Privity of Contract & Rights of Third Party: An Appraisal of Pakistani & English Courts’ Judgments on the Doctrine

A contract is enforceable by law and a lawful relationship is generated under it. It creates certain rights as well as obligations between parties to the contract. This paper comparatively surveys the two limbs of the privity doctrine. To that end, the judgments of Pakistani and English courts have been analyzed to perform a critical analysis of the developed jurisprudence on the privity of contract doctrine. It reviews the traditional approach of Pakistani courts toward the non-enforcement of third-party rights. Also, it highlights the evolved English approach that gives third parties a right to enforce a contract which confers benefits on it. Then, the paper examines judge-made exceptions of the privity doctrine including cases of family settlement and trust. Furthermore, it analyzes the second limb of privity doctrine that does not permit the imposition of liability on third party, however, it highlights that in Pakistan such burden is placed on third party.


Introduction
The primary focus of this paper is whether the third party is entitled to the enforcement of contractual rights that have been purportedly conferred to it in a contract to which it is a stranger or not a party.According to the the privity doctrine, a person who is not a party to a contract cannot either enforce the rights under a contract or be liable to any obligation under it. 1The doctrine has two limbs.The first limb is more controversial as it prevents the third party from the enforcement of the promises that are made for its benefit.Pakistani courts validate the first limb of the privity doctrine and do not allow the third party to enforce contractual rights.On the other hand, the Contract (Rights of Third Parties) Act 1999 (hereinafter 1999 Act) was introduced in the United Kingdom (UK) as a statutory exception to the doctrine of privity that provides requirements for the enforcement of contractual rights by a third party.Despite the clarity of the 1999 Act, there is inconsistency in English judicial interpretations regarding these provisions, and this article in each segment highlights the inconsistent approach of these courts.However, the lack of advancement is specifically visible when Pakistan's perspective is compared to the English courts' approaches.
First, this paper surveys the Pakistani jurisprudence to highlight its approach to the first limb claims and how the courts justify it rigidly.Then, this paper discusses English courts' endeavor in order to modify the first limb that led to the adjustment of enforceable third-party rights in the privity doctrine.Additionally, the generosity of the English courts in conferring beneficial rights to the third party where the contracting parties had not intended and how the courts endeavor to satisfy the reasonable expectations of the third party is analyzed.Moreover, the Pakistani judge-made exceptions to the first limb are also analyzed in trust and family settlement cases.Next, the application of the test where the contract is purported to confer a benefit on the third party is evaluated.Whether the reasonable construction of the contract can be effective for rebutting the presumption that the contracting parties intended the third party's ability to enforce its contractual rights is appraised.Then, the paper demonstrates the inconsistency in English courts' decisions while enunciating whether or not the construction of contractual terms is necessary for entitlement of the same where the third party is expressly identified by name, member of a group, or class.Finally, the paper critically evaluates the attitude of Pakistani courts towards the second limb where they likely permit the imposition of the burden on a third party.This paper provides a comparative study of the English and Pakistani courts' jurisprudence to find that Pakistani jurisprudence can be adjusted and modified according to the advanced English legal regime.

Pakistani Perspective
An agreement is a promise or a series of actionable promises forming consideration for one another.A contract is an agreement enforceable and recognized by law.All contracts are agreements but all agreements are not contracts. 2A contract can be oral or written.There is no statutory requirement that a contract should necessarily be in written form.However, for a legally enforceable oral contract, the courts require the beneficiary to produce cogent, credible, and unimpeachable evidence vis-à-vis the contents and formation of such contract particularly after its denial by the other party.It is difficult to prove the existence of an oral contract if it is denied by the other party. 3contract is valid if it contains the following essentials: an offer, an acceptance, free consent of competent parties, lawful subject matter, lawful consideration, and object, capacity to contract, and intention to contract. 4hen the offer is accepted, then it cannot be withdrawn and such a contract is created if it contains consideration. 5However, it is not clear whether the existence of the rest of the essentials is the sine qua non to create a contract.
The section 2(d) of Contract Act 1872 (hereinafter '1872 Act') says that the promisee or any other person can move consideration.For reference, Section 2(d) of the contract act is reproduced as: When, at the desire of the promisor, the promisee or any other person has done or abstained from doing, or does or abstains from doing, or promises to do or to abstain from doing, something, such act or abstinence or promise is called a consideration for the promise.
In Pahal Khan v. Muhammad Iqbal, the claimant asserted that the contracting parties entered into a compromise but despite many requests, the defendant did not attest to the mutation.While opposing the claimant, the respondent stated that the alleged compromise was invalid because no monetary consideration was paid to him.The Lahore High Court (LHC) held that consideration does not always imply any financial benefit or anything susceptible to valuation in terms of money.The consideration can be forbearance, abstinence, responsibility, benefit or act or omission for the promise.Consideration for the promise does not need to move from the promisee, it can come from 'any other person.'In this way, consideration for the promise can be furnished by any third party if the promisor has no objection. 6wever, under the first limb of the doctrine of privity only the contracting parties have rights under a contract, ands the third party does not have such rights.Therefore, a third party is not able to invoke contractual terms against the contracting parties.Second, the contractual obligations will not be placed on the third party.Thus, the contracting parties cannot invoke the terms of the contract against a third party. 7kistani courts give several justifications in support of the first limb of the privity doctrine.For instance, the third party is a stranger to the contract, hence, it cannot enforce contractual rights.C.I.R, Zone-I v. Karachi Port Trust, 8 held that privacy of contract is labelled as privity of contract but in ordinary legal parlance, privity to contract means the parties to contract.The court stated that the legal relationship created under the privity imposes rights and obligations on the contracting parties which are the promisor and the promisee.Moreover, only the contracting parties have authority and are free to enterprise, and are encouraged to earn and possess anything so the contracting parties are guided and guarded by the extraordinary principles of protection from going astray.However, the person who is not a party to the contract is incompetent to claim his rights on basis of such contract and he cannot even sue the parties to the contract in any court for any action based on the content, terms, or conditions inscribed in such contract.
