Doctrine of Privity of Contract

Law of Contract

Table of Contents
“In a contractual relationship, a party can only take action or be subjected to an action by another
party in the event of breach and under no circumstances shall be liable to any third party who is
not a party of the contract.” With reference to relevant case law, critically analyse the above
statement within the doctrine of Privity of contract.........................................................................1
Doctrine of Privity of Contract...............................................................................................2
Third party beneficiary...........................................................................................................3
Circumstances in which third party can overcome Doctrine of Privity of Contract..............3
Statutory exceptions to the doctrine of privity of contract.....................................................4
Important Case Laws and their decisions...............................................................................5
REFERENCES................................................................................................................................6

“In a contractual relationship, a party can only take action or be subjected to
an action by another party in the event of breach and under no
circumstances shall be liable to any third party who is not a party of the
contract.” With reference to relevant case law, critically analyse the above
statement within the doctrine of Privity of contract.
As per the English Contract Law, a contract can be defined as an agreement which is
entered into by two or more parties which gives rise to emergence of obligations that are
enforced as well as acknowledged by the law (Davies, 2018). As per common law, there are
basically 3 essential conditions for the creation of a contract, namely, agreement, consideration
and contractual intention. The pre requisite to a contract is that the parties must have an
agreement. In this relation, an agreement is made whereby a party gives an offer that is accepted
by other party. In simple words, it can be said that a contract is an agreement taking place
between 2 or more than two parties. Further, a legally binding contract is the one whereby a
voluntary agreement is reached between all the parties to the contract, which holds enforceability
as per statute.
A contractual relationship is built between the parties to a contract only when certain
elements are present within the contracts (Goldberg, 2019). Such elements comprise of
indulgence of 2 or over two individuals, written or oral agreement, exchange relationship, the
prevalence of at least one promise, enforceability. These conditions are discussed in brief manner
as follows:-
Written or oral agreement : This is considered as being one of the most important facets
of a contract. There needs to be a consensual and voluntary relation between the parties. The
agreement made between the parties with free will and intention to get bound by its obligations
needs to be in a written or oral manner.
Indulgence of 2 or over 2 individuals : For the creation of a contract, there must be at
least 2 parties. The maximum numbers of parties within a contract are not confined; they can be
as many as is the requirement of transactions within a contract (O'Sullivan, 2020).
An Exchange Relationship : While entering into the agreement, the parties are
acknowledged to bind themselves to one another for the unified goal of the contract. Therefore,
there must be a relationship for a contract to exist between the parties. The most important
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