Law of Privity in Malaysia

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The doctrine of privity prevented a third party from enforcing a benefit in a contract made between other parties. This position has clearly been altered by the enactment of the Contract (Rights of Third Parties) Act 1999. Today, third parties are no longer denied the ability to enforce benefits conferred upon them by a contract between two or more parties. 1. Examine the doctrine of privity and the problems that it faced,

2. Discuss the changes brought about by the development of the law

3. Examine the changes and whether they have abolished the doctrine or caused further problems

4. Compare the current position of the law to that of Malaysia

5. Consider all relevant judicial decisions

6. If necessary, suggest an appropriate remedy for the law in dealing with this matter.

7. Compare the current position of the law to that of Malaysia
A basic rule in the law of contract is that only those who are parties to the contract or privy to the contract can sue or be sued on it. A person who is not a party to a contract may not enforce a contract even though it was made for his benefit. Similarly, the parties to a contract cannot impose liabilities upon a third party who is a stranger to the original contract. This principle is known as privity of contract.

This thesis examines the doctrine of privity in Malaysia and argues that its application to contracts made for the benefit of third parties is inadequate and requires statutory reform. The main obstacle of this doctrine is that it frustrates the contracting parties’ intention to benefit third parties. The difficulty is exacerbated by the growth of contracts made for the benefit of third parties in recent years. It is submitted that contract theory can accommodate third party rights. The development of common law mechanisms to overcome the doctrine of privity in England, Australia and Canada are analysed to consider their application to the position in...
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