The Sindh High Court (SHC) in Ume-Aiman v. Yousuf followed the approach of C.I.R, Zone-I and held that the doctrine of the privity ensures the meeting of mind, mutuality of assent, and the mutual and legal perceptible relationship between the contracting parties.Privity of contract is created between the contracting parties that have any legal interests in any transaction, property, matter, or action so a party will have privity with another when his interest or agency is associated with the other party and both are the parties to any contract.The third party has no privity with the contracting parties. 9cond, no promises have been made to third parties by the contracting parties.This argument is based on a general principle that the obligations have been undertaken by the promisor towards the promisee and no one else, hence, only the promisee can enforce the contract. 10This reason describes that it is on the parties to contract to determine to whom they should owe the contractual obligations.However, this argument may ignore the intention of the parties to contract.If the contracting parties explicitly agree that the third party should enforce the terms of the contract, despite the fact that no promise has been made to the third party, the right to enforce the contract should be given to it.Consequently, this argument encourages the creation of an exception to the general principle which allows the third party to get contractual rights when the contracting parties intended to do so.
Third, the doctrine of consideration says that the contract should be supported by the consideration, and section 2 (d) of the 1872 Act allows third parties to move the consideration.The Pakistani courts have held that albeit consideration can be moved by third parties, it will not make him competent to enforce the contractual terms because doctrines of consideration and privity are linked and whoever provides consideration but the contractual terms will be enforced by contracting parties; allowing a beneficiary third party to enforce contractual terms will undermine the privity doctrine. 11In Trade Development Authority of Pakistan v. Rahimuddin, the consideration was moved by a third party and the consignment of cellphones was to be delivered to him.When the promisor did not ship the delivery of the agreed commodities to the office of a third party, the latter sued the promisor.The promisor argued that he had a shipping contract with the promisee, and not with the third party, and was not obliged to fulfill any demand of the third party.The court upheld the stance of the promisor by stating that he had no privity of contract with the third party.Being a stranger to the contract it had no right to sue the promisor. 12In this case, the court followed the literal sense of the law and did not take into consideration the special circumstances.The argument upheld by the court is objective when a third party could not move consideration and it were easy to justify that the third party was unable to enforce contractual terms.Moreover, a valid justification could be made by the Pakistani courts in order to provide the third party with its beneficial rights enshrined in any contract.Pakistani courts could justify with an argument that by giving rights to third parties they are honoring the intention of contracting parties.In addition, if the courts provide rights to third parties, then they are protecting the freedom of contracting parties because such rights are conferred by the latter.
Based on the aforementioned justifications, the courts in Pakistan have held that the beneficiary third party cannot be considered as a proper or necessary party of the suit when it sues for entitlement of beneficial rights arising under a contract to which it is stranger. 13The third party cannot enforce its beneficial rights on the basis of collateral contracts.The third party cannot sue for its beneficial rights even if it is specifically identified by its name in the contract or the contract explicitly identifies the third party by its name. 14In Raj Bibi v. Ghulam Sarwar, the contracting parties with their clear intention entered into a contract wherein they mentioned that the promisor will transfer certain property to the third party after a certain time.In the contract, the third party was expressly identified by name.The contracting parties permitted the third party to enjoy all the rights on the property until it would be transferred to it.When the property was not transferred to the third party at the prescribed time, it pleaded for the specific performance of a contract.The Supreme Court of Pakistan (SCP) dismissed the case for a subjective reason that the third party was a stranger to the contract and had no privity with the promisor albeit its name was specifically mentioned in the contract and that for enforcement of beneficial rights, one should be a party to the contract. 15The Islamabad and Sindh High Courts held that neither a third party nor the agent of contracting parties, in any case, has the right to enforce the beneficial rights or sue on the terms of the contract to which they are not a party. 16

Judge-Made Exceptions to First Limb of Privity Doctrine
There are two judge-made exceptions to the privity doctrine in the Pakistani legal landscape.A third party under marriage and family settlement can enforce the terms of the contract.Second, a beneficiary third party can enforce contractual terms under trust.
