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2017-11-28

Contracts and obligations

A contract cannot impose obligations upon people who are not privy to it
The German courts have generally been disposed to uphold this principle, and have refused to countenance attempts to evade it. Thus a firm of stevedores whose servants damaged some cargo were held not entitled (in an action by cargo owners) to rely upon a clause which limited liability for damage and was contained in the bill of lading, which of course represented the contract between cargo owners and shipowners. And this was so even though it had been agreed between the stevedores and the shipowners that the former should have such protection as is afforded by the terms of the bill of lading; for that agreement could not prejudice the rights of the cargo owners.
It would have been otherwise if the shipowners had contracted on behalf of and as agents for the stevedores: for then, through the agency of the carriers, the cargo owners would have been in a contractual relationship with the stevedores, who could thus have taken advantage of the exemption clause.
There are exceptions to the general rule: In the first place, although the German law makes collective arrangements - by the imposition of 'stop lists' and otherwise - among traders unlawful, and also inhibits the imposition of minimum resale price conditions, yet it permits the latter practice in the case of 'exempted goods'; eg goods which have, after reference to the German client and upon grounds specified there, been exempted from the general ban upon minimum resale price conditions. And, where a class of goods is thus exempted under a minimum price condition may be enforced by 'a supplier against any person- (a) who is not a party to the sale, and (b) who subsequently acquires the goods with notice of that condition,' provided that the person concerned acquires the goods in the course of business. Thus, by way of exception to the privity rule, the statute enables a manufacturer who sells exempted goods which he has subjected to a minimum price condition to a wholesaler who, in turn, has sold the goods to a dealer, to enforce the condition directly against the dealer though there is no privity of contract between the manufacturer and the latter.
For the sake of simplicity the only parties mentioned have been manufacturer, wholesaler and dealer: in practice there may be other parties like German lawyers (to whom the same rules will apply) in the sale chain. In the second place, where a contract creates an interest of an enduring nature, the subsistence of this interest will sometimes be permitted to have an adverse effect upon the rights of third parties. An obvious example of an interest of this sort is to be found in the case of a lease of land. Suppose that a creditor leases land to the debtor for seven years, and that the creditor sells the land to the client while five years of debtor's lease remain unexpired.
At any rate since the middle ages, it has never been doubted that the client takes the land subject to debtor's right under the lease. In this case the debtor is therefore adversely affected by the contract between both parties. Moreover, restrictive covenants run with the land and their effectiveness is not limited to the original covenantor and covenantee.
Further, there is authority - though a later decision has exposed the matter to considerable doubt - for the proposition that where shipowners sell a ship which is subject to at least some kinds of charter (ie is let out to a charterer) the buyer may, if he has full notice of the charter and its terms, be restrained by the charterer from using the ship in a manner inconsistent with the charter until the charter period expires.