1.0 Introduction
2.0 Objectives 3.0 Main Content
3.1 Nature of Privity 3.2 Historical Development 4.0 Conclusion
5.0 Summary
6.0 Tutor-Marked Assignment 7.0 References/Further Readings
1.0 INTRODUCTION
Privity is the relationship that exists between parties to a contract. The rules states that a person who is not a party to a contract cannot enjoy the benefits nor suffer the burdens of that contracts; that is, a stranger (non-party) to a contract cannot sue or be sued on it.
The general rule is that only party to a contract may sue on it. In Dunlop v. Selfridge (1915) A.C. 847. A sold tyres to B & Co. on terms that B & Co. could not resell, B & Co.
resold to Selfridge, S below stated prices. A (Dunlop) sued for a breach.
It was held that Dunlop was a stranger and could therefore not sue on it. Similar decisions were reached in the following cases: Chuba Ikpeazu v. A.C.B Ltd. (1965)NMLR. 374, R.T. Briscoe v. Universal insurance Co. (1966) 2 A.L.R. Comm. 263 and Tweedle v.
Atkinson (supra). In Chuba Ikpeazu v. A.C.B. Ltd. (supra) where the respondent sued a debtor and joined the appellant o the assumption that he was a trading partner and a guarantor to the overdraft in question, it was held by the Supreme Court (in reversing the Lower Court’s Judgment) that a contract cannot be enforced by a person who is not a party, even if the contract is made for his benefit and purports to give him the right to sue upon it.
2.0 OBJECTIVES
At the end of this unit, you should be able to:
• Define or describe what the doctrine of privity of contract is
• Explain the two aspects of the doctrine of privity
• Discuss the strengths and weaknesses of the doctrine of privity.
3.0 MAIN CONTENT
3.1 NATURE OF PRIVITY
A contract cannot confer enforceable rights or impose obligations arising under it o any person, except parties to it. Thus, only parties to a contract can sue on it. It also follows that only those who has furnished consideration toward the formation of the contract can bring an action on it. The classical exposition of the principle is contained in the Lord Haldene’s judgment in Dunlop v. Selfridge (1915) AC 847, at p. 853.
My lords, in the law of England, certain principle are fundamental. One is that only a person who is party to a contract can sue on it. Our law knows nothing of a jus qua estitum tertio arising by way of contract. Such a right may be conferred by way of property, as for example, under a trust, but it cannot be conferred on a stranger, to a contract as a right in personam to enforce the contract.
Thus, the doctrine of privity is to the effect that a contract cannot confer enforceable rights or impose obligations under it on any person except parties to it. Accordingly, only those who has furnished consideration towards the formation of a contract can institute an action on it.
However, it does not follow that a contract can not affect the legal rights of a third party to it indirectly. Therefore, the non-party may have some other cause of action (e.g. in tort) arising from the contract. For example, such a contract may operate as a license to the third party to be on the premises, hereby raising a duty of care in tort between him and them.
In Driver v. William Wilet Contractors Limited (1969) 1 All ER 655, in the case, a safety consultant employed by X was to held to owe a duty of care to X’s servant.
Also, this common law rule does not indicate that a third party cannot by his action benefit either of the parties to a contract. For instance, if a owes money to B and C pays off the debt, C a non-party has by his benefit one of the contracting parties, A.
The doctrine can be summarized as follows:
a. A person cannot enforce right under a contract to which he is not a party.
b. A person who is not a party to a contract cannot have contractual liabilities imposed on him.
c. Contractual remedies are designed to compensate parties to a contract, not third parties.
It should be noted from the above that the scope of the doctrine is to prevent the third party from being entitled to enforce rights or rely on defenses which arise only under a contract between two parties. Also, the privity doctrine prevents a contract from being enforced in favour of, or against someone who is not privity to it.
3.2 HISTORICAL DEVELOPMENT OF THE DOCTRINE
English legal system was first to adopt the Doctrine of Privity of Contract. In the middle of 19th century, the common law judges came to a decisive conclusion on the scope of contract can sue it. Accordingly, this was not the case in the earlier common law, the principle was not accepted universally. As a matter of fact, in the middle ages the action for debt and account was readily available to third parties who wished to reap the benefit of an arrangement made by others on their behalf. And so it happened that there, the Doctrine of Privity was established in it present form, there was as conflict of authority
on the question whether a person could enforce a Contract to which he was not a party. In some cases decided in the 17th and 18th centries such as Crow v. Roggers (1754) 1 STR 592. In the case, Hardy owed Crow £70. By an agreement between Hardy and Roggers, roggers promised to discharge his debt in return for Hardy undertaking to convey a house to him. Crow sued Roggers on his promise and failed. It should be observed that the reason why the court gave judgment against the plaintiff was because he was a privity to the contract.
However, it should be noted that this doctrine is not closed to this circumstances, there are some case where judgment was given in favour of third party.
In Dutton v. Poole (1677) 2 LEV 201, in this case. A father wanted to sell his property to generate money for his kids, but his eldest child promise to pay £1,000 each to the younger kind and asked is father not to sell his belongings. He default and one of these children sued. And the suit was allowed. However, in 19th century. The principle of privity was properly laid down in 1915 in the landmark case of Dunlop v. Selfridge (1915) AC 847 and the doctrine of privity became firmly established.
4.0 CONCLUSION
In this unit we learnt about the doctrine of privity of contract, incapacity to enter into contract, contracts for necessaries, beneficial contracts of service, void, voidable and unenforceable contracts and recovery of property paid or handed over in a non-binding contract. You are now in a position say what the doctrine of privity is about, explain its two aspects with illustrations and by reference to decided cases.
Similarly you can establish what contracts for necessaries and beneficial contracts of service are and why trading contracts are treated differently from contracts of employment.
5.0 SUMMARY
We discussed the nature of privity of contract. We have also discussed the historical development of privity of contract. At the end of this module you should be able to explain the general principle of privity of contract and give the historical account.
6.0 TUTOR-MARKED ASSIGNMENT Write short note on the following:
1. Nature of Privity
2. Give a detail account of the historical development of privity of contract
7.0 REFERENCES/FURTHER READINGS
OLUSEGUN YEROKUN, Modern Law of Contract, 2nd ed., Nigerian Revenue Project Publishers (2004)
T.O DADA, General Principles of Law, 3rd ed., T.O. Dada & Co. (2006)
I.E. SAGAY, Nigerian Law of Contract, 2nd ed., Spectrum Law Publishing (2001)
TREITEL, G.H The law of Contract, 7th ed, London: Sweet and Maxwell (2007)
M.C. OKANNY, Nigerian Commercial Law, Revised Ed., Africana First Publishers Plc (2009)