In a contract of marriage, partition, and family settlement 'a third party can enforce contractual terms.' 17 In Khuda Bakhsh v. Khudeja, the parents of the bride and groom entered into a contract, in which the father of the groom had given a house to the bride as a consideration so that she married his son.Controversy was generated about whether or not the bride could enforce the terms of contracts held between her parents and her husband's parent.The LHC stated that the bride can enforce contractual terms and there is nothing wrong when the parties to the contract allow the third party can enforce the terms of the contract. 18e court referred to Sajjad Ali v. Badshah Begam 19 wherein the third party had pleaded the enforcement of ante nuptial agreement terms and the court held that ante nuptial agreements are usually made in the country between the guardians and parents of bride and groom and it will be serious injustice if the bride will not be allowed to get her beneficial rights by enforcing the terms of the contract on a subjective ground that she was not a party to the ante-nuptial agreement.The LHC relied on the full bench's judgment of the Madras High Court (MHC) (53 Mad) that considered the marriage settlement as an exception to the no-benefit rule of the privity doctrine.The LHC held that a promise to settle some money or to pay a specific amount to the groom or bride in consideration of his or her marriage to the promisor's daughter or son is not invalid as it rests well with the public policy and in a marriage agreement where the gift is promised in consideration, after the occurrence of marriage that will be a binding contract and can be enforced by the bride and groom.
Trust is defined as 'an obligation annexed to the ownership of property for some persons other than its owner.'A trust is created on a certain property and where there is no property, there is no trust.Trust is created when the author of the trust shows the intention of creating it; there is a purpose of the trust; the presence of the beneficiary; and the property.Trust can be either expressed or implied.An express trust is created to benefit the children by the parent.While implied trust is created when a person gains the title or possesses some property that is to benefit another person.A person in whose favor a trust has been created over a particular property can enforce the terms of it albeit he is a third party.When an individual has property in his possession but has not had the whole beneficial interest over that property then it is presumed that he is holding the property benefitting a third party who has some interest in such property.In such a situation, if the third party challenges its beneficial rights, then the third party will have the right to sue for his beneficial rights by invoking an exception to the privity doctrine. 20ere the claimant placed goods in the warehouse of the first defendant that was ruined due to fire but the first defendant insured the goods with the second defendant.When the claimant sued the second defendant he argued he had no privity of contract with the claimant.The Sindh High Court held that when the objects are placed in the warehouse keeper's possession, the beneficial interest of such good is vested to their owner; trust will be created, invoking 'an exception to the doctrine of privity.'The court stated that the first defendant was a trustee of the claimant's good as the good does not belong to him but the implied trust has been created between them.So being the implied trustee of goods he insured goods with the second defendant.Consequently, the claimant being the beneficiary has the right to enforce the contractual terms of the insurance contract.Moreover, the court stated when the contract is held between the author of the trust and trustee to benefit the beneficiary, then the beneficiary third party can enforce the contractual terms. 21

Adjustment of Third Parties' Rights in Privity Doctrine
Initially, the English courts validated the first limb and the justifications of the English courts were similar to Pakistani courts. 22The former traditionally debarred the right of third parties to enforce the contractual terms because the third party was a stranger and was not a party to the contract, 23 the third party had not provided consideration for the promise, 24 and no promises were made to the third party by the contracting parties. 25wever, in Darlington Borough Council v. Wiltshier Northern Ltd, the first limb was entirely criticized for its foundations.The court held that: 26 The case for recognising a contract for the benefit of a third party is simple and straightforward.The autonomy of the will of the parties should be respected.The law of contract should give effect to the reasonable expectations of contracting parties.Principle certainly requires that a burden should not be imposed on a third party without his consent.But there is no doctrinal, logical, or policy reason why the law should deny effectiveness to a contract for the benefit of a third party where that is the expressed intention of the parties.Moreover, often the parties, and particularly third parties, organise their affairs on the faith of the contract.They rely on the contract.It is therefore unjust to deny effectiveness to such a contract.I will not struggle with the point further since nobody seriously asserts the contrary.
Moreover, the first limb faced severe judicial criticism over time.The English courts held that the first limb has 'anachronistic shortcomings.' 27It is a legitimate blot, 28 an unjust, 29 deficient, and defective rule because it lacked jurisprudential stability and the foundation of the rule lacks logic. 30e English courts had been expressing their concerns for several years but Darlington Borough Council talked about it at some length.This developing agreement in the case law finally culminated in the Contract (Rights of Third Parties) Act 1999 (hereinafter 1999 Act).

Modification of First Limb
To modify the first limb a commission was made in 1996 which submitted its report named 'Law Commission, Privity of Contract: Contract for the Benefit of Third Parties 1996'. 31Many reasons to reform the first limb were pinpointed by the commission.These included: First, the first limb of privity thwarts the contracting parties' intentions where both intended to give contractual rights to a third party. 32Second, it causes injustice to the third party where it has created reasonable expectations that it will be entitled to the contractual rights. 33Third, where the contract is intended to benefit a third party but the promisor breach such contract, it is the third party who suffers losses rather than the promisee.In this case, losses have been suffered by the third party but it has no right to sue the promisor.However, the promisee who has suffered no losses can sue the promisor. 34ourth, it causes practical problems in commercial dealings as an insurance policy is usually taken out for the cohabitee's benefit but the cohabitee is unable to enforce it.Last, the unjust application of the first limb has generated various uncertain, complex, and artificial 'judge-made or statutory exceptions.' 35 The 1999 Act, passed by parliament, has created a lot of exceptions by allowing the third party to enforce contractual rights when contracting parties intend that the third party can do so.However, the 1999 Act has not abrogated the first limb.It has generated exceptions to it. 36ere is no definition of contract in the 1999 Act that is problematic for courts to conclude the third parties' rights and causes inconsistent decisions.In Chudley and Others v. Clydesdale Bank PLC, 37 initially, the court did not consider the letter of instruction a contract due to which the third party was not entitled to the rights accruing from the contract.This decision was reversed without any reasonable justifications by the Court of Appeal, which considered the letter of instruction a binding contract.In Rhino Enterprises Properties Ltd v. Matthew David Smith, the issue was whether a company's voluntary arrangement was a contract for the purpose of the 1999 Act.The court stated that the application of the 1999 Act to company voluntary arrangements will be seismic.Due to the lack of any authority, text or commentary and definition of contract in the 1999 Act the court realistically held that company voluntary arrangement is not a contract and the 1999 Act is not applicable 38 albeit the facts of both cases were different, however, these decisions were inconsistent but the courts could utilize the general definition of contract in the English contract law to conclude whether the letter of instruction or company voluntary arrangement is a contract.
