FLK1 · Contract

Privity & third-party rights

SQE1 revision notes — the key rules, leading cases and common traps for this topic, in plain English and current to 2026.

CON.03 — Privity & Third-Party Rights

The core rule

Privity of contract: only a party to a contract can sue or be sued on it. A stranger acquires no rights and bears no burdens, even where the contract is made for their benefit. Tweddle v Atkinson (1861); Dunlop v Selfridge (1915).

Privity is closely tied to consideration: consideration must move from the promisee, though it need not move to the promisor. A third party who gives nothing cannot enforce at common law.

The statutory gateway — Contracts (Rights of Third Parties) Act 1999

A third party (C) may enforce a term in their own right where:

s.1(1)(a) — the contract expressly provides that they may; or
s.1(1)(b) — the term purports to confer a benefit on them — UNLESS, on proper construction, the parties did not intend it to be enforceable (a rebuttable presumption: Nisshin Shipping v Cleaves (2003)).

The third party must be expressly identified by name, class, or description (s.1(3)), but need not exist when the contract is made (e.g. a future spouse or company).

C gets the same remedies as if a party (s.1(5)) — damages, specific performance, injunction. C is also bound by relevant terms, e.g. exclusion/arbitration clauses (s.1(6)).

Variation/rescission (s.2): once C's right has crystallised — C has communicated assent, or relied on the term and the promisor knew or could reasonably foresee the reliance — the parties cannot vary or cancel it without C's consent (subject to express terms otherwise).

Common-law work-arounds (still examinable)

Agency (undisclosed/disclosed principal); assignment of contractual benefits (burdens cannot be assigned without novation).
Collateral contracts; trusts of a promise; tort (e.g. negligence, Donoghue v Stevenson).
Promisee suing for the third party's loss — narrow exceptions: Jackson v Horizon Holidays; the "broad/narrow ground" in Linden Gardens / Panatown / St Martins.

Traps to avoid

The 1999 Act does not displace common-law routes; C can use either.
A benefit being conferred is not enough — check the parties did not exclude enforcement.
Distinguish enforcement (the right) from defences — the promisor keeps defences available against the promisee (s.3).
Excluded contracts: most provisions don't apply to negotiable instruments, company constitutions, employment contracts (against employees), and carriage contracts (s.6).
The Act gives no right to a party — only third parties; it does not abolish privity, it carves an exception.

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In January, a doctor negotiating the sale of his medical practice tells the buyer, truthfully, that the practice generates around £2,000 a month in income. Contracts are not signed until May. Between January and May the doctor falls seriously ill, stops practising, and the patient list collapses, so that by the time of signing the practice earns almost nothing. The doctor says nothing about this change. The buyer, still relying on the January figure, completes the purchase and then discovers the true position.

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