contract law - privity

• Privity

  The principle that a contract cannot place rights or obligations on someone who is not a party to the contract
• Privity of contract

  You cannot place rights or obligations on someone who is not party to the contract. A contract between person A and person B cannot lead to a claim from person C.
• Privity

  Overlaps with consideration when assessing whether we have a valid contract claim
• Case - Dunlop Pneumatic Tyre Co. Ltd v Selfridge Ltd (1915)


  • Dunlop manufactured tyres and sold some to Dew, who agreed to not resell them below a certain price. Dew resold some tyres to Selfridge, using the same term that they cannot be resold below a certain price. Selfridge then resold them below this price. Dunlop could not sue Selfridge because Dunlop was not a party to the contract between Dew and Selfridge.
• Privity rule

  Based on 'Rule 3' of Consideration - the consideration must move from the promisee (as seen in Tweedle v Atkinson (1861))
• The privity rule is often viewed as causing injustice, so the Courts try to find ways of avoiding the rule
• Case - Jackson v Horizon Holidays Ltd (1975)


  • Jackson booked a holiday for himself and his family. The holiday was disappointing. He sued for damages for himself and his family. The Court decided that it would be unfair to limit the award of damages to just Jackson. The remedy could also be extended to all family members.
• General exceptions to the rule of privity

  • Agency
  • Collateral contracts
• Agency

  An agency arises when one person (the agent) is authorised to make a contract on behalf of an another (the principal). The principal is still bound by the terms of the contract, even though they themselves did not make the contract.
• Collateral contract - Shanklin Pier Ltd v Detel Products Ltd (1951)


  • The case involved the painting of a pier, using 'Detel' paint. The Shanklin Pier told the contractors to use this paint, but the paint quality ended up being poor. There was no privity of contract between Shanklin Pier and Detel, but the Courts found a collateral contract between them due to a previous representation made by Detel on the good quality of the paint.
• Collateral contracts

  The Court may find a second contract alongside the main agreement.
• Contracts (Rights of Third Parties) Act 1999 - Section 1


  A contract can be enforced by a person not party to a contract if the third party is: 1) Expressly identified by name, or as a member of a class, or as answering a particular description, 2) The contract expressly provides that the third person may enforce the contract, 3) The contract term is an attempt to confer the benefit of the term on the third party.
• Contracts (Rights of Third Parties) Act 1999 - Section 1 - Beswick v Beswick (1967)


  • Mr Beswick made a contract with his nephew to sell his coal merchant's business in exchange for weekly payments him for life, and after his death, to his wife (the nephew's aunt). After Mr Beswick's death, the nephew refused to pay. The Court decided that the aunt was not a party to the contract and so there was no privity of contract.