privity

Privity is a legal principle concerning the relationship between contracting parties and the enforceability of contract rights and obligations. In contract law, privity means that only the parties who enter into a contract may sue to enforce its terms or be bound by them. As a result, a person who is not a party to the contract cannot generally sue on it, even if the contract affects them.

Exceptions and developments exist. Agency law can bind principals and agents in certain circumstances; trusts allow beneficiaries to enforce terms of a trust; assignments and novations can transfer rights; and collateral contracts may permit a third party to enforce terms if they were intended to benefit them. Statutory reforms have altered privity in some jurisdictions. A notable reform is the Contracts (Rights of Third Parties) Act 1999 in the United Kingdom, which permits a third party to enforce a contract if the contract expressly provides for it or if the terms purport to confer a benefit on the third party, subject to conditions. Other jurisdictions have adopted similar mechanisms or alternative approaches, aiming to balance predictability for contracting parties with access to remedies for third parties.

In common law, privity remains a foundational concept, but its practical impact is shaped by these exceptions and by modern commercial practices, where standard form contracts and explicit third-party rights are common. The term is sometimes contrasted with privity of consideration, a related but distinct notion historically concerned with whether consideration moves between the same parties.