Privity of Contract

In one sentence

The legal relationship between parties who directly made a contract, limiting who can sue on it.

Plain English

Privity of contract means that only the people who actually signed or agreed to a contract can sue each other over it. A stranger or third party generally cannot enforce the contract, even if they're affected by it. This rule protects parties' freedom to make private deals without worrying about outsiders suing them.

Ad slot

Example

A builder contracts with a homeowner to build a house. A neighbor who is bothered by construction noise cannot sue the builder based on the contract because the neighbor is not in privity with the builder—they weren't a party to the agreement.

Used in a sentence

“Privity of contract prevents third parties from suing on an agreement they didn't sign.”

Related terms

Intended Beneficiary

A person who is not a party to a contract but has the right to enforce it because the parties meant to benefit them.

Third-Party Right

A legal right or benefit that belongs to someone who is not a party to the original contract.

Assignment of Rights

The transfer of a contractual right from one party to another, making the new party the beneficiary.

Delegation of Duties

Assigning your contractual responsibilities to another person.

Consideration

Something of value exchanged by each party to make a contract binding.

Mutual Assent

Both parties agree to the same contract terms at the same time.

Offer

A proposal to enter into a binding agreement on specific terms.

Acceptance

Agreeing to the exact terms of an offer, creating a binding contract.

This page is a plain-English reference and is not legal advice. Laws vary by jurisdiction and change over time. For specific situations consult a licensed attorney.