TOPIC 6: PRIVITY OF CONTRACT

SLW 105

SR.KILATU-LSOSF
Privity of Contract definition,
rationale and historical development
• The Definition of Privity of contract means only the
parties to the contract can enforce the contract or
take action against it.
• It is the relation which exists between the parties to a
contract which enable one person to sue another on it
• The rationale is that only contracting parties have
accepted the terms and responsibilities stipulated in
the agreement.
• A person who is not a party to the contract but
perceives some benefits from the contracts is not
entitled to take any enforcement action.
SR.KILATU-LSOSF
 Historical development of the Principle of
Privity of Contract
• Before 1833, there were decisions in
English law allowing persons not part to
contract to sue.
• The Doctrine of Privity of Contract
emerged alongside the Doctrine of
Consideration, the rule of which states
that “Consideration must move from the
promisee.
SR.KILATU-LSOSF
 Cont...
• In Tweddle v.Atkinson[1861]123 E.R 762, the doctrine
was linked with consideration. The plaintiff was unable
to sue the executor of his father in law who had
promised to the plaintiff’s father to make payment to
the plaintiff because he had not provided
consideration.
• The doctrine was developed further in Dunlop
Preumatic Tyre Co. v.Selfridge Co[1915]A.C 847 it was
held that there was no contract between Selfridge and
Dunlop hence Dunlop could not sue for 5 pound for
each Tyre sold below the listed price by Selfridge

SR.KILATU-LSOSF
 Cont...
• The holding was based on two principles
i) only a person who is part to a contract can sue
to it
ii) in order to enforce a single contract a person
must provide consideration.
• Privity to contract also contributed to
development of the principle of negligence.

SR.KILATU-LSOSF
 Cont...
• Beswick v Beswick [1966]3All ER 1 C.A where the
deceased agreed with the company that that the
company should employ him as a consultant and
also the company should pay his wife E5 per week
if he dies, so when he dies the wife claim for it in
two grounds, firstly she is a beneficiary of E5 and
secondly she was administrator of her husband
estate.
• It was held that as administrator the widow could
only be successful under the strength of the
executor but not as a wife because she was not
part to the contract.
SR.KILATU-LSOSF
 Relationship with the doctrine of
consideration
• The relationship of the doctrine of Privity
of Contract with the doctrine of
consideration is that consideration must
move from a promisee.
• Moreover, only a person who has
provided consideration can enforce a
promise.

SR.KILATU-LSOSF
 The Position under the LCA
• In Tanzania we assume the position
under common law and Indian Law.
• The LCA is silent in the matter;
• Section 2(1)(d) of the LCA a 3rd part is
allowed to furnish consideration for the
promisee but not to sue on the contract
on the ground that he furnished
consideration.

SR.KILATU-LSOSF
Its applicability in customary law
contracts.
• In Tanzania the rule of Privity of Contract does not
apply in Customary law.
• In Ephraim Obongo v. Naftael Okeyo (1968) HCD
286 , where by the defendant, a lorry owner, used
to collect cassava from plaintiff for selling. On one
occasion, his lorry driver and turn boy went to
plaintiff to collect some bags of cassava. Plaintiff
refused to deliver the goods, demanding that they
first produce some empty cassava bags which they
had evidently taken another day, or some money

SR.KILATU-LSOSF
 Cont...
• They returned to defendant’s wife, who gave
them 24 bags and T.shs. 190/-, and sent a not
promising that everything would be taken care
of when her husband returned from a journey.
Plaintiff received no more money, and sued in
Primary Court for the value of the cassava he
had given them, and for some other empty
bags not returned, less the money and bags
received.

SR.KILATU-LSOSF
 Cont...
• The Primary Court held that since the transaction
leading to the disputes was between plaintiff and
the defendant’s wife the proper party to the suit
was the defendant’s wife and not the defendant.
On that ground he dismissed the suit.
• The case went on appeal to the District court and
then to the High Court. Seaton J observed that
the case involved an issue of privity of contract, a
contract rather subtle and technical point which,
perhaps Primary Court couldn’t deal with.

SR.KILATU-LSOSF
Exception to the privity rule
• Trust-the beneficiary of a trust can sue the
trustee to carry out the contract.
• Agency- a principal will be bound by contract
made by every action done by the agent with the
3rd part even if his existence is not revealed.
Principle can sue in his own name
• Negotiable instrument- Under the Bill of
Exchange Act, a holder of a bill can sue on the bill
in his own name.
• Insurance-3rd part may claim under insurance
policy. see SeeTarlock Case
SR.KILATU-LSOSF
 Cont...
• In Tarlock Singh Nayar v. Sterling
General Insurance Co. Ltd(1966) E.A 144
in this case the issue was whether a
driver could sue for insurance by his own
name. It was held that the driver can not
sue on the contract since he is the
stranger to the contract, even though the
insurance covered him as well.

SR.KILATU-LSOSF
 Cont...
• Land law- any subsequent purchase of
the land is bound by all the covenants of
the original owner of the land.
• Tort law/Liability- under the principle of
negligence a 3rd part can sue for his or
her injury.
• Any part can sue for his injury regardless
of not being the part.

SR.KILATU-LSOSF
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