Privity

• Privity


  The general rule on privity of contract means that only parties to a contract can sue each other. Third parties cannot sue on a contract they are not a party to.
• Tweddle v Atkinson


  • A groom was unable to enforce a contract that was made for his benefit because the consideration did not move from him.
• Dunlop Pneumatic Tyre Co v Selfridge Co Ltd


  • The House of Lords enforced the privity rule. There was no contract between Dunlop and Selfridge and therefore Dunlop could not sue.
• Denning recognized the injustice of the privity rule and the commercial inconvenience of it (Beswick v Beswick; Forster v Silvermere Golf (1981)).
• The privity rule can leave some parties without a remedy, so over the years, the courts have developed exceptions both in common law and in statute to enable 3rd parties to have rights to a contract, and now the privity rule has limited application.
• Dunlop v Lambert

  • The House of Lords held that, where goods had been lost at sea, a consignor could recover substantial damages even though the goods, by the time of the loss, had become the property of the consignee.
• The Contract (Rights of Third Parties) Act 1999


  A statutory exception to the privity rule. The Act was designed to give third parties, for whose benefit a contract was made, the right to sue on it.
• Under the Act a third party can enforce terms of a contract if the 3rd party is specifically mentioned in the contract as someone authorized to enforce the term, or if the contract purports to confer a benefit on them. The 3rd party cannot enforce their rights if it appears that the parties did not intend the term to be enforceable by the 3rd party.
• Other statutory exceptions have developed over the years and these can be used as an alternative to the 1999 Act, although the 1999 Act covers most situations. Examples include the Married Women's Property Act 1982 and the Road Traffic Act 1988.
• Shanklin Pier Ltd v Detel Products (1951)

  • The claimants hired a contractor to paint Shanklin pier. The claimants told the contractors to use a particular paint, because the makers of the paint said it would last seven years. The paint only lasted a few months.
• New Zealand Shipping v Satterthwaite (1975)


  • An independent contractor could rely on a clause in a contract that they had not been privy to, because they were acting as a trustee or agent.
• Les Affreteurs Reuinis v Leopold Walford (1919)

  • It was held that there was a trust exception to the privity rule.