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Contract Law, Basic Principle of

Privity of Contract
Last updated: 06-Oct-2014

The common law doctrine of privity of contract provides as a general rule (which is said one can trace down to at least the thirteenth century) that contract cannot be enforced either by or against third parties. Over the years this rule was a source of some controversity and applied by the courts with a number of exceptions (the device of a trust of a promise, the doctrine of agency).

In Tweddle v Atkinson [1861] EWHC QB J57 Crompton J stressed in his judgement that the main objection to the appellant’s argument is the ‘monstrous proposition’ to give to the outsider to contract the right to sue under this contract and still retain position of not being sued:

The modern cases … shew that the consideration must move from the party entitled to sue upon the contract. It would be a monstrous proposition to say that a person was a party to the contract for the purpose of suing upon it for his own advantage, and not a party to it for the purpose of being sued.

Dunlop Pneumatic Tyre Co Ltd v Selfridge and Co Ltd [1915] AC 847 per Viscount Haldane LC:

My Lords, in the law of England certain principles are fundamental. One is that only a person who is a party to a contract can sue on it. Our law knows nothing of a jus quaesitum tertio (lat. third party right of action) 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 to enforce the contract in personam. A second principle is that if a person with whom a contract not under seal has been made is to be able to enforce it consideration must have been given by him to the promisor or to some other person at the promisor’s request. These two principles are not recognized in the same fashion by the jurisprudence of certain Continental countries or of Scotland, but here they are well established. A third proposition is that a principal not named in the contract may sue upon it if the promisee really contracted as his agent. But again, in order to entitle him so to sue, he must have given consideration either personally or through the promisee, acting as his agent in giving it.

Scruttons Ltd. v Midland Silicones Ltd. [1962] AC 446 by Lord Reid:

I find it impossible to deny the existence of the general rule that a stranger to a contract cannot in a question with either of the contracting parties take advantage of provisions of the contract, even where it is clear from the contract that some provision in it was intended to benefit him. That rule appears to have been crystallised a century ago in Tweddle v Atkinson [1861] EWHC QB J57; (1861) 121 ER 762 and finally established in this House in Dunlop Pneumatic Tyre Co Ltd v Selfridge and Co Ltd [1915] AC 847.

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