Privity of contract 63Privity of contract
The doctrine of privity of contract holds that a contract is private between the parties
who made it. Anyone who did not make the contract cannot sue on the contract or be
sued on it. The Contracts (Rights of Third Parties) Act 1999 has created an exception to the
privity rule. However, privity is perhaps best understood if it is considered before the effect
of the 1999 Act is considered. The following case provides a classic example of the privity
rule.
The privity rule was affirmed by the House of Lords in the following case.
Figure 2.5 shows how privity operated in Tweddlev Atkinsonand Dunlop Pneumatic
Tyre Co Ltdv Selfridge & Co Ltd.
Privity could cause particular injustice when one person bought unsafe goods or services
on behalf of another. The following case provides an example.
Tweddle vAtkinson (1831)William Guy and John Tweddle made a contract with each other that William Guy would
pay the claimant £200 and in return John Tweddle would pay the claimant £100. The
claimant was the son of John Tweddle, who was marrying the daughter of William Guy. The
contract between William Guy and John Tweddle said that the claimant should be able to
sue either of them to enforce the contract. John Tweddle paid the money he had promised
to pay but William Guy died before paying the money he had promised. The claimant sued
William Guy’s personal representatives to make them pay. The personal representatives
took over William Guy’s affairs and would have had exactly the same obligation to pay as
William Guy would have had.
HeldThe claimant could not sue on the contract because he did not make the contract.Dunlop Pneumatic Tyre Co Ltd vSelfridge & Co Ltd (1915) (House of Lords)Dunlop sold car tyres to Dew & Co, who were dealers in motor accessories. In return for
being given a 10 per cent discount on the price, Dew & Co agreed that they would obtain
a written undertaking from any person to whom they resold the tyres that the tyres would
not be sold below a certain price. Dew & Co resold the tyres to Selfridge & Co. Dew & Co
gave Selfridge & Co a discount on the price of the tyres in return for the written agreement
not to resell below the agreed price. Selfridge & Co resold the tyres below the agreed price
and Dunlop sued them on the written agreement not to do this.
HeldDunlop could not sue Selfridge on the agreement as there was no contract between
them. Dunlop had given no consideration to Selfridge & Co in return for the promise not to
sell below the agreed price. The discount which Selfridge & Co had been given in return for
their agreement had been given by Dew & Co and not by Dunlop.