The principles related to the privity of contract have been under considerable scrutiny in the past years. Essentially, the doctrines related to privity concerns the issues relating to third parties. Specifically, it claims that an individual cannot have any rights or put into effect any right found on a contract which he/she is not considered a party. In the same manner an individual who is not considered a party to a contract will not be liable to any concerns relating to it. In looking at the accepted definition of the privity doctrine, there seem some discrepancies that need to be addressed. The following discussions will attempt to establish a set of arguments in opposition to the implementation of the doctrine.
II. Arguments against the Privity Doctrine Being out of DateThere are several major arguments that need to be addressed in the doctrine of privity. These include the importance of the privity doctrine in determining who would enforce the contract; protection of the integrity of a contract being a private transaction; and possible injustices held in relation to the capabilities of the third party. These four are to be expounded in the subsequent parts. Certain laws applicable will be taken into consideration such that the arguments will be supported.
A. Third Party and Consideration
In contract law, it is an established tenet that consideration should be present in any legal relationship. This being said, one could therefore deduce that a third party cannot take any benefit whatsoever in the contract, given that he has not given any consideration on it. On its plane, it is just logical that a third party given a better legal position in the context of contracts as compared to the promisor and the promisee is essentially unreasonable given that the two latter parties has provided consideration in the agreement.
Nevertheless, in certain jurisdictions the third party could acquire rights in the contract provided that they are covered by law. Specifically in Australia, s55 of the Property Law Act 1974 (Queensland), s56 Law of Property Act 2000 (Northern Territory), s11(2-3) of the Property Law Act 1969 (Western Australia), provides the third party the capability to enforce the contract if they were named in the contract itself. This means for Third Parties to have any right in implementing the terms of the contract, then they have to be actually named. Thus, the doctrine of privity is not out of date. It only appears to be because it is often misconstrued as the consideration rule. There is a difference. The doctrine of privity is still a superior in determining the people who should implement the contract, as seen in the legislation above those named should be the ones having the right to do so. On the other hand, the rule of consideration the actual promises that should be enforced. This means as the lack of consideration is a valid argument against the privity doctrine provided that they are two separate principles. The presence of the Acts such as those above provides a venue in where the privity doctrine could be contested.
B. Contracts as Private Transactions
Essentially, contracts are indeed a private and personal transaction between the parties involved. The presence of consent (offer and acceptance) is essential in determining the actual existence of a legal relationship bound by contract. Thus, in the context of the third party, it is perceptible that he/she should not have any rights on the contract.
However, in analysing the creation of consent in contractual relationships, it is done not so much as to preclude others from acquiring benefit from the terms held in it. The existence of us is to establish protective legal armour for the autonomy of the contracting individuals. It seeks to protect the intention of the contracting parties in enforcing an agreement. Thus, in instances where, as stated above, third parties are given the ability to benefit in the contract, then it still does protect the autonomy of the parties involved, and consequently maintains the transaction still as a personal one. Nevertheless, as stated in the case of Trident General Insurance Co Ltd. v McNiece Bros Proprietary Ltd. [1988] 165 CLR 107 at 123, 117-118, there should be established that it is the intention of the parties involved to provide the third party power of enforcing the terms indicated in the contract. This claimed under the credence of s55(6) of the Property Law Act 1974 (Queensland) and s55(6) of the Law of Property Act 2000(Northern Territory). It means that there should be an expressed intention among the parties involved. In Western Australia on the other hand, an implied intent to enforce the third party is sufficient. (Western Farmers v Southern Meat [1981] WAR 241)
C. Capability of Third Party to Sue
There is the longwinded argument against the privity doctrine that it favours the third party because the third party could take legal actions against the promisor but the promisor is not authorised to take legal action against the third party. In looking at this scenario, the doctrine of privity appears to present a situation where a degree of protection is given to those not part of the contract from any unjust legal actions. In the case of third party, the problem lies in the capability of the promisor to take reciprocal actions, thus appears to have placed his/her interests in the line. Thus, as the intention of the creation of the contract, interests of the parties involved should constantly be protected. In this context, the inability of the promisor to sue the third party does not compromise his/her interests; in the first place he/she could still protect it by taking legal actions against the promisee.
III. Conclusion
The discussions above has provided arguments against the claim that the doctrine of privity being out of date. The issues presented above indicate that the doctrine continues to protect the parties involved. In the same way, the doctrine has evolved such that laws and legislations have been ratified to meet the flexibility required by the courts. The doctrine of privity does not go out of date. It continues to develop and improve. With the enactment of such laws as Property Law Act 1974 (Queensland) and Law of Property Act 2000 (Northern Territory), then issues relating to privity will continue to grow.
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