privity of contract

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privity of contract

the relationship between the parties privy to the contract, i.e. those who are direct parties to it. Until the passing of the Contracts (Rights of Third Parties) Act 1999, English law did not permit parties not in a relationship of privity to sue on a contract. Thus, a third party benefited by a contract could not sue on it. The effect of the Act has been to substantially relax this rule, although many contracts seeks to exclude the effect of the Act. Scots law and other civilian systems recognize a JUS QUAESITUM TERTIO.

PRIVITY OF CONTRACT. The relation which subsists between two contracting parties. Hamm. on Part. 182.
     2. From the nature of the covenant entered into by him, a lessee has both privity of contract and of estate; and though by an assignment of his lease he may destroy his privity of estate, still the privity of contract remains, and he is liable on his covenant notwithstanding the assignment. Dougl. 458, 764; Vin. Ab. h.t. 6 How. U. S. R. 60. Vide Privies.

References in periodicals archive ?
Thus, the principled exception to the doctrine of privity was born.
While it is commonplace to refer to this protection as an exception to the doctrine of privity of contract, (19) it is submitted that this is an incorrect characterization.
As noted above, (23) Justice Iacobucci stated that the principled exception to the doctrine of privity of contract will be available where (a) the parties intend to extend the contractual benefit to the third party and (b) the third party performs the very activities contemplated as coming within the scope of the contract.
All of these have been posited as possible points of crystallization by those seeking to reform the doctrine of privity.
Simply to abolish the doctrine of privity or to ignore it, without more, would represent a major change to the common law involving complex and uncertain ramifications.
Thus, any rationale put forward to explain the principled exception will have to elucidate why it allows for this incremental change yet simultaneously does not swallow the whole of the doctrine of privity or any other fundamental rules of contract law.
Closely related to the doctrine of privity, but conceptually distinct, is the rule that consideration for a promise must move from the person entitled to sue or rely on that promise.
What about the argument that in situations like London Drugs the intentions of the parties would be frustrated if the strict doctrine of privity were upheld since the promisor would be allowed "to circumvent or escape the limitation of liability clause to which it had expressly consented"?
It seems fundamentally unfair, and anomolous in the extreme, to allow the manufacturer to hide behind the doctrine of privity when the product, which it induced the purchaser to buy, turns out to be worthless.
Essentially, there are four lines of authority that have eroded the strict doctrine of privity.
The doctrine of privity of contract in accountants' negligence cases has undergone considerable erosion since Chief Judge Cardozo first held its applicability in the 1931 Ultramares case.

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