Explain privity of Contract

Question

What do you mean by privity of Contract?

Answer 1

In general, the privity of contract rule stipulates that a contract does not confer any benefits or place any obligations on a 3rd party. This type of 3rd party could also be banned from suing on the contract. Outlines the rationale for the privity rule and some of the reasons why the courts have found it to be problematic.

1. Only the people who create the contract should have a say in its disposition.

2. Third parties have not given consideration.

3. The rule prevents undue numbers of lawsuits on a single contract.