# Privity of contract and third-party rights

> **Key takeaway:** Common law: only parties enforce (Dunlop). 1999 Act s.1: express right or term purports to confer benefit (subject to contrary intention) + identifiable third party. Often excluded by contract. Variation limits: s.2. Fallbacks: agency, assignment, trust of promise, collateral contract.

- **Jurisdiction:** England & Wales
- **Practice area:** Commercial
- **Last reviewed:** 2026-08-04
- **Interactive page:** https://kttclegal.info/library/notes/Commercial/privity-of-contract
- **Keywords:** privity of contract, Contracts Rights of Third Parties Act 1999, third party rights, Dunlop v Selfridge, Beswick v Beswick, section 1, collateral warranty

## What is this about?

The doctrine of privity means that, as a general rule, only the parties to a contract may enforce it or be bound by it. Modern practice is dominated by the Contracts (Rights of Third Parties) Act 1999, which creates a statutory route for third-party enforcement, alongside older common-law and equitable workarounds that still matter where the Act is excluded.

## What is the core rule?

At common law, a person who is not a party cannot usually sue on a contract to obtain its benefits (and is not bound by its burdens). The Contracts (Rights of Third Parties) Act 1999 allows a third party to enforce a contract term if the contract expressly provides that they may, or if the term purports to confer a benefit on them (unless on a proper construction the parties did not intend enforceability) — s.1. Parties may exclude or limit the Act. Variation and rescission affecting third-party rights are controlled by s.2 once the third party's rights have crystallised under the Act.

## What are the elements or test?

1. Is the claimant a contracting party? If yes, ordinary enforcement — privity is not the obstacle
2. If a third party: does the 1999 Act apply (not excluded), and is s.1(1)(a) express right or s.1(1)(b) purporting to confer a benefit engaged?
3. Does s.1(2) displace enforceability (parties did not intend the term to be enforceable by the third party)?
4. Check s.1(3) identification of the third party (by name, class, or description)
5. If the Act is excluded or inapplicable: consider collateral contracts, agency, assignment, trusts of the promise, tort, or other statutory schemes

## Which authorities matter?

- **Contracts (Rights of Third Parties) Act 1999, ss.1–2** — Primary statutory route for third-party enforcement and limits on variation once third-party rights attach.
- **Dunlop Pneumatic Tyre Co Ltd v Selfridge & Co Ltd [1915] AC 847** — Classic House of Lords statement of common-law privity (and consideration moving from the promisee).
- **Beswick v Beswick [1968] AC 58** — Illustrates privity limits and the use of specific performance at the promisee's suit to secure a third-party benefit in a suitable case.
- **Nisshin Shipping Co Ltd v Cleaves & Co Ltd [2003] EWHC 2602 (Comm), [2004] 1 Lloyd's Rep 38** — Early illustration of s.1(1)(b) 'purport to confer a benefit' analysis under the 1999 Act.

## How does this apply in practice?

Always check whether the contract excludes the 1999 Act — common in negotiated commercial terms. Carriage of goods, company law, and consumer statutes may create parallel third-party regimes. Assignment of contractual rights is distinct from creating original third-party rights under the Act.

## What are common pitfalls?

- Assuming third parties can never enforce after 1999 without reading the contract's exclusion of the Act
- Treating a benefit to a third party as automatically enforceable without s.1 analysis
- Confusing the third party's right under the Act with the promisee's remaining rights to enforce
- Overlooking s.2 constraints on varying a contract after third-party rights have arisen

## When would a practitioner use this?

Relevant in group company contracts, construction collateral warranties (and their interaction with the Act), insurance, and consumer supply chains.

## Quick reference

Common law: only parties enforce (Dunlop). 1999 Act s.1: express right or term purports to confer benefit (subject to contrary intention) + identifiable third party. Often excluded by contract. Variation limits: s.2. Fallbacks: agency, assignment, trust of promise, collateral contract.

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*Reference material from [KTTC Legal](https://kttclegal.info/), not legal advice. Work product supports instructing solicitors and barristers under their supervision. England & Wales.*