Coulls v Bagot's Executor & Trustee Co Ltd (1967) 119 CLR 460
Contract; formation; privity; rights of third parties.
Facts: In a contract entered into between Mr Coulls and the O'Neil Construction Company, Mr Coulls gave O'Neil the right to dig up and remove stone from his property. In exchange, O'Neil promised to pay royalties for the stone. The contract authorised O'Neil to pay the royalties to Mr Coulls's wife. Some time later, Mr Coulls died. This contract for quarrying stone did not involve services of a personal nature and accordingly it was not terminated by his death. The contract remained enforceable against his estate. This meant that O'Neil could continue to quarry the stone and the royalties would continue to be payable. The executor of Mr Coulls's estate wanted to know if Mrs Coulls had a contractual right to receive these royalties.
Issue: Did Mrs Coulls herself have a legally enforceable right to the payment of the royalties?
Decision: O'Neil owed no contractual obligations to Mrs Coulls because she was not herself a party to the contract.
Reason: Although Mrs Coulls was present and had put her signature on the contract when it was made, the majority of the court held that she had not signed it as a party to the agreement. In particular, she had not provided any consideration to make the agreement contractually binding between herself and O'Neill. Because she was not a party to the contract, she had no contractual right to sue on or enforce the terms of the contract. The royalties should therefore be paid to Mr Coulls's estate, to be distributed to his beneficiaries.