The section 1(1)(a) of the 1999 Act says when the contracting parties intend to give a right of enforcement of contractual terms to the third party, the third-party should enforce such contractual terms, 39 even when the third party has not provided consideration for it.Consequently, the lack of consideration will not be a hurdle for the enforcement of contractual terms. 40n Sismey v. Salandron 41 when the third party asserted for enforcement of contractual terms, the court required whether contracting parties intended such enforcement.The court held that a third party can enforce contractual rights because the contract authorized it.
There are two ways in which a third party can establish the intention of contracting parties.The simpler method is that the contract might expressly acknowledge that a third party can enforce contractual rights. 42The second method is that the third party can rely on section 1(1)(b) which provides that the third party can enforce its contractual rights if the terms of the contract purport to confer a benefit on the third party. 43It is not an easy task because it promotes a rebuttable presumption that the contracting parties intended the third party to have the right of enforcement of contractual terms.However, on the proper construction of the contract if it appears that there is nothing to rebut the presumption then the right to enforce the contractual term will be given to the third party.Consequently, section 1(1)(b) of the 1999 Act will be invoked in cases where the contracting parties will not have intended. 44 Goshawk Aviation Ltd v. Terra Aviation Network SAS, the claimant sought the outstanding sum against the defendant that was due under the aircraft leases.A side letter was signed between the parties wherein it was mentioned that the lessee is obliged to pay some amount as an additional security deposit to the lessor.The question was whether the lessor being the third party could enforce the contractual terms under the 1999 Act.The court held that the lessor is a third party to the side letter so it can invoke the 1999 Act.The court said that the side letter was purported to confer benefit to the lessor under section 1(1)(b) of the 1999 Act so the lessor can be benefited. 45he third party which knew about the side letter and might have a reasonable expectation of enforcing the contractual terms in the side letter as was explicitly mentioned in it that it conferred a benefit on the lessor and there was nothing to rebut the presumption.However, in Chudley v. Clydesdale, 46 Arck through a letter of instruction directed the bank to open an account entitled 'Segregated Client Account.'The account was made with the purpose of developing a beach resort.The bank was obliged to hold the amount in that client account for a certain time and the withdrawal from this account will only be permitted in the case when an undertaking was to be received from a particular solicitor.Many investors invested in it, but no segregated account was opened by the bank and all the amount was accrued by the bank into the general account of Arck.Arck entered into liquidation due to defraud.The investors sued the bank and received their invested amounts from it and the bank released such amounts without acquiring the undertaking of a solicitor.The investors were not a party to the contract held between Arck and the bank but they invoked the 1999 Act.The court considered the letter of instruction as a binding contract and held that letter purported to confer a benefit on third parties.The investors could be benefited from it and could enforce the terms of this contract although they were unaware of this contract when they invested.This judgment raises following main questions: whether this decision rests well with the provision that the third party can enforce contractual terms when the contracting parties intended; whether Arck and the bank while entering into such a contract intended that the investors could enforce the terms of the letter of instruction.It is also questionable that the bank exposed the information to the parties to which no promise was made.It means when there is nothing explicit in the contract regarding the intention of parties then the 1999 Act would be misapplied and unintentionally impose the liabilities on the contracting parties.It could contradict the intention of contracting parties although with the help of using a presumption.Consequently, the presumption failed to give effect to the intentions of the contracting parties.
Moreover, the second reason for reforming the first limb was also misapplied as the investors were unaware of the letter of instruction unless they were informed by the attorney so the investors would have not generated any reasonable expectation for enforcing the contractual terms.
It is also difficult to deal with the expectations of a third party to enforce the contract.In Clearlake Chartering USA v. Petroleo Brfasileiro, the agent of contracting parties emerged as a third party and expected to enforce the contractual terms.The court held that it could enforce contractual terms merely on the ground that he was an agent to one of the contracting parties.
