 brought in collateral warranties. The Rights of Party Act (1999) had the effect of changing the private of contract with regard to the construction by bringing in collateral warranties. The third parties to the contract were able to be part of the contractual relationship. This Act has made building and contracts involving civil engineers quite easy to enforce¹².

The UK Act recognized the rights of third parties. The UK Act allows third parties to invoke courts action where there has been infringement of the contract; however, there are exceptions to the private of contract doctrine¹³. The parties to the construction contract can include a clause whether to be covered by the English law statutory exceptions. This will enable them to follow the earlier terms of the private of the contract when third parties cannot enforce the contract or enable the third parties named in the contract power to enforce it¹⁴.

The UAE Civil Code once enacted could enable the third parties and beneficiaries to enforce the contract. The UAE Civil Code was very important to be enacted since in the building industry most people who are direct beneficiaries cannot be able to enforce the contract¹⁵.The construction industry unlike other field has a very high likelihood of poor performance of the contract and therefore, the third party must have power to sue when there is under performance of the contract. This may be as a result of taking more time than agreed when it comes to the completion of the project. Some contractors delay in order to get more money from the specific construction project¹⁶. The third parties to the construction agreement must therefore, be empowered to enforce the contract.

Consequently, the third parties were relieved when the private of contract laws were relaxed and allowed them to sue for defective work done by the contractors. The third parties could now provoke the courts action for any injustice which amounted to breach of the contract. When it came to the construction contract any person who was named in the contract either directly or impliedly would be able to enforce the contract¹⁷.

The beneficiaries were not empowered to sue the trustees in the event of breaching the contract¹⁸. The trustee could misuse the property trusted on him as the beneficiaries were not recognized as party to the contract. However, when the rights of third parties to the contract were recognized the beneficiaries could enforce the contract against any trustee who failed to carry out his obligation with regard to the trust property¹⁹.

Conclusion

The private of contract especially with regard to the construction contract has evolved for quite a long time. Since the time when the rights of third parties were not recognized to the current time when third parties can invoke courts action with regard to the performance of the contract. This has made things move quite swiftly as everybody can enforce the contract when his rights have been infringed²⁰.

Any party mentioned in the contract can hold the contractors, engineers, and builders responsible for any defective work done. The UK Act and the UAE Civil Code have the effect of recognizing the rights of everyone who might be affected by the contract. It is no longer a relationship to the parties to the contract only but anybody else who stands to benefit or to be affected by that contract. Therefore, the English common law and the UAE Civil Code have finally recognized the rights of third parties with regard to contractual obligations and rights²¹.

Bibliography

Beatson, J, Anson’s Law of Contract, Oxford University Press, New York, 2002.

Guenter, TN, An Outline of the Law of Contract, 6th Ed, Oxford University Press, New York, 2003.

Reuters, T, Construction Law: Construction and Engineering, Al Tamimi & Company, London, 2012.

Whelan, J, & H, Marjorie, The Civil Code of the United Arabs Emirates: The Law of Civil Transactions of the State of the United Arabs Emirates, Graham & Trotman Ltd, London, 1987.

Footnotes

• 1 J Whelan & M Hall, The Civil Code of the United Arabs Emirates: The Law of Civil Transactions of the State of the United Arabs Emirates, Graham & Trotman Ltd, London, 1987.
• 2 T Reuters, Construction Law: Construction and Engineering, Al Tamimi & Company, London, 2012, p. 2.
• 3 T Guenter, An Outline of the Law of Contract, Oxford University Press, New York, 2003, p. 44
• 4 J Beatson, Anson’s Law of Contract, Oxford University Press, New York, 2002, p. 71
• 5 T Guenter, An Outline of the Law of Contract, Oxford University Press, New York, 2003, p. 44
• 6 Whelan & Hall, p. 19.
• 7 Beatson, p. 69
• 8 Guenter, p. 49
• 9 Reuters, p. 2.
• 10 Whelan and Hall, p. 10.
• 11 Reuters, p. 1.
• 12 Beatson, p. 79
• 13 Beatson, p. 73
• 14 Whelan & Hall, p. 16.
• 15 Reuters, p. 2.
• 16 Guenter, p. 61
• 17 Guenter, p. 37
• 18 Beatson, p. 83
• 19 Whelan & Hall, p. 32.
• 20 Reuters, p. 2.
• 21 Whelan & Hall, p. 12.