Privity of contract

Privity of contract provides that a contract cannot confer rights or impose obligations on persons not party to the contract.

The doctrine has proven problematic due to its operation to exclude legal remedies for third parties in cases where contracts were formed for their benefit.

Privity of contract was formally entrenched following the case of Tweddle v Atkinson (1861). However, doubt was cast upon the scope of its operation in Australia in Trident General Insurance Co Ltd v McNiece Bros Pty Ltd (1988).

In that case, the third party was allowed to obtain the benefit by examination of the commercial reality, and the Court made a point of highlighting the unjust operation of the privity of contract doctrine.