In this case, a vessel was sub-chartered by CUSA to PBSA.The indemnity was given to the CUSA regarding the subcharter of the vessel to PBSA.On the arrest of the vessel, the claim of indemnity was invoked by the agent of the CUSA against PBSA.The CSPL asserted that PBSA is liable under the Indemnity and that CSPL being an agent of CUSA expected to enforce the contract under the 1999 Act.The court held that CSPL could not enforce the terms of indemnity as it had not acted as an agent in any event related to the discharge of the contractual task.The court further added that for enforcement of terms, it has to be a party to the contract while CSPL was a stranger. 47The court did not clarify whether being the third party or stranger is sine qua non for the operation of the 1999 Act despite the Act being clear regarding this provision.Moreover, many grounds were ignored by the court on which CSPL could not enforce the contract of indemnity for the following reasons: first; the indemnity contract was not expressly providing any rights on CSPL.Second, the contract was not made to confer a benefit on CSPL.Third, on the construction of an indemnity contract, there was nothing to believe that the contracting parties intended that CSPL could enforce the terms of the contract.

Conferring Benefit on Third Party
The section 1(1)(b) of the 1999 Act provides where the terms of the contract purported to confer a benefit on the third party, then it could have the right to enforce the terms of the contract. 48There are two significant issues: first, when terms of the contract will purport to confer a benefit on the third party; second, when a rebuttable presumption enshrined in section 1(1)(b) of the 1999 Act will be rebutted.This is basically a kind of test that is a requirement for the enforcement of contractual rights by a third party.The commission failed to give detailed guidance on this test.Moreover, the commission did not determine how this test would be applied.
There are some methods of applying this test.First, when the terms of the contract directly confer a benefit on the third party, the test can be applied.However, the main problem is whether the parties to the contract intended the third party to have the right to the primary performance of the contract.Right to primary performance includes the actual performance of a contract.It will be hard to discern whether this was the intention of the contracting parties because this dimension is usually not determined by them while entering into the contract.This issue does not fall in the domain of the test under section 1(1)(b) as the primary purpose of the test is whether or not the contracting parties conferred a benefit on a third party.However, the scope of the test does not focus on whether the contracting parties intended the third party to have the primary enforcement rights.
Prudential Assurance Co Ltd v. Ayres 49 was the first case that discussed the test.While elucidating the test of section 1(1)(b) it was held that: It thus seems to me that section 1(1)(b) is satisfied if on a true construction of the term in question its sense has the effect of conferring a benefit on the third party in question.There is within section 1(1)(b) no requirement that the benefit on the third party shall be the predominant purpose or intent behind the term… However, this decision was reversed in the Court of Appeal because the court made another version after the reasonable construction of the subject contract, which is why no question regarding the operation of the 1999 Act arose.
In Dolphin Maritime & Aviation Services Ltd v. Sveriges Angfartygs Assurans Forening, 50 this point was reconsidered.The claimant was engaged by the underwriters to recover the compensation regarding the lost goods that the underwriters had paid out on the grounding of a ship.It was a term of the contract that the claimant would get its commission from the recovery obtained from the ship-owner.On behalf of the underwriters, the claimant negotiated a letter of undertaking with the owner which had a term that if the settlement would be agreed upon, the amount at first instance would be paid to the claimant.But the underwriters directly resolved the issue with the shipowner and the settlement agreement was concluded and the settled amount was directly paid to the underwriters.The claimant asserted that the terms of the letter of undertaking had been breached by the owner as he directly paid the amount to underwriters rather than ship-owner.Moreover, such terms purported to confer a benefit on the claimant so it brought his claim under section 1(1)(b) of the 1999 Act.The court held that: A contract does not purport to confer a benefit on a third party simply because the position of that third party will be improved if the contract is performed.The reference in the section to the term purporting to 'confer' a benefit seems to me to connote that the language used by the parties shows that one of the purposes of their bargain (rather than one of its incidental effects if performed) was to benefit the third party.
The court further stated that the letter of undertaking described the method of discharging the obligations of the ship-owner to the underwriters.The agreed method was that the amount will be given to Dolphin at first instance and this method was concluded to benefit underwriters rather than Dolphin.Dolphin Maritime had restricted the scope of section 1(1) (b) of the 1999 Act.However, Dolphin Maritime created a significant boundary between the direct and incidental effects.Moreover, it had directed stringency emphasis on the terms and conditions of the contract rather than its purpose.
Very recently Broadcasting Investment Group Ltd v. Smith, 51 dissected the approaches of Prudential Assurance and Dolphin Maritime.In BIG Limited, the claimant entered into an agreement with the defendant in which they agreed to transfer their shares into SS PLC and become its shareholders.The SS PLC soon went into creditors' voluntary liquidation.The enforcement of an agreement was sought and it was asserted that in light of section 1 of the 1999 Act, SS PLC is entitled to enforce the agreement.Furthermore, it was asserted that the terms of the agreement plainly 'purport to confer a benefit' on SS PLC.The contrary argument was that SS PLC had no reasonable cause of action and the claim of SS PLC under the 1999 Act was baseless on various grounds: First, section (1)(b) of the 1999 Act is not satisfied as the contract did not purport to confer a benefit on it directly and the benefit was incidental.Moreover, on the proper construction of the contract, it can be seen that the contracting parties did not intend to benefit SS PLC hence, section 1 (2) is also not satisfied.
The court stated that the phrase 'purports to confer a benefit on' in the 1999 Act is very critical.This phrase is made of very ordinary English words and is prima facie giving their natural and usual meanings.The words confer means to give or grant; while benefit means any kind of favor or advantage; purport is defined as 'signify, profess to or appear ostensibly to.'The court held that SS PLC could enforce the terms of the agreement because in the agreement there was a term that the contracting parties would transfer share capital to SS PLC and this term was purported to confer a benefit on SS PLC.
