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Privity of contract is a legal concept applicable principally to contracts involving the sale of goods or services. Privity of contract occurs only between the parties to a contract. A third party which, benefits under a contract does not have the right to proceed legally against the parties to the contract for entitlement in excess of its benefits as provided in the contract…
This facet of the rule became a hindrance, where the contract was made to the benefit of the third party. Collateral warranties support the viability of this rule.
Prior to 1833 there existed decisions in English Law, which permitted enforcement of the provisions of a contract by persons not party to the contract. The doctrine of privity emerged together with the doctrine of consideration, which states that consideration must move from the promisee. That is if nothing is given for the promise of something to be given in return, that promise is not legally binding unless promised as a deed.
In the case of Price v Easton, where a contract was made for work to be done in exchange for payment to a third party. When the third party attempted to sue for the payment, he was held to be not privy to the contract, and as such his claim failed1.
This was completely linked to the doctrine of consideration and was established by the case of Tweddle v Atkinson, where the plaintiff was unable to sue the executor of his father-in-law, who had promised to the plaintiff's father to make payment to the plaintiff, because he had not provided any consideration to the contract. The husband's claim against his father - in - law's estate was dismissed on the grounds that no consideration had moved from the husband2.
The doctrine was further developed ...
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