⇒ A third party is not under the obligations of a contract

⇒ Privity of contract means that only parties privy (i.e. in the contract) are subject to those rights and obligations in the contract

⇒ There are three parts to privity of contract:

• A 3rd party cannot get a benefit from a contract they are not in
• A 3rd party cannot be sued for a contract they are not in
• A 3rd party cannot enforce any contract they are not in

⇒ Why do third parties have no rights/obligations for a contract they are not in?

• They have made no agreement
• They have provided no consideration

⇒ Dunlop Pneumatic Tyre v Selfridge [1915]: It is “fundamental’ for a party to have agreed and provided consideration if they are a party to a contract

⇒ In Tweddle v Atkinson [1861], it was said that even if the 3rd party has an interest in the contract, he/she will NOT be able to enforce it

⇒ In Beswick v Beswick [1968], it was said that even if a contract gives rights and obligations to a third party they will not be enforced

⇒ Privity of contract can be unfair especially where there is a benefit in the contract for a 3rd party; so there are some exceptions to the doctrine of privity of contract

⇒ Exceptions at common law:

1. Agency
• Agency = Agent (x) contracts with 3rd party (y) and acts on behalf of another party (z)
• There is then an enforceable contract between the 3rd party and the principal





• Lockett v Charles [1938]: Agents can bind the principal legally e.g. estate agents are the agents and not the landlords


2. Assignment
• You can assign your rights/obligations to a third party, particularly if the original contract says so
• In certain cases someone else can fill your role in the contract e.g. continue the tenancy

⇒ Only a party in a contract can get damages

⇒ However, in Jackson v Horizon Holidays [1975] Denning said a third party was able to claim damages. This case was doubted in Woodar Investment Development v Wimpey Construction [1980]

⇒ An additional exception to privity of contract is seen in statute: the Contracts (Rights of 3rd parties) Act 1999

⇒ This Act is essentially created to to help 3rd parties to a contract where there was a benefit for them in that contract

⇒ There are two situations where 3rd parties could enforce a contract:

• s1(1)(a) = If the contract says the 3rd party can enforce it
• s1(1)(b) = If the contract appears to be for the benefit of the third party

⇒ See the case of Dolphin Maritime & Aviation Services Ltd v Sveriges Angfartygs Assurans Forening [2009] and Nishin Shipping Co. Ltd v Cleaves & Co. Ltd [2004]