Also known as: strict privity of contract · privity of contract
Written by attorneys · grounded in primary & secondary sources — see below
2 senses
A doctrine limiting tort liability for economic loss or negligent misrepresentation to plaintiffs who share a direct contractual relationship with the defendant.
A doctrine limiting tort liability for economic loss or negligent misrepresentation to plaintiffs who share a direct contractual relationship with the defendant.
Select any source to read its text and confirm it supports the definition.
The principle that a transferor remains obligated on an express lease covenant touching and concerning the land when the obligation rests on privity of contract and the obligee has not relieved the transferor of the duty.
Select any source to read its text and confirm it supports the definition.
The principle that a transferor remains obligated on an express lease covenant touching and concerning the land when the obligation rests on privity of contract and the obligee has not relieved the transferor of the duty.
Each sense below has its own examples, sources, and questions.
Sofia Stern purchased a new automobile from a local dealer. The steering mechanism failed due to a latent defect and caused an accident injuring Sofia. Sofia sued the manufacturer with whom she had no direct contract. Under the strict privity rule the claim would have been barred, yet the court permitted recovery because the product was dangerous when used as intended.
Serena Soto and Sean Steele invested in a company after reviewing an audit report prepared by Spectrum Financial. The report contained negligent misstatements that caused substantial losses. The investors had no contract with Spectrum. Strict privity would have barred their claim, but the court limited liability to parties with a direct relationship or known intended reliance.
Samantha Stone, an employee at Silverline Industries, was injured when a pneumatic tool exploded. The tool had been sold by the manufacturer to an intermediate distributor and then to Silverline. Samantha had no contractual relationship with the manufacturer. Strict privity would have prevented recovery, yet the court allowed the claim because the product was expected to reach the ultimate user.
Spencer Silver worked as a coachman for a customer who had contracted with a wheelwright for repair of a carriage. The wheelwright performed the work negligently and Spencer was injured when the carriage collapsed. Spencer had no contract with the wheelwright. Under the strict privity rule Spencer could not recover because he lacked any direct contractual relationship with the defendant.
Yes. Under a strict privity approach liability for negligent misrepresentation extends only to parties with whom the defendant has contracted directly. This rule protects defendants from an unlimited class of potential plaintiffs and is more favorable to defendants than foreseeability-based standards.
Supporting sources
Yes. The court held that a manufacturer may be liable to a remote purchaser for negligence when the product is dangerous if used in the ordinary manner, even without contractual privity. This created an exception to the general rule that a vendor is not liable to third parties lacking contractual relations.
Supporting sources
Spencer Silver leased commercial space from Stella Shapiro under a written lease containing an express covenant to maintain structural supports. Spencer assigned the entire leasehold to Samantha Stone with Stella's written consent. The assignment document contained no release of Spencer. Stella later sued Spencer for breach of the maintenance covenant after the supports failed. Because the obligation rested on privity of contract, Spencer remained liable despite the transfer.
Stella Shapiro leased property to Spencer Silver under a lease with an express promise to resurface a shared access road. Spencer assigned the lease to Samantha Stone after promising in writing to perform the resurfacing obligation. Samantha then assigned the lease to Serena Soto. When the road deteriorated, Stella sued Samantha. Samantha's liability rested on privity of contract and therefore survived the subsequent transfer.
The original promisor remains liable after assignment if the obligation rests on privity of contract and the person entitled to enforce the promise has not relieved the promisor. Consent to the assignment or acceptance of rent from the assignee does not by itself constitute relief.
Supporting sources
Privity of contract arises from the original lease agreement and survives transfer unless the obligee grants relief. Privity of estate arises from the landlord-tenant relationship and ends upon transfer of the interest, so obligations resting solely on estate privity terminate with the transfer.
Supporting sources
…If he can maintain the suit, it is because an anomaly has found its way into the law on this subject. In general, there must be privity of contract. The party who sues upon a promise must be the promisee, or he must have some legal interest in the undertaking. In this case, it is plain that Holly, who loaned the money to the defendant…