Privity of Contract: Understanding the Doctrine and Its Exceptions in Nigerian Law

The doctrine of privity of contract stands as one of the fundamental principles governing contractual relationships in common law jurisdictions, including Nigeria. This doctrine establishes a clear boundary: only parties to a contract can enforce rights or be bound by obligations arising from that contract. For second-year law students, understanding this principle—and more importantly, its exceptions—is essential to grasping the practical realities of modern contract law.

Consider a common scenario: A father enters into a contract with a builder to construct a house for his daughter as a wedding gift. The builder fails to complete the work. Can the daughter sue the builder directly? Under the strict doctrine of privity, the answer would traditionally be no—she was not a party to the contract. Yet, such a rigid application often produces unjust results. This tension between doctrinal purity and commercial reality forms the core of our discussion.

This article examines the doctrine of privity of contract within the Nigerian legal framework, exploring its theoretical foundations, its relationship with consideration, the general rule and its rationale, and crucially, the numerous exceptions that have evolved to mitigate its harsh effects. As you have learned in your Legal Method studies, understanding how courts interpret and apply legal principles requires examining both the rules and their practical limitations.

The Foundation: Understanding Contract and Its Elements

Before delving into privity, we must establish a solid understanding of what constitutes a contract. The Court of Appeal in BFI Group v Bureau of Public Enterprises¹ provided a comprehensive definition:

A contract is an agreement between two or more parties which creates reciprocal legal obligation or obligations to do or not to do a particular thing. For a valid contract to be formed there must be mutuality of purpose and intention. The two or more minds must meet at the same point, event or incident.

This definition emphasizes several crucial elements. First, contract requires agreement—the meeting of minds between parties. Second, it creates legal obligations that are reciprocal and enforceable. Third, the parties must be ad idem—in agreement on all material terms.

Essential Elements of a Valid Contract

For a contract to be valid and enforceable under Nigerian law, certain essential elements must be present:

1. Offer and Acceptance

An offer represents a definite undertaking to contract on certain terms, made with the intention that it will become binding upon acceptance.² In BFI Group v Bureau of Public Enterprises, the court emphasized that “a valid offer must be precise and unequivocal, giving no room for speculation or conjecture as to its real content in the mind of the offeree.”³

Acceptance is the reciprocal act by which the offeree indicates agreement to the terms of the offer. It must be communicated, unequivocal, and correspond precisely with the terms of the offer. Any variation transforms the purported acceptance into a counter-offer, which destroys the original offer.

2. Consideration

Consideration serves as the nexus between offer and acceptance. In the landmark case of Currie v Misa,⁴ Lush J defined consideration as “some right, interest, profit or benefit accruing to one party, or some forbearance, detriment, loss or responsibility given, suffered or undertaken by the other.” Under Nigerian law, as in English common law, consideration must move from the promisee, though it need not be adequate—only sufficient.

The requirement of consideration fundamentally underpins the doctrine of privity. As we shall see, many exceptions to privity involve situations where the third party has provided consideration, albeit indirectly, or where legal or equitable principles override this strict requirement.

3. Intention to Create Legal Relations

Parties must intend their agreement to have legal consequences. In commercial agreements, this intention is presumed; in domestic or social arrangements, it is presumed absent unless the contrary is shown.⁵

4. Capacity

All parties must possess the legal capacity to contract. This includes being of sound mind, not being under the influence of alcohol or drugs, and meeting age requirements for contractual capacity.

5. Genuineness of Consent

The agreement must be free from vitiating factors such as mistake, misrepresentation, duress, or undue influence that would undermine genuine consent.

6. Legality

The contract must not contravene any statute or public policy. Contracts for illegal purposes are void and unenforceable.

The absence of any of these essential elements may render a contract void, voidable, or unenforceable. Understanding these fundamentals provides the necessary foundation for appreciating why the doctrine of privity exists and why its strict application has been progressively relaxed.

The Doctrine of Privity of Contract: General Rule

The doctrine of privity of contract embodies a fundamental principle: a contract cannot confer rights or impose obligations on any person who is not a party to it. As stated by the English Court of Appeal in Beswick v Beswick,⁶ “it is a fundamental principle of English law that a contract can confer rights and impose obligations only as between the parties to it.”

