NAME: AQIF IQBAL BIN SHAIPUDDIN

CLASS: AP1166F

TUTORIAL 1 BGN342

Question: Privity of contract in relation to construction industry

Answer: In the construction industry, privity of contract is essential for establishing legal
responsibilities and relationships between every participant engaged in a project. Basically,
privity of contract means that parties bound by a contract have a direct relationship with each
other. In most cases, the main agreement is made between the contractor doing the
construction and the client, who is frequently the property owner. This contract outlines the
terms of payment, the project's specifications, the scope of work, and other important
information that will guide the project's implementation. Even though they are essential to the
project's success, suppliers and subcontractors are not covered by this principal contract.
Instead, they define their roles, duties, and terms of compensation in separate agreements that
they sign with the principal contractor.
When it comes to building, the owner-client and main contractor have the primary contractual
relationship. The terms of the construction project are outlined in this contract, including the
work to be done, deadlines, payment plans, and criteria for quality. This contract only directly
binds the contractor and the consumer, and they are the only parties that may enforce its
terms against one another. Instead of signing contracts with the owner, subcontractors and
suppliers frequently do so with the main contractor. "Derivative privity" or "indirect privity"
is the second level of privity created by these agreements. The primary contract between the
contractor and the owner does not include subcontractors or suppliers; rather, agreements
with the contractor derive their rights and responsibilities from it.

In conclusion, all parties involved in the construction sector must comprehend the nuances of
privity of contract to control risks, handle legal complexity, and guarantee fair treatment
throughout the project lifespan. Although privity restrictions may present difficulties for
subcontractors and suppliers, proactive contractual discussions and the use of alternative legal
remedies enable them to protect their rights and preserve their interests within the
construction industry.