Beswick v Beswick [1967] UKHL 2 (29 June 1967)

Facts

Mr Peter Beswick, a coal merchant, entered into a written agreement to sell his business to his nephew, the appellant Mr John Joseph Beswick. The agreement stipulated that the nephew would employ Peter Beswick as a consultant for the remainder of his life at a weekly salary. A crucial term of the contract was that upon Peter Beswick’s death, the nephew would pay an annuity of £5 per week to Peter Beswick’s widow, the respondent Mrs Ruth Beswick, for the rest of her life. The widow was not a party to this agreement. After Peter Beswick’s death, the nephew made one payment of £5 to the widow and then refused to make any further payments. Mrs Beswick, in her capacity as the administratrix of her late husband’s estate, and also in her personal capacity, brought an action against the nephew seeking specific performance of the agreement to pay the annuity.

Issues

The case presented two primary legal issues for the House of Lords to resolve:

1. Could Mrs Beswick, in her personal capacity as a third-party beneficiary, sue to enforce the term of the contract made for her benefit, despite not being a party to it? This directly engaged the doctrine of privity of contract.
2. If she could not sue personally, could she, as the administratrix of her husband’s estate, obtain an order for specific performance compelling the nephew to pay the annuity directly to her? This questioned the nature of the remedy available to the promisee’s estate, particularly whether damages would be an adequate remedy.

Judgment

Privity of Contract

The House of Lords unanimously held that Mrs Beswick could not succeed in her personal capacity. They affirmed the long-standing common law doctrine of privity of contract, which dictates that a person who is not a party to a contract cannot sue to enforce its terms. The Law Lords confirmed that the rule established in Tweddle v Atkinson (1861) remained good law, preventing a third party from enforcing a contract made for their benefit.

Lord Reid stated: “My Lords, in my opinion the Respondent in her personal capacity has no right to sue, but she has a right as administratrix of her husband’s estate to require the Appellant to perform his obligation under the agreement.”

Specific Performance for the Estate

The central pillar of the judgment was that Mrs Beswick, acting as the administratrix of her husband’s estate, was entitled to an order for specific performance. The estate stood in the shoes of the deceased promisee (Peter Beswick) and could enforce the contract against the promisor (the nephew).

The court reasoned that the common law remedy of damages would be inadequate. If the estate sued for damages for the breach, it would likely only be awarded nominal damages because the estate itself had suffered no direct financial loss from the failure to pay the widow. Such an outcome would be grossly unjust, as it would allow the nephew to retain the full benefit of the business while repudiating his central obligation under the contract. Equity, therefore, had to intervene.

Lord Upjohn articulated the rationale for using the equitable remedy:

“The estate’s damages for breach of the contract to pay the widow would be nil or purely nominal, for it is clear that the estate has suffered no loss. To this the simple answer, in my opinion, is that the court will grant a specific performance of the contract to pay the money to the widow. … So, in the circumstances of this case, the estate as the contracting party can enforce the contract for the benefit of the third party (the widow) and is entitled to a decree of specific performance.”

The Law Lords concluded that specific performance was the only appropriate remedy to do justice in the case, compelling the nephew to perform his promise exactly as it was intended under the contract.

Implications

The decision in Beswick v Beswick is a landmark case that created a crucial equitable exception to the harsh effects of the doctrine of privity of contract. While upholding the formal doctrine, it provided a vital mechanism for its circumvention. It established that a promisee (or their personal representative) can sue for specific performance to enforce a benefit for a third party where damages would be an inadequate remedy. This prevents the promisor from being unjustly enriched by breaching their obligations without consequence. The case remains a leading authority on the availability of specific performance and the role of equity in enforcing contractual promises. While the Contracts (Rights of Third Parties) Act 1999 has since provided a direct statutory right for third parties to enforce contracts in many situations, the principles from Beswick v Beswick remain important, particularly where the Act does not apply or where a party prefers to seek an order for specific performance via the promisee’s estate.

Verdict: Appeal dismissed. The order for specific performance in favour of the respondent was affirmed.

Source: Beswick v Beswick [1967] UKHL 2 (29 June 1967)