there are three exceptional situations, in which the intended beneficiary will nevertheless be able to enforce the promise.
1. Where the intended beneficiary is made party by statute: If the Contracts (Rights of Third Parties) Act 1999 were to apply to voluntary covenants (which is doubtful) then, the intended beneficiary can enforce the promise by virtue of Sec. 1 CRTA 1999 which provides that – a third party may in his own right enforce a term of the contract if the contract expressly provides that he may, or if the term purports to confer a benefit on him; unless on a proper construction of the contract it appears that the parties did not intend the term to be enforceable by the third party. However, it is doubtful whether CRTA 1999 applies to voluntary covenants. Where the intended beneficiary can sue under this Act, he can obtain any remedy that would have been available had he been a party to the contract – (Sec. 1(5) CRTA 1999). This might be interpreted as meaning that the third party may obtain specific performance, if the subject matter is such that the remedy of damages would be inadequate. However, it is established that a volunteer may not obtain specific performance. It is difficult to see why a third party, who has not given consideration, should be in a better position under the 1999 Act. 2. Where the intended beneficiary is within the ‘marriage consideration’: At one time, it was traditional upon marriage for the woman’s father to set up a trust. The beneficiaries of that trust would be the husband and wife for their joint lives, the survivor for their life, remainder to any children of the marriage and in the event of there being no children, to the wife’s next of kin. The wife would also enter into a covenant, whereby she promised to convey to the trustees any rights she might later receive above a certain value to be held on the same trusts, problem ensues when she fails to do it. Unlike common law, equity regards marriage as ‘the most valuable consideration imaginable’ – (AG v Jacobs-Smith). The parties to the marriage and the issue of it are within the ‘marriage consideration’, that is to say – equity treats them as if they had given consideration; as the very reason for entering into the covenant is to provide for the family. But note, next of kin are not considered as within the marriage consideration – (Re Plumptre). They are, therefore, able to obtain specific performance of the covenant where the purported settlor fails to transfer the rights – (Pullan v Koe). Pullan v Koe also envisaged, equity would not only insist on specific performance of the covenant, but also treat the trust as constituted by way of constructive trust the minute the covenant could be performed. The doctrine of ‘marriage consideration’ applies only to marriage settlements; that is settlements made in contemplation of marriage. A husband and wife who are already married, who set up a trust for themselves and their children, do not create a marriage settlement; accordingly the children are not within any marriage consideration. 3. Trust of the right to sue on the covenant: An argument has sometimes been made that, the intended trustee being a party to the covenants, holds his common law right to sue on the covenants, on trust for the intended beneficiary. If this argument is made out, then intended beneficiary can compel the intended trustee to exercise his right and sue alleged settlor. The assumption is that, the intended trustee would recover substantial damages at common law, which he would then hold on trust for the intended beneficiary.