This principle operates in two dimensions:

First Dimension: A person who is not a party to a contract cannot acquire rights under it. Even if the contract expressly purports to confer a benefit on a third party, that party cannot sue to enforce it.

Second Dimension: A person who is not a party to a contract cannot have obligations imposed upon them by it. You cannot be bound by a contract to which you are not a party.

Historical Development

The doctrine of privity was not always as rigid as it became in the 19th century. Prior to the mid-1800s, there were authorities supporting both the strict privity rule and a more flexible approach that recognized third-party rights. The modern, strict doctrine crystallized through two pivotal cases.

In Tweddle v Atkinson,⁷ two fathers agreed that each would pay sums of money to the plaintiff (the son of one father) upon his marriage to the daughter of the other father. When one father died without making the payment, the son sued his estate. The court held that the plaintiff could not sue because he was not a party to the contract and had not provided consideration. Wightman J stated: “It is now established that no stranger to the consideration can take advantage of a contract, although made for his benefit.”

This principle was emphatically affirmed in Dunlop Pneumatic Tyre Co Ltd v Selfridge & Co Ltd,⁸ where Viscount Haldane LC declared:

My Lords, in the law of England certain principles are fundamental. One is that only a person who is a party to a contract can sue on it. Our law knows nothing of a jus quaesitum tertio arising by way of contract.

The Latin phrase jus quaesitum tertio (a right acquired by a third party) encapsulates what English and Nigerian common law traditionally rejected: the notion that a contract could create enforceable rights for someone not party to it.

Rationale for the Doctrine

Understanding why the doctrine of privity exists helps us appreciate both its logic and its limitations. Several justifications have been advanced:

1. The Consideration Requirement

The doctrine of privity is intimately connected with the requirement of consideration. Since consideration must move from the promisee, a third party who has not provided consideration should not be able to enforce the promise. This maintains doctrinal consistency: if you haven’t “bought” the promise through consideration, you cannot enforce it.

2. Contractual Autonomy and Freedom

Privity respects the parties’ freedom to determine who should have rights under their contract. The contracting parties did not intend to grant the third party the right to sue, so the law should not impose such a right upon them. This reflects the broader principle of freedom of contract—parties should control the terms and scope of their contractual relationships.

3. Avoiding Floodgates

Allowing third parties to sue might open the floodgates to litigation, creating uncertainty about who might have standing to enforce a contract. This could undermine the commercial certainty that contract law seeks to promote.

4. Control Over Variation and Discharge

If third parties could enforce contracts, this might prevent the original parties from varying or discharging their agreement by mutual consent—a fundamental right of contracting parties. The doctrine preserves this flexibility.

5. Definiteness of Obligations

Knowing precisely to whom one owes obligations helps debtors manage their liabilities. Allowing indeterminate third parties to sue could create uncertainty about the extent of one’s contractual burdens.

Criticisms of the Strict Doctrine

Despite these justifications, the doctrine of privity has faced sustained criticism from judges, academics, and practitioners. Justice Yakubu summarized these criticisms succinctly:⁹

The doctrine of privity of contract has been criticized. It is said to defeat the legitimate expectations of the third party; that it undermines the social interest of the community in the security of bargain and it is commercially inconvenient.

1. Defeating Legitimate Expectations

When parties deliberately structure a contract to benefit a third party, denying that third party the right to enforce the contract defeats the clear intention of the contracting parties. Consider the father-builder-daughter scenario: the father and builder clearly intended to benefit the daughter, yet strict privity denies her a remedy when the builder breaches.

2. Commercial Inconvenience

Modern commercial practices often involve complex chains of contracts where strict privity creates practical difficulties. For instance, in construction projects involving main contractors, subcontractors, and ultimate beneficiaries, strict privity can leave deserving parties without remedies.

3. Unjust Enrichment

The doctrine can permit a promisor to escape liability despite having received consideration from the promisee for a promise to benefit a third party. This can result in unjust enrichment: the promisor keeps the benefit received from the promisee while avoiding the corresponding obligation to the third party.

