Doctrine of Privity
What is doctrine of privity?
Third parties do not have any rights in a contract due to doctrine of privity. Only parties contracted to each other can enforce an agreement Dunlop v Selfridge
“Only a person who is a party to a contract can sue on it.. Our law knows nothing of a jus quaesitum tertio (rights on account of third parties) arising by way of contract “ as per Viscount Haldane Dunlop sued Selfridge and stated that Selfridge was bound by their term that they have made with Dew&Co. Can Dunlop enforce the term agreed with Dew against Selfridge? HOL stated no. Due to doctrine of privity, a third party cannot enforce a term or a third party cannot enforce sue on a term. Law of contracts do not recognize the rights of third parties. Tweedle v Atkinson
A contract cannot impose liabilities on anyone except a party to it A contract cannot confer rights on anyone except a party to it “In general, no action can be maintained upon a promise unless the consideration moves from the party to whom it is made” Beswick v BeswickWhat is the relationship between consideration and privity? Consideration gives the right to enforce an agreement regardless privity. In the absence of consideration, privity is required to have a right to sue. Justifications: What is the purpose of doctrine of privity?
Contract law concerns bargain between parties (Eg: Dunlop & Dew). Therefore, it is unfair to impose any terms on a third party to enforce a term that she or he was not privy to. Parties should only be obliged to fulfill terms stated in the contract and not to anyone else. Based on the above, Lord Haldane in Dunlop’s case stated, only a person who is party to a contract can sue on it because our law knows nothing of third party’s rights or liabilities. Should the doctrine of privity be retained/removed/abolished/modified? Law Commission Report Opposition to the Law Commission Report The main principle of privity; that 2 contracting parties...
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