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The doctrine of privity of contract is a legal principle that establishes that only parties to a contract can sue or be sued for breaches of that contract. This means that individuals who are third parties to the contract, who may have been affected by the contract in some way, cannot bring any legal action against the parties involved in the contract.
However, there are some exceptions to the doctrine of privity of contract, and in this article, we will be discussing a few of them.
1. Trusts
One of the exceptions to the doctrine of privity of contract is in the case of a trust. A trust is a legal relationship where one party, the trustee, holds assets for the benefit of another party, the beneficiary. In this case, even though the beneficiary is not a party to the contract between the trustee and the third party, the beneficiary can sue the third party if the contract breaches the terms of the trust.
2. Assignment of a contract
Another exception to the doctrine of privity of contract is the assignment of a contract. In this case, a contract can be transferred from one party to another party. When a contract is assigned, the assignee becomes a party to the contract, and therefore, they can sue or be sued for any breach of the contract.
3. Collateral contracts
A collateral contract is a separate contract made between a third party and one of the parties involved in the original contract, which guarantees the performance of the original contract. In this case, the third party can sue the party that they made the collateral contract with if they fail to perform their obligations under the original contract.
4. Statutory exceptions
There are also some statutory exceptions to the doctrine of privity of contract. For example, in the UK, under the Consumer Rights Act 2015, consumers can bring legal action against anyone involved in the manufacturing or supply chain of a faulty product, even if they were not a party to the original contract between the manufacturer and the retailer.
In conclusion, while the doctrine of privity of contract is an essential legal principle, there are some exceptions to it. These exceptions provide some protection to third parties who may have been affected by a contract but were not party to it. When dealing with contracts, it is essential to be aware of these exceptions and the legal implications they may have.
