| Introduction | | | | and all parties agree that C will pay the money to |
| The doctrine of privity of contract is the | | | | B, not A, B’s consideration to C is agreeing |
| relationship that exists between parties to a | | | | to release A from his obligations and A’s |
| contract. Only those parties to the contract are | | | | consideration is providing the new debtor, C. |
| bound by it and are able to enforce the | | | | Assignment |
| contractual obligations under the contract. The | | | | Novation can be distinguished from assignment. A |
| concepts of novation and assignment, although | | | | party to a contract (the assignor) is able to |
| not exceptions to this rule, are contrary to the | | | | transfer the benefit of a performance he is to |
| principles outlined in it and have developed to | | | | receive under that contract to another person |
| overcome restrictions imposed by the doctrine. | | | | (the assignee) who is able to enforce |
| | | | performance in his own right, without the consent |
| Privity of Contract | | | | of the other party (the debtor). For example, |
| The principle that a person can not enforce | | | | where there is a contract between A and B and |
| obligations under a contract to which he is not a | | | | B assigns the benefit of the contract to C, he can |
| party to was established in the case of Tweedle | | | | then enforce it against A. |
| v Atkinson (1861) 1 B. & S. 393 where A | | | | With regards to the assignment of the burden of |
| promised B that he would pay a sum of money | | | | a contract, the general rule is that this can not be |
| to B’s son, C upon his marriage to | | | | done unless the creditor consents, as Collins MR in |
| A’s daughter. It was held that C could not | | | | Tolhurst v Associated Portland Cement |
| enforce the promise made by A to B to pay him, | | | | Manufacturers (1900) Ltd [1902] 2 KB 660 at 668, |
| as he was not a party to the contract. | | | | stated: “It is, I think, quite clear that neither |
| This was re-affirmed in the case of Dunlop | | | | at law nor in equity could the burden of a |
| Pneumatic Tyre Co Ltd v Selfridge & Co Ltd | | | | contract be shifted off the shoulders of a |
| [1915] A.C 240, 246 where Viscount Haldane LC | | | | contractor on to those of another without the |
| stated that “ … in the Law of England | | | | consent of the contractee. A debtor cannot |
| certain principles are fundamental. One is that only | | | | relieve himself of his liability to his creditor by |
| a person who is a party to a contract can sue on | | | | assigning the burden of the obligation to |
| it”. The leading modern authority is Beswick | | | | somebody else; this can only be brought about by |
| v Beswick [1968] A.C 58. | | | | the consent of all three, and involves the release |
| Despite the volume of case law which re-affirms | | | | of the original debtor.” |
| this principle, the doctrine has been, and remains, | | | | Conclusion |
| the subject of judicial debate proving to be far | | | | As it stands, the doctrine of privity of contract is |
| from popular as demonstrated in Darlington | | | | still an integral part of the principles which govern |
| Borough Council v Wiltshier Northern Ltd [1195] 1 | | | | the law of contract. In recent years, the |
| WLR 68, 76, where Steyn LJ expressed his | | | | strictness of the principle has been alleviated by |
| dissatisfaction of the rule and the many | | | | the Contracts (Rights of Third Parties) Act 1999. |
| inconveniences it caused. | | | | Contracts (Third Party Rights) Act 1999 has |
| Novation | | | | relaxed the operation of the doctrine so that a |
| The concept of novation derives from Roman | | | | person or class of persons are able to enforce a |
| Law and is where all liabilities and obligations under | | | | contract without being a party to it where the |
| a contract, whether it is the transfer of the | | | | contract confers a benefit on them; alternately, |
| benefit or burden of a contract, can be passed to | | | | the contract may expressly provide for the |
| a third party providing that all parties consent. | | | | benefit of third parties. The effect of this Act is |
| Where this happens, the original contract between | | | | usually excluded in professionally to avoid contract |
| the debtor and creditor is annulled and is replaced | | | | disputes with persons not party to the |
| by a new contract between the debtor and the | | | | agreement. |
| third party. Consideration must be provided in | | | | The concept of novation and assignment may be |
| respect of the new contract and is usually | | | | catered for in the contract itself as a way of |
| assumed to be the discharge of the original | | | | circumventing the limitations of privity of contract, |
| contract and the creditor’s contractual | | | | although they are not considered exceptions to |
| obligations. For example, where A owes B money | | | | the rule per se. |