Question

Explain the concept of privity of contract and two exceptions to this legal concept.

Answer 1

Privity of contract is the law which commonly provides the principle that says that a contract cannot give any right to any person (s) who is not a part of the contract, at the same time it also does not impose any obligation to any person (s) who is not a part of the contract. In short privity of contract is limited only to the persons who are party to the contract in terms of giving any right or imposing obligations; it does not impact any person in terms of giving any right or imposing obligations who are not party to the contract.

There are a few exceptions to this legal concept; two out of those exceptions are given as under:

• A third party may sue the seller or the manufacturer if it is getting adversely affected by flaws in the goods being defective.
• A third party may sue the insurance company if it is getting adversely affected due to accident caused by an insured automobile provided the court rules in favour of automobile owner.