There are two main aspects to privity:
1. No-one except a party to a contract can enforce it
This is closely linked to the rule of consideration i.e. it must move from the promissee therefore no one who has not put something into the contract can sue or be sued upon it. For example, a third party cannot enforce a benefit purported to be granted on him/her by others. This principle and its potential injustice can be seen in the case:
Tweedle v Atkinson
T’s father and father-in-law agreed each to pay T a sum of money and provided in their agreement that T could sue either one of them if the agreed funds were not forthcoming from that person. When T’s father-in-law died without making payment, T sued his executor. It was held that T could not enforce the agreement, because he had not provided any consideration (i.e. not party to the contract). This was despite the provision in the agreement entitling him to sue.
However the law has relatively recently changed on this matter.
- The Contracts (Rights of Third Parties) Act 1999
2. No-one except a party to a contract can be subjected to liabilities under it.
This rule is based on the idea of free will. The parties can sue each other in order to enforce obligations, because they have chosen to of there own free will to take on these obligations, a third party has not.
Dunlop v Selfridge
Dunlop sold tires to Dew & Co and Dew & Co promised not to sell on the tires below a certain price and that a similar condition would be part of any agreement between Dew & Co and others. Dew & Co sold tires to Selfridge who agreed not to sell bellow the fixed price. In fact Selfridge did sell the tires to customers below the fixed price. Dunlop became aware of this and sued. Held whilst Dew & C0 could have sued Selfridge, Dunlop could not because Dunlop was trying to take advantage of someone else’s contract.