The court surveyed Dolphin Maritime and stated whether the transfer of the shares to SS PLC was one of the purposes of the contracting parties' bargain or merely an 'incidental effect of it.'It described that the Dolphin recommended a test based on a 'hierarchy of contractual benefit.'The court stated that Dolphin was trying to suggest that section 1(1)(b) of the 1999 Act 'distinguishes between (for the want of a better term) major and minor benefits accruing to a third party under the relevant contractual term.'This is the highly subjective approach utilized in Dolphin because there is no kind of such distinction in section 1(1)(b) of the 1999 Act.The approach of Dolphin will introduce an unjustified gloss on section 1(1)(b) of the 1999 Act as the section is clear and requires the conferring of benefit which means any kind of benefit.
The court considered the decision of Prudential more valid and held that section 1(1)(b) requires after true construction of the contract if the terms are conferring a benefit on a third party then it be able to enforce the contractual terms and section 1(1)(b) does not require that the 'benefit on the third party shall be the predominant purpose or intent behind the term.' The statutory test enshrined in section 1 is only concerned with the relevant contractual terms that purport to confer a benefit on a third party.The inspection of whether the primary purpose of the parties to the contract's bargain is to confer a benefit on the third party.This is also a subjective approach.Additionally, this question could make subjective intentions relevant where such intentions are not reliable.

Rebuttal of Presumption in Contract
After fulfilling the requirements of section 1(1)(b) of the 1999 Act, there is a presumption that the parties to the contract intended that the third party would be capable of enforcing contractual terms. 52The significant issue is when such a presumption would It is not easy to rebut such a presumption.However, it may only be rebutted when there is an express term in the relevant contract inconsistent with a third party to have enforcement of contractual rights. 53 Broadcasting Investment Group Ltd v. Smith, the court stated after satisfying section 1(1)(b), the story did not end here, further, it is subjected to section 1(2) which has the power of disapplying section 1(1)(b).54 Section 1(2) states 'on a proper construction of the contract it appears that the parties did not intend the term to be enforceable by the third party'.To this end, the whole of section 1 suggests that if section 1(1)(b) is satisfied, it then 'creates a rebuttable presumption of enforceability by the third party.'In this way the burden to satisfy the court that the parties to the contract have no intention and this is evident in the construction of the contract, this lies on the party that is denying the enforceability.55 In a very recent case Cox v Secretary of State, 56 the claimant being an employee of the defendant was a member of a trade union.The union subscription amount was deducted from the claimant's salary by the defendant and was paid to the union under 'check-off arrangements.'The issue was whether the check-off provisions would be enforceable by the trade union under section 1(2) of the 1999 Act.The court held that section 1 (2) of the 1999 Act creates a rebuttable presumption when the terms of the contract purport to confer a benefit on a third party.In the present case, as a matter of construction and interpretation, not a single strong point had been established to show that check-off provisions should not be enforced by the trade union so there is nothing to rebut this presumption.Consequently, check-off provisions are enforceable by the third party in light of section 1(2) of the Act.
When the provisions of the contract are neutral, the presumption will not be rebutted and the third party will be able to enforce contractual terms.There is an option for the contracting parties as they can exclude the 1999 Act application by adding a provision in their contract that a third party has no right to enforce this contract under the 1999 Act. 57However, it is expected that only contracting parties should be able to enforce the contract.So generally in a contract, an explicit exclusion provision is added.Whether adding such an express provision in a contract debars the third party rights.Undoubtedly, the presumption is problematic and rather as it is difficult to extract the intention from a presumption.In many situations, it becomes very easy to determine the presumption due to lack of evidence to rebut it although in simple contracts like letters it is uneasy to rebut the presumption. 58e section 1(2) requires reasonable construction of contractual terms.The proper construction of the contract is not an easy task.It is not constructed arithmetically.So it becomes difficult to determine how much realistic reliance is placed on a factual matrix while constructing a contract reasonably.In Chartbrook Ltd v. Presimmon Homes 59 the court stated that broad interpretation should be acknowledged during the construction of the contract.However, the Supreme Court in Arnold v. Britton and others highlighted the documented language used by the contracting parties as the only source for the construction of the contract.Moreover, the contracts should be interpreted based on the ascertainment of meaning that an ordinary person understands from the document.The English courts usually consider the natural meaning of the terms of the contract and rely on clear and simple meanings. 60 Broadcasting Investment Group Ltd v. Smith, the court observed that if the proper construction of the contract is considered the only way to the entitlement of contractual rights, the same will become difficult for the oral contract as it is impossible to properly construct the oral contract that is a matter of a written contract.However, this can affect the application of the 1999 Act regarding the oral contract.This can be observed by another point that the 1999 Act has not defined the term contract and has only used the word contract which must include written as well as oral contracts.So, the 1999 Act provides the test of the proper construction of contracts then it may create ambiguities when it comes to oral contracts.61

