Third party rights—the common law doctrine of privity of contract

The following Dispute Resolution practice note provides comprehensive and up to date legal information covering:

  • Third party rights—the common law doctrine of privity of contract
  • What does privity of contract mean?
  • Exceptions to the doctrine of privity of contract
  • Privity—the equitable exceptions
  • Privity—the statutory exceptions (The Contracts (Rights of Third Parties) Act 1999 and other statutory exceptions)
  • Privity—enforcing a contract against a third party
  • Privity—indirect effect on third parties
  • Liability in negligence cases
  • Intimidation cases

Third party rights—the common law doctrine of privity of contract

This Practice Note discusses the common law doctrine of privity of contract; the equitable and statutory exceptions to it; how the doctrine affects enforcing a contract against a third party and what happens when, notwithstanding the lack of privity, a contract has an indirect effect on a third party. For guidance on contracts and third parties more generally and on the Contracts (Rights of Third Parties) Act 1999 (C(RTP)A 1999), respectively, see Practice Notes:

  1. Contracts and third party rights

  2. Third party rights—the Contracts (Rights of Third Parties) Act 1999

What does privity of contract mean?

'Privity of contract' is a common law doctrine, which provides that you cannot either:

  1. enforce the benefit of, or

  2. be liable for any obligation under

a contract to which you are not a party.

Therefore, if your client is not a party to a contract (ie they are a third party) then they cannot sue or be sued under that contract.

Example:

A promises to B that they will pay a sum of money to C—C cannot sue A for that sum if A fails to pay.

Beswick v Beswick is considered to be the modern statement of the doctrine. Here, a coal merchant transferred his business to his nephew who promised him that he would, after the uncle's death, pay an annuity to the uncle's widow.

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