- Formation of contracts, third parties rights and causation of loss (Chudley v Clydesdale Bank plc)
- What are the practical implications of this case?
- What was the background?
- What did the Court of Appeal decide?
- Formation of a contract and intention to create legal relations
- Third party rights and identification of the third party
- Causation of loss by the breach
Commercial analysis: This case deals with a Letter of Instruction (LOI) made between a property developer and Yorkshire Bank (Bank). The LOI provided that a specific account was to be opened into which Mr. Chudley and others (the investors) would pay investment monies for the development of a resort by the property developer. The account was never opened and the property developer fraudulently misapplied the monies. The investors commenced numerous proceedings against the Bank. The Court of Appeal’s decision is concerned with the contractual aspect of the case. The decision is important as it deals with the principles applicable in ascertaining the formation of an unconditional and binding contract as well as a construction of the Contracts (Rights of Third Parties) Act 1999 (C(RTP)A 1999) and causation of loss. It is one of the few cases on the 1999 Act. Written by Lynne Counsell, barrister at 9 Stone Buildings.
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