Meaning of the term “privity of contract” and the exception

This phrase means that only a person who is party to contract can sue or be sued on it. Dunlop V. Selfridge.
It means that by providing consideration a person becomes party to a contract. Tweddle V.Atkinson.
It means that a stranger to a contract cannot sue or be sued on it even if it was entered into for his benefit Scruttons Ltd V. Midland Sillicones Ltd.
However there are several exceptions to this rule where persons who have not provided consideration or are not privy to a contract can sue or be sued on it.

  • Agency relationship
  • Legal assignment
  • Trust relationship
  • Covenants running with land
  • Third Party motor insurance.
  • Negotiable instruments.
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