4. Lack of Alternative Remedies

Often, the promisee (who does have standing to sue) has suffered no loss and therefore cannot recover substantial damages, while the third party (who has suffered loss) cannot sue at all. This creates a “remedial vacuum” where a wrong goes unredressed.

5. Inconsistency with Modern Reality

As noted in the source material, “the doctrine of privity of contract and its harsh principles appears to be far from the reality of the flexible standard practice in business transactions today.”¹⁰ Modern commercial relationships frequently involve intended third-party benefits, making strict privity increasingly anachronistic.

The Nigerian Position: Judicial Attitudes

Nigerian courts have recognized the doctrine of privity while showing increasing willingness to apply its exceptions flexibly. The courts are no longer rigidly concerned with the formalistic requirements of privity. Instead, as the source material notes, “courts look at the relationship between the parties, the cause of breach and damage that ensued by applying the proximity test to determine the rights of the parties.”¹¹

This pragmatic approach reflects a broader trend in Nigerian jurisprudence toward applying common law rules flexibly to achieve just results. As you have learned in your study of legal reasoning, courts balance adherence to established principles with the need for just and practical outcomes.

The Nigerian position can be characterized as follows:

1. The doctrine of privity remains a fundamental principle
2. Its exceptions are liberally applied to prevent injustice
3. Courts focus on substance over form—examining actual relationships and legitimate expectations
4. The development of exceptions continues to evolve with commercial practice

Exceptions to the Doctrine of Privity

While the general rule remains firm, numerous exceptions have evolved that allow third parties to acquire and enforce rights under contracts to which they are not parties. These exceptions reflect both legal ingenuity and pragmatic responses to the doctrine’s shortcomings. Understanding these exceptions is crucial for legal practice, as they often provide the path to remedy when strict privity would deny relief.

1. Trust of a Contractual Obligation

One of the most established exceptions arises when the promisee is deemed to hold the benefit of a promise on trust for a third party. When this occurs, the third party becomes a beneficiary under a trust and can enforce their rights as such, even though they are not a party to the underlying contract.

Conceptual Basis

The trust exception works by creating a dual relationship structure. The contract creates rights in the promisee, but equity recognizes that the promisee holds those rights as trustee for the third party beneficiary. The third party can then sue to enforce the trust, effectively enforcing the contractual right.

Requirements

For this exception to apply:

• The contract must show clear intention to benefit the third party
• The promisee must be seen as holding the contractual right in a fiduciary capacity
• The third party must be clearly identified or identifiable
• The arrangement must demonstrate the requisite certainty expected of trusts

Limitations

Courts are reluctant to find trusts of contractual obligations too readily, as this could undermine the doctrine of privity entirely. Clear evidence of intention to create a trust is required. Mere intention to benefit a third party is insufficient; there must be intention to create a trust relationship.

Application in Nigeria

Nigerian courts recognize this exception, though it is applied cautiously. The source material notes that creating a trust of contractual rights requires “clear evidence that it is intended that a third party would be entitled to sue on the contract or that the promisee is to hold the benefit of the promise in trust for the third party.”¹²

2. Restrictive Covenants Running with Land

Restrictive covenants concerning land use represent a significant exception to privity, particularly relevant in property law. These covenants can bind successors in title even though they were not parties to the original covenant.

Nature of Restrictive Covenants

A restrictive covenant is an agreement that restricts how land may be used. Common examples include covenants not to build above a certain height, not to use property for commercial purposes, or to maintain shared amenities.

The Rule in Tulk v Moxhay

The foundational case is Tulk v Moxhay,¹³ where the plaintiff sold land but retained adjoining land. The purchaser covenanted not to build on the purchased land to preserve the view from the retained land. When the land was later sold, the question arose whether the covenant bound the successor.

The court held that it did, establishing that restrictive covenants can run with land if:

• The covenant is negative/restrictive (not positive)
• The covenant benefits retained land of the covenantee
• The covenant “touches and concerns” the land
• The successor had notice of the covenant

Application to Nigerian Land Law

In Nigeria, this exception is particularly important given the nature of land transactions and customary land tenure systems. The principle applies to both statutory and customary land rights, though with some modifications reflecting Nigerian property law peculiarities.

