Privity of Contract – The Basics

The basic rule of privity of contract is that nobody can sue or be sued on a contract who has not provided consideration under the contract i.e. any person that is not a party to the contract can neither sue under it or be sued under it. Â

Privity of contract is a somewhat controversial rule and the justifications for it are not considered to be entirely satisfactory:

  • contract law regulates bargains and as such it would be unfair to allow a person to gain from a bargain when he has provided nothing for this benefit Â
  • equally it would be unfair to oblige a person who has not played any part in the bargain to do something Â
  • of course if it is accepted that a person cannot sue under the contract the conversely it would be unfair to allow them to be sued. Â

In the case of Price v Easton [1833] 110 ER 518 Easton agreed to do certain work in consideration of which he would pay a specified sum to Price (a third-party), the work was done however Easton failed to pay Price. Price tried to sue to enforce the contract but found his claim unsuccessful because he was not a party to the contract. A more recent case to peruse is Dunlop Pneumatic Tyre Co lTd v Selfridge & Co Ltd [1915] AC 847.

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