Privity of contract

The relationship between the two parties to a contract that confers a right to take action on that contract.

Privity is the legal term for a close, mutual, or successive relationship to the same right of property or the power to enforce a promise or warranty.

Privity of contract is a relationship, existing between two parties,and recognised in law. In the case of privity of contract it refers to the relationship between the parties to a contract that confers a right to take action on the contract

The doctrine of privity in contract law provides that a contract cannot confer rights or impose obligations arising under it on any person or agent except the parties to it.

The assumption is that only parties to contracts should be able to sue to enforce their rights or claim damages as such. However, there have been problems due to its implications upon contracts made for the benefit of third parties who are unable to enforce the obligations of the contracting parties.

There are rules governing who can take action to sue another party within a contract.

In the case of Dunlop Pneumatic Tyre Co Ltd v Selfridge & Co Ltd (1915) there was a contract between two parties, Dunlop and Selfridge a third party was unable to sue Selfridge over an agreement over the price because the third party was not in contract with Selfridge.

The court decided that there was no contract between the third party, and it could not have the right to sue. The privity rule shows only those who have engaged in a contract have the right to sue.

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