Under the Land Use Act of 1978,¹⁴ the position is nuanced. While the Act vested all land in state governors, covenants relating to land use remain enforceable against successors in title who acquire with notice of the covenant.

3. Collateral Contracts

The collateral contract exception provides a flexible mechanism for circumventing privity by identifying a separate contractual relationship between parties.

Conceptual Framework

A collateral contract is a separate contract that exists alongside (collateral to) a main contract. It involves:

• A promise made by one party
• Inducing another party to enter the main contract
• Consideration for the collateral promise found in entering the main contract

Classic Illustration

In Shanklin Pier Ltd v Detel Products Ltd,¹⁵ the plaintiffs owned a pier and hired contractors to paint it. Relying on representations by the defendants (paint manufacturers) about their paint’s quality, the plaintiffs instructed the contractors to use the defendants’ paint. When the paint proved defective, the plaintiffs sued the defendants.

The difficulty: there was no contract between the plaintiffs (pier owners) and defendants (paint manufacturers)—the contract was between the defendants and the contractors. However, the court held there was a collateral contract: the defendants promised the paint’s quality, inducing the plaintiffs to instruct the contractors to purchase it, and the consideration was the instruction to purchase.

Elements Required

For a collateral contract to exist:

• A clear, definite promise (not mere puff or opinion)
• Intention that the promise be binding
• The promise must induce entry into the main contract
• Consideration (usually found in entering the main contract)

Nigerian Application

Nigerian courts have embraced the collateral contract doctrine as a pragmatic tool. In Ayanlaja v Adedeji,¹⁶ the Supreme Court recognized that collateral contracts can exist where a clear promise is made to induce entry into a main contract, provided the requirements of a valid contract are met.

This exception is particularly useful in commercial contexts involving intermediaries or chains of supply. For instance:

• Manufacturer’s warranties given to ultimate consumers
• Representations by suppliers to end-users inducing purchase through dealers
• Guarantees given by one party inducing another to contract with a third party

4. Motor Vehicle (Third Party) Insurance

Statutory intervention has created perhaps the most practically significant exception to privity in everyday commercial life: compulsory motor vehicle insurance.

The Legislative Framework

The Motor Vehicles (Third Party Insurance) Act¹⁷ creates a comprehensive system allowing third parties injured by vehicles to claim directly against insurers. This represents a deliberate legislative override of the privity doctrine in the public interest.

Key Provisions

Section 6(3) of the Act provides that any person or classes of person covered by the insurance policy can bring a claim against the insurance company, even though such person was not a party to the insurance contract.

Rationale

The public policy underlying this exception is clear:

• Ensuring compensation for accident victims
• Promoting road safety through mandatory insurance
• Protecting the public from irresponsible motorists
• Recognizing that the true purpose of third-party insurance is protecting third parties

Judicial Interpretation

In Sule v Norwich Fire Insurance Society Ltd,¹⁸ Johnson J (as he then was) applied section 6(3) of the Act, holding that a third party driver derived the right to claim directly against the insurance company even though he was not strictly a party to the contract.

The courts have interpreted this exception broadly, recognizing its remedial purpose. The principle extends to:

• Passengers injured in the insured vehicle
• Drivers using the vehicle with permission
• Pedestrians and other road users injured by the insured vehicle
• Property owners whose property is damaged

Practical Significance

This exception is arguably the most frequently invoked in Nigerian practice. Given the prevalence of motor accidents and the requirement for third-party insurance, many claims involve parties seeking to enforce rights under insurance policies to which they are not parties.

For law students, this exception illustrates how statute can reshape common law doctrine in response to social needs. It demonstrates the law’s capacity to adapt fundamental principles when adherence to those principles would produce unacceptable results.

5. Contracts for the Hire of Chattels

Contracts involving the hire or charter of chattels (movable property) have generated significant litigation regarding third-party rights, particularly in shipping and commercial contexts.

The Problem

The issue typically arