Doctrine of Privity
The doctrine of privity of contract is a fundamental legal principle that governs contract law in common law jurisdictions. It stipulates that only parties who have entered into a contract can enforce its rights and obligations. Strangers to the contract are not legally entitled to do so, even if the contract benefits them indirectly.
1. Essentials of Privity to Contract
The Doctrine of Privity of Contract has several essential components:
a) Contractual Parties: The most significant requirement is the existence of a contract signed between two or more parties. Without a valid contract, the doctrine does not apply.
b) Consideration and Competence: For the doctrine to be applicable, a contract must have consideration (something of value exchanged) and involve competent parties capable of entering into a contract.
c) Breach of Contract: The doctrine comes into play when a breach of contract occurs. After a breach, only the parties to the contract can sue each other for damages or enforcement of obligations.
d) Legally Capable Parties: The parties to the contract must be of legal age, of sound mind, and not under coercion or undue influence.
e) Identification of Parties: The contract must clearly define who the parties are and outline their respective duties and obligations.
2. Exception to the Doctrine of Privity of Contract
While the doctrine typically restricts the right to sue to the contractual parties, there are exceptions:
a) Beneficiary: If a contract is made for the benefit of a third person who is not a party to the contract, that third party can pursue their rights against the parties if either fails to perform their obligations.
b) Conduct, Acknowledgement, or Admission: Sometimes, even without contractual privity, one party’s behaviour or acknowledgement can lead to accountability under the doctrine of estoppel.
c) Maintenance, Partitions, Marriage Settlements Under Family Arrangement: These exceptions protect the rights of family members and ensure the effect of a testator’s will.
d) Covenant Running with the Land: When a property is bought with the understanding that certain responsibilities and liabilities are attached to it, a person can sue based on a contract between the previous owner and a settlor, even if they weren’t a party to the original deal.