Express Identification of Third Party in Contract
Section 1 (3) of the 1999 Act says that the third party in the contract should be expressly identified by its name, as a member of a group or class, or as answering to a particular description and it is not obligatory that the third party must be present when the contracting parties entered into the contract. 62Very recently in Broadcasting Investment Group Ltd v. Smith, it has been adopted where the company SS PLC was not in existence even though it was not registered when the contracting parties created the contract that they will transfer their share into SS PLC.The court held that terms purported to confer a benefit on a non-existent company, satisfied the requirement of section 1(3) of the 1999 Act hence; it can enforce its beneficial rights. 63 Avraamides v. Colwill, a bathroom manufacturing company was sold to the defendant.In the agreement of sale, it was mentioned that the buyer of a company will complete the company's outstanding orders and will pay all the liabilities incurred by the company.The court held that although the buyer promised to complete the company's outstanding orders this did not amount to an express identification of one of the previous customers of the company.The court held that in case, where the class, name, and specific description are not present, then it might become difficult to conclude the contract even by the construction process but where there is express identification of a third party, then there is no need for the process of the construction. 64wever, in Prudential Assurance Co Ltd v. Ayres, the court held that express identification of a third party satisfies the requirement of section 1(3) of the 1999 Act but it is not a final element for enforcement of contractual terms hence, the court decides to go for the proper construction of the contract.In this case, Prudential Assurance entered into a contract with a firm wherein there was an unusual non-recourse provision that Prudential Assurance could not make recovery from any previous tenants. 65The stance of Prudential Assurance Co Ltd was properly explained in Broughton v. Capital Quality Ltd, 66 wherein it was described that section 1(3) should be read with subsection (1) of the 1999 Act.To entitle a third party to sue on a contract merely because it belongs to the class or group of people that are mentioned in the agreement is not enough for the enforcement of contractual terms.The significant requirement of section 1(1)(b) must be satisfied and the court should test whether the term was purported to confer a benefit on the third party with the help of proper construction of that term.
In Crowson v. HSBC Insurance Brokers Ltd., 67 the court did not find the construction of contractual terms necessary where the third party was expressly identified as a class.In this case, the contract between HBL and HSBC has a provision that the latter will provide the liability insurance policy to the former's directors and officers.When the director of HBL asserted for entitlement of beneficial rights arising under this term the court held that the director is a member of the class and satisfies the requirement of section 1(3) of the 1999 Act, as well as the term, is conferring a benefit on him so, he is entitled to get its rights.
In Starlight Shipping Co v.Allianz Versicherungs, the contract was between the insurers and the owner of a ship that provided for the settlement of the claims against the underwriters by the shipowner.The term underwriters was to be interpreted as whether it was covering the insurers' agents and the servants.The court initially was reluctant to admit that underwriters were expressly identified in accordance with section 1(3) of the 1999 Act.However, finally, the court after the proper construction of the contract held that the word 'underwriters' referred to the servants or agents of the insurers that satisfied the requirement of section 1(3) and the terms of the settlement contract were conferring a benefit on them. 68Consequently, the express identification by name, class, or group of the third party is not sufficient for entitlement of the contractual rights, there is always a need for proper construction of terms to find out whether the contracting parties intended that the contractual terms be enforced by the third party.Royal Bank of Scotland Plc v. McCarthy 69 is one instance.
Chudley and Others v. Clydesdale Bank 70 tried to resolve the inconsistency in the English court decisions.In this case, a letter of instruction that was considered a binding contract was provided to open a segregated client account for investment for the resort development.The court held that the reference to the client account sufficiently fulfilled the requirement of express identification of the investors under section 1(3) of the 1999 Act.
The court by relying on the Laemthong International Lines Co Ltd v. Artis stated that the entitlement of beneficial rights to a third party under the 1999 Act depends upon whether the requirement of section 1(3) of the 1999 Act is fulfilled or not.And along with the express identification of the group or class of which the third party must be the member would entirely be dependent on the reasonable construction of the contract with the spectacles of the admissible factual matrix. 71he court held that in Avraamides it had been stated that the term 'express' never permits the process of construction or implications.The court said that the 'or' is an error and must be replaced with 'by.'The court stated that the third party's express identification as a particular group or class will be determined by the construction of the contract.However, this decision of Chudley is inconsistent with the very recent decision of the Supreme Court in Duval v. Randolph 72 wherein the court maintained that section 1(3) of the 1999 Act never allows implication and makes it necessary that there should be express identification of the third party.
The court in Chudley stated that construing the letter of instruction, the reference to the segregated client account was undoubtedly an express identification of the class of the investors and the claimants were part of it.Moreover, this express identification made them competent to get their beneficial rights under section 1(1)(b) of the 1999 Act as the main purpose of the letter of instruction was investors' protection by opening segregated client accounts.Consequently, the requirements of sections 1(3) and 1(1)(b) of the 1999 Act are cumulative.However, it is not true that the same contractual term will satisfy the requirement of both sections 1(3) and 1(1)(b) 73 like if any terms satisfy section 1(3), they will necessarily meet the requirements of section 1(1)(b). 74wever, in a recent case, the requirement of both sections was satisfied.In Sismey v. Salandron, the claimant was not a party to a deed of covenant in which the contracting parties promised to transfer certain property to him.In this way, the contract was purported to confer a benefit on a third party that fulfills the requirement of section 1(1)(b).Moreover, it was mentioned in the deed that the claimant can enforce it and the name of the claimant was expressly identified which rests well with section 1(3).The court held where there is an express reference to a third party in a contract and the contract is purported to confer a benefit on him then he has the express right to enforce the contractual terms under the 1999 Act. 75cond Limb: Imposition of Liability on Third Party

Pakistani Perspective
The burden of liability on any party to contract is placed after its consent.Therefore, second limb of privity underscores that the burden on third-party to contract should not be placed.However, Pakistani courts place a burden on third parties without their consent.In KESC v. KWSB, the contract was created between the parties where the promisor had to provide electricity to the third party and the promisee was obliged to pay the bill.When the bill was not paid by the later, the former sued a third party to the contract.Furthermore, the third party asserted that it was not a signatory to the contract and argued that it is a well-settled principle that a contract can only be enforced by and between the signatories and contracting parties and contractual obligations cannot be imposed on a stranger to the contract.The SHC stated that where the third party is not a signatory and is a stranger to the contract but is a beneficiary then the doctrine of privity will be applied and contractual obligations will be imposed on it. 76 Pakistan State Oil Company v. KESC, the claimant and defendant entered into a contract to supply the furnace oil, and the Cartage Contractors were hired for the transport of oil.Their contract has a provision that in case of losses or shortage of product, the liability will be imposed on the cartage contractors.On the imposition of liability, the cartage contractors argued that they were not a party to the contract and they had no privity of contract with the claimant.The SHC stated that Cartage Contractors were very much liable and the privity of the contract was generated when cartage contractors were hired to deliver oil. 77

English Perspective
The burden of the contract cannot be imposed on a third party and contracting parties cannot impose liabilities of the contract on a third party.Even the contracting parties by their contract cannot impose the obligation of performance of any act on a third party.When in a contract the contracting parties agree that a third party will pay some amount to the promisor, this contract cannot oblige the third party to give the amount to the promisor. 78he burden of the contract cannot be transferred from the original contractor to the third party without the consent of the third party. 79Additionally, the third party which is not a party to the contract cannot be bound by an exemption clause of any contract. 80It is impossible that contracting parties merely impose liability or deprive the third party of any right.
The contract is a matter of contracting parties when it comes to the losses and contracting parties cannot make a third party liable for losses faced by them.In VTB v. Nutritek, 81 contracting parties contracted that one of the parties would buy six dairy companies from the third party and the amount for buying these companies was provided by another party.When the promisee defaulted and the promisor encountered massive losses he asserted that it entered into the contract with the promisee by misrepresentation hence promisor argued that a third party is also jointly responsible for the losses faced by the promisor due to the fault of the promisee.The court stated that liabilities of losses faced by the promisor due to the fault of the promisee cannot be imposed on a third party.The contracting parties cannot bind a third party to afford the losses faced by contracting parties due to their fault.
The contracting parties cannot lawfully deprive the rights of third parties.In Bocardo v. Star Energy UK Onshore Ltd, 82 contracting parties agreed in a way that the performance of their act was depriving the rights of a third party as the promisor being the owner of a land permitted promisee to bore his land and search the petroleum on that land.The promisee while boring the land of the promisor drilled some land of a third party in the process of searching for petroleum.When the land of the third party was unlawfully drilled without his consent and the contracting party deprived the third party of his rights then the third party sued the contracting parties.The court of law considered the contracting parties liable to the third party for depriving its rights and using its land without consent.

Conclusion
The Pakistani legal regime can adjust its attitude according to evolved English legal regime.The threshold of the regime's rigidity and implementation of traditional versions is incapable of bearing fruits for societal needs.Changing attitudes and accepting an evolved English approach will bring more and more stability to the legal landscape of privity.Practically, the traditional Pakistani jurisprudence could seek benefit from the jurisprudence of English courts.
The 1999 Act is a commendable job and has been promulgated to save the beneficial rights of third parties.The Act has brought clarity to the first limb of the privity doctrine although it sought many statutory exceptions to it and did not call the third party a contracting party.The inconsistency in the established jurisprudence of English courts causes uncertainty despite the clear version of the 1999 Act.Albeit there is no definition of contract in the Act which is a lacuna because of which the courts could interpret the existing definition of a contract under English Contract law while concluding the enforcement of contractual rights by a third party.Practically, it is difficult to calculate the certainty, soundness, and predictability of reasonable expectation that a third party generates for enforcement of contractual rights but where the third party is not aware of its beneficial rights then it is a fact that no reasonable expectation has been engendered.
The section 1 of the 1999 Act contains a statutory test that inspects whether the terms of the contract are purported to confer a benefit on a third party and this test never inspects the purpose of the contracting parties' bargain.The presumption that the contract intended to entitle the third party to enforce contractual terms can be rebutted where the parties added an exclusion provision, however, in its absence, it becomes difficult to rebut the presumption and the only way is to construct the contractual terms to pinpoint the rebuttal provision and in case of oral contract, it is difficult to construct the contractual terms.Hence, it is difficult to deal with the presumption and its rebuttal.Section 1(3) requires the express identification of the third party where the party is expressly identified then it can enforce the terms of the contract if the terms are purported to confer a benefit on the third party.
For second limb, if third party has not been consented and has no reasonable expectation from the contract, then placing burden on it is unfair.In addition, it is also subjective and injustice with third party as it would bear the liability for someone else.