Privity – Definition

Cite this article as:"Privity – Definition," in The Business Professor, updated October 15, 2019, last accessed October 21, 2020,


Privity Definition

Privity refers to a contract law doctrine which states that contracts are only binding on the parties involved in contract signing and that no third party can either enforce the contract or be sued under it.

A Little More on What is Privity

Privity is a major concept in contract law. Under privity’s doctrine, for instance, a homeowner’s tenant can’t sue the previous property owner for failing to carry out repairs guaranteed by the land sales contract existing between the seller and buyer, as the tenant wasn’t “in privity” with the seller.

However, privity has been problematic and many exceptions are now welcomed. For instance, according to privity’s doctrine, the individual benefiting from a life insurance policy will be unable to enforce the contract, because he or she wasn’t a part of the contract, and the signatory is dead. As this will be unjust, a major exception to the doctrine of privity would be third-party insurance contracts.

Manufacturers’ warranties for their products is another exception. Initially, only the party to the original transaction or contract could bring a suit for breach of warranty, so consumers would eventually sue retailers for bad goods because there was no existing contract between the manufacturer and the consumer. Currently, under modern doctrines of strict liability and implied warranty, there has been an extension of the right to sue to third-party beneficiaries, as well as, members of a purchaser’s household, whose use of a product can be foreseen.

References for “Privity” › Investing › Financial Analysis…act…/doctrine-of-privity-of-contract/ › Legal Dictionary

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