This doctrine is to the effect that only a person who is party to a contract can sue or be sud on it. It means that only a person who has provided consideration to a promise can sue or be sued on it. It means that a stranger to consideration cannot sue or be sued even if the contract was intended to benefit him. It was so held in Scruttons Ltd v. Midland Sillicones Ltd. In Price Easton, X agreed to pay the plaintiff a sum of money if Y did some work for him. Y rendered the services to X but X did not honour the promise to pay.
The plaintiff sued to enforce the promise. It was held that the promise was unenforceable as the plaintiff was not a party to the transaction. He had provided no consideration. A similar holding was made in Dunlop v. Selfridge as well as in Tweddle v. Atkinson.
However in certain circumstances, persons who are not party to a contract or who have not provided consideration may sue or be sued on it.
These are exceptions to the Doctrine of Privity of Contracts
In an agency relationship, the agent contracts on behalf of the principal. The principal is not directly involved in the transaction. However the principal may sue or be sued on a contract entered into by the agent. This exception is more apparent than real as in law the agent represents the principal.
- Legal Assignment
Under the provisions of the ITPA4 if a creditor assigns his debt to another person in a legal assignment the assignee becomes entitled to sue the debtor as if he were the original creditor.
- Negotiable Instruments
A holder of a negotiable instrument can sue on it in its own name not withstanding the absence of consideration provided a previous holder of the instrument gave some consideration.
This is an equitable relationship whereby a party expressly impliedly or constructively holds property on behalf of another known as the beneficiary. In certain circumstances, the beneficiary can sue or be sued under a trust.
- Third Party Insurance
Under the provisions of the Insurance (Motor Vehicles Third Party Risks) Act5, , victims of motor vehicle accidents are entitled to compensation by Insurance companies for injuries sustained from the use of motor vehicles on the road.
However the insurer is only liable if the motor vehicle was in the hands of the insured or some authorized driver. If the authorized driver pays the amount due to the victim for the injury, such amount is recoverable from the insurer but through the insured as was the case in Kayanja v. NewIndia Insurance Co. Ltd.
- Restrictive Covenants (Contracts running with land)
In certain circumstances, certain rights and liabilities attached to land are enforceable by or against subsequent holders of the land. This is particularly the case in the law of leases