UNIT 6

MEANING OF THE DOCTRINE OF PRIVITY

The doctrine of privity of contract is a common law principle which states that only parties to a contract are bound by and can enforce the terms of the contract. In other words, a contract cannot confer rights or impose obligations arising under it on any person except the parties to it. This doctrine ensures that third parties who are not part of the contract cannot sue or be sued under the contract. See the case of Makwe v. Nwukor (2001) 14 NWLR (Pt. 733) 356 which reaffirmed the principle that only parties to a contract can sue or be sued on it.

NATURE OF THE DOCTRINE OF PRIVITY

The doctrine of privity is rooted in the principle that a contract is a private agreement between the parties who have entered into it. It ensures that only the parties who have provided consideration are entitled to enforce the contract. The consideration is the price one party pays for the promise of the other, and it is fundamental to the enforceability of the contract. This doctrine is a cornerstone of contract law, reflecting the individualistic nature of contractual obligations. See the case of Thomas v. Olufosoye (1986) 1 NWLR (Pt. 18) 669 where the Supreme Court held that a contract cannot confer rights or impose obligations arising under it on any person except the parties to it.

OPERATION OF THE DOCTRINE OF PRIVITY

This doctrine operates to ensure that contractual rights and obligations remain within the parties who have expressly agreed to them, thereby preserving the sanctity of the contractual relationship. See the case of Shuwa v. Chad Basin Development Authority (1991) 7 NWLR (Pt. 205) 550 which highlighted that a third party cannot claim benefits under a contract to which they are not a party. The operation of the doctrine of privity means that:

1. A third party cannot enforce a contract, even if the contract is made for their benefit.
2. A third party cannot be held liable under the contract.
3. A contract cannot be enforced against a third party.

APPLICATION OF THE DOCTRINE OF PRIVITY

The doctrine of privity applies in various contractual scenarios. See the case of Dunlop Pneumatic Tyre Co. Ltd. v. Selfridge & Co. Ltd. [1915] A.C. 847 which illustrate the application of privity. They include the following:

1. Contract of sale: this is where only the buyer and seller are bound by the terms of the sale.
2. Insurance contracts: this is where the insured and the insurer are the primary parties, and third parties cannot claim benefits unless specified.
3. Construction contracts: this is where the contract between the owner and the contractor cannot be enforced by a subcontractor who is not a party to the original contract.

RULES OF THE DOCTRINE OF PRIVITY

See the case of Ikpeazu v. African Continental Bank Ltd (1965) NMLR 374 which established that only a person who has provided consideration can sue on a contract. They inlcude the following;

1. Only parties to a contract can sue: this is where only those who are parties to the contract can sue to enforce its terms.
2. Third parties cannot be sued: this is where individuals who are not parties to the contract cannot be held liable under the contract.
3. Consideration must move from the promisee: this is where the party seeking to enforce the contract must have provided consideration.

EXCEPTIONS TO THE DOCTRINE OF PRIVITY

Despite its strict nature, there are exceptions to the doctrine of privity and they include the following:

1. Agency: this is where an agent can enter into a contract on behalf of a principal, and the principal can enforce the contract. See the case of Tinubu v. Ojo (1990) 1 NWLR (Pt. 139) 392 where the principal can sue on contracts made by an agent.
2. Trusts: this is where a beneficiary of a trust can enforce the trust, even though they are not a party to the contract. See the case of Otunba Adedeji v. National Bank of Nigeria Ltd. (1989) 1 NWLR (Pt. 96) 212 where trust beneficiaries can enforce the trust.
3. Covenants running with land: These covenants can bind successors in title to the land. See the case of Afolabi v. Adekunle (1983) 8 SC 98 where covenants that run with the land can be enforced by successors.
4. Statutory exceptions: this is where certain statutes provide for third-party rights. See section 1(1) of the Contracts (Rights of Third Parties) Act 1999 (applicable in some contexts through judicial decisions) which provides for third-party enforcement rights under certain conditions.
5. Collateral contracts: this is where a collateral contract may allow a third party to enforce a promise made in consideration of their own promise. See the case of Shanklin Pier Ltd. v. Detel Products Ltd. [1951] 2 KB 854 which is often cited in Nigerian courts regarding collateral contracts.

CONCLUSION

The doctrine of privity of contract is a fundamental principle in Nigerian contract law, emphasizing that only parties to a contract can enforce or be bound by it. However, the strictness of this doctrine is tempered by various exceptions that allow third parties to benefit from or be held liable under certain circumstances. Understanding these nuances is crucial for navigating contractual relationships and ensuring legal enforceability.