Privity of Contract

• Pages: 209-222

CHAPTER 11

PRIVITY OF CONTRACT

THE PRIVITY DOCTRINE

According to the doctrine of privity, a contract creates enforceable rights and obliga-

tions only between the parties to it; thus, only the original parties can sue and be

sued on it.

1 The diffi culty with the doctrine has always been that it excludes third

parties for whose benefi t a contract was intended to be made. The exceptions to the

doctrine seek to address this diffi culty.

The doctrine of consideration rationale

One of the earliest enunciations of the doctrine was in Price v Easton , 2 where it was

held that an action for breach of contract must be brought by the person from whom

the consideration moved, thus linking the privity rule with the rule that considera-

tion must move from the promisee. The facts were that D owed £13 to C. D promised

to do certain work for T, and T in return agreed to discharge D’s debt by paying £13

to C. D completed the work but T failed to pay the money to C. C sued T to recover

the amount. It was held that C had no right of action against T, but the three judges

in the English Court of Appeal used differing reasoning. According to Lord Denman

CJ, C’s action failed because he did not ‘show any consideration for the promise

moving from him’ to T; Littledale J, on the other hand, said: ‘No privity is shown

between the plaintiff (C) and the defendant (T)’; while Patteson J remarked that there

was ‘no promise to the plaintiff alleged’.

The decisive case laying down the doctrine in the late nineteenth century was

Tweddle v Atkinson, 3 in which the plaintiff’s father, in consideration of the plaintiff’s

intended marriage, made an agreement with the future bride’s father that each father

would pay the plaintiff a sum of money in connection with the intended marriage.

The bride’s father failed to pay the plaintiff the promised amount and later died. The

plaintiff sued the father’s executors.

The court rejected the plaintiff’s argument that an agency relationship had arisen

between the plaintiff’s father and the bride’s father, entitling the plaintiff to sue the

deceased father’s executors. Wightman J stated the position as follows:

Some of the old decisions appear to support the proposition that a stranger to the consid-

eration of a contract may maintain an action upon it, if he stands in such a near relation-

ship to the party from whom the consideration proceeds, that he may be considered a

party to the consideration . . . But there is no modern case in which the proposition has

been supported. On the contrary, it is now established that no stranger to the considera-

tion can take advantage of a contract, although made for his benefi t.

1 Dunlop Pneumatic Tyre Co Ltd v Selfridge & Co Ltd [1915] AC 847, per Lord Haldane.

2 (1833) 4 B & Ad 433.

3 [1861] EWHC QB J57.