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The privity of contract rule means that only the parties to a contract can acquire rights under it or have obligations imposed upon them under it, even if the contract was created to give that party a benefit.
The rule is a key one in English contract law and continues to apply to all contracts where no rights are given under The Contracts (Rights of Third Parties) Act 1999. The Act gives a person who is not party to an agreement the right to enforce a term of that contract in specified circumstances.
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Landlord steps to take if tenant becomes insolvent—checklist This Checklist covers issues that a landlord should consider in the event of tenant insolvency, including the remedies available to the landlord such as Commercial Rent Arrears Recovery (CRAR), forfeiture, drawing down on a rent deposit, and pursuing former tenants, guarantors and sub-tenants. It also covers practical points for a landlord to consider in relation to securing and marketing the property and contacting the insolvency practitioner. What type of insolvency scenario applies to the tenant? Dependent on the type of insolvency arrangement that applies, there are different remedies available to the landlord and different restrictions will apply. For a table summarising the restrictions, see Practice Note: Quick guide to property insolvency—Insolvency of a tenant. Has contact been made with the insolvency practitioner? It is important to contact the relevant insolvency practitioner to assess the position the tenant is in and what, if any, chance there is of any debts being repaid, future rents being secured or the tenant recovering from the insolvency...
Due diligence—positive covenants—checklist This Checklist is for use as part of a due diligence exercise where a buyer, tenant or lender is investigating title to property which is subject to, or has the benefit of, positive covenants. It provides a summary of the issues that should be considered when reviewing and reporting on positive covenants. Are there any positive covenants affecting the property? A positive covenant is a promise to do something or to make a financial contribution to something. Common examples in property transactions include covenants to build and maintain a fence or contribute to the maintenance of a shared driveway or other shared facilities. HM Land Registry has no obligation or power to enter the benefit of a positive covenant on a registered title. In order to establish the existence of any positive covenants, check: • the registered title and any accompanying documents which may reveal that the seller, or a predecessor in title, has entered into a positive covenant in respect of the property or has received...
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This Practice Note discusses the common law doctrine of privity of contract; the equitable and statutory exceptions to it; how the doctrine affects enforcing a contract against a third party and what happens when, notwithstanding the lack of privity, a contract has an indirect effect on a third party. For guidance on contracts and third parties more generally and on the Contracts (Rights of Third Parties) Act 1999 (C(RTP)A 1999), respectively, see Practice Notes:•Contracts and third party rights•Third party rights—the Contracts (Rights of Third Parties) Act 1999What does privity of contract mean?'Privity of contract' is a common law doctrine, which provides that you cannot either:•enforce the benefit of, or•be liable for any obligation undera contract to which you are not a party.Therefore, at common law, if your client is not a party to a contract (ie they are a third party) then they cannot sue or be sued under that contract.Example:A promises to B that they will pay a sum of money to C—C cannot sue A for that sum...
Bilateral, syndicated and club arrangements One of the key features used to categorise loans is the number of lenders involved. A loan involving one lender is known as a 'bilateral loan'. A loan involving more than one lender may be a 'syndicated loan' or be referred to as a 'club loan'. Multiple lenders can also be indirectly involved in the same loan by way of sub-participation. This Practice Note explains the key features of bilateral loans, syndicated loans and club loans. Bilateral loans A bilateral loan is a loan involving a single lender. There may be a single borrower or multiple obligors involved, ie the borrower and other companies in the borrower's group as guarantors and/or security providers. Bilateral loans are normally used for loans of relatively small amounts and where less complex financing arrangements are required (eg a simple overdraft or term loan). Where the borrower requires a larger loan, a single lender may be unwilling or unable to advance the full amount required by...
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This Precedent is a short form letter of extension between two parties, used to extend an existing contract beyond its initial term. Optional drafting is provided for any variations to the contract that the parties may additionally wish to include. This Precedent is for use in situations where: • there is an existing contract between two or more parties • the parties, by consent, wish to extend the term of the contract and/or change certain provisions of the contract (whether to delete, amend or add further provisions) • there are no provisions within the existing contract which permit the extension or change of some or all of its provisions without entering into a written form of variation, and • the parties are satisfied that there is consideration for the extension or variation and so do not need it to be effected by way of deed The existing contract should be checked for any provisions relating to extension or variation. It should also be checked carefully for anything that might need...
Notice to Former Tenant or Guarantor of Intention to Recover Fixed Charge (Landlord and Tenant (Covenants) Act 1995, Section 17) Notice to Former Tenant or Guarantor of Intention to Recover Fixed Charge (Landlord and Tenant (Covenants) Act 1995, Section 17) To: [insert full name of tenant or guarantor] of [insert address] Important—the person giving this notice is protecting the right to recover the amount(S) specified from you now or at some time in the future. There may be action which you can take to protect your position. Read the notice and all the notes overleaf carefully. If you are in any doubt about the action you should take, seek advice immediately, for instance from a solicitor or citizens advice bureau. 1 This notice is given under section 17 of the Landlord and Tenant (Covenants) Act 1995 (see Note 1) 2 It relates to [insert address and description of the property] let under a lease dated [insert date] and made between [insert full name of original landlord] and [insert full...
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Can a consultant limit liability for the advice provided by a third party whom the consultant sources? Considerations A consultant who wishes to limit its liability in respect of advice provided by third party consultants should consider the following: • the consultant is under an obligation to perform his contractual obligations with reasonable care and skill (see section 13 of the Supply of Goods and Services Act 1982). He will need to consider if sourcing third party consultants is a contractual obligation. If that is the case, then it is difficult to envisage a situation where the client will be agreeable to the consultant, excluding its liability for the advice given by those third party consultants. Even so, if the client was agreeable, then any provision excluding the liability of the consultant for the advice that the third parties subsequently provide to the customer, would have to be drafted very carefully for it to work alongside the obligation of the consultant to source those third party consultants...
Would the purchaser of a freehold interest subject to a residential student tenancy be able to enforce a parental guarantee, where the definition of the term landlord in that guarantee does not refer to the landlord’s successor-in-title? The main interests of a landlord letting a property (and perhaps particularly a student property) are in the rent being paid and the property not being damaged and being kept in good repair. While the primary obligation to comply with the terms of the tenancy agreement are of course the tenant’s, it will often be the case that a landlord will require a guarantee so that if the tenant defaults, there is a third party the landlord can look to for recourse. In the case of a student letting this will usually be a parental guarantee. Ordinarily, a guarantee will take the form of a contract (usually by deed) between the landlord and the guarantor, with no privity of contract between the guarantor and the tenant. As such, in order for an incoming...
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Arbitration analysis: This decision arises from Renaissance Securities (Cyprus) Ltd’s (Renaissance) application to vary an anti-suit injunction (ASI) previously granted by the English court in November 2023. The ASI had been granted by the English court to prevent the six defendants in the underlying dispute (the defendants) from proceeding against Renaissance in the Russian courts or any other court or tribunal, in breach of parties’ agreement to arbitrate under the rules of the London Court of International Arbitration (LCIA). Following the ASI in November 2023, the second and sixth defendants (the Minority Defendants) commenced claims in Russia for damages against certain companies affiliated with Renaissance (the RREs), who were not parties to the arbitration agreement between Renaissance and the defendants. In response, Renaissance filed an application at the English court in which the main issue for determination was whether the court had jurisdiction to grant an ASI preventing the defendants from continuing and/or commencing claims against the RREs before the Russian courts. The English court, applying the English rules of...
PI & Clinical Negligence analysis: The Court of Appeal rejected a claim against a credit card company under section 75 of the Consumer Credit Act 1974 (CCA 1974) which had been brought by a third party beneficiary in a package holiday claim. The claimant’s husband had used his credit card to pay for a deposit for a package holiday with a subsidiary of Thomas Cook. The claimant suffered personal injury on the holiday and sued the tour operator, but the company then entered liquidation. She tried to join the credit card company, arguing that the term ‘debtor’ in CCA 1974, s 75 applied to her as she had a deemed claim in contract against the supplier under the Package Holidays Regulations. The court disagreed with the claimant, and held that the term ‘debtor’ was confined to the individual who was party to the credit agreement. Written by David Juckes, barrister at Hailsham Chambers.
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