Legal Dictionary of Pakistan

privity of contract

The relationship between the parties to a contract, allowing them to sue each other but preventing a third party from doing so. ( The requirement of privity has been relaxed under modern laws and doctrines of implied warranty and strict liability, which allow a third-party beneficiary or other foreseeable user to sue the seller of a defective product. "To many students and practitioners of the common law priuity of contract became a fetish. As such, it operated to deprive many a claimant of a remedy in cases where according to the mores of the time the claim was just. It has made many learned men believe that a chose in action could not be assigned. Even now, it is gravely asserted that a man cannot be made the debtor of another against his will. But the common law was gradually influenced by equity and by the law merchant, so that by assignment a debtor could become bound to pay a perfect stranger to himself, although until the legislature stepped in, the common-law courts characteristically made use of a fiction and pretended that they were not doing that which they really were doing." William R. Anson, Principles of the Law of Contract 335 (Arthur L. Corbin ed., 3d Am. ed. 1919). "It is an elementary principle of English law - known as the doctrine of 'Privity of Contract' - that contractual rights and duties only affect the parties to a contract, and this principle is the distinguishing feature between the law of contract and the law of property. True proprietary rights are 'binding on the world' in the lawyer's traditional phrase. Contractual rights, on the other hand, are only binding on, and enforceable by, the immediate parties to the contract. But this distinction, fundamental though it be, wears a little thin at times. On the one hand, there has been a constant tendency for contractual rights to be extended in their scope so as to affect more and more persons who cannot be regarded as parties to the transaction. On the other hand, few proprietary rights are literally 'binding on the world'." P.S. Atiyah, An Introduction to the Law of Contract 265 (3d ed. 1981)."The doctrine of privity means that a person cannot acquire rights or be subject to liabilities arising under a contract to which he is not a party. It does not mean that a contract between A and B cannot affect the legal rights of C indirectly." G.H. Treitel, The Law of Contract 538 (8th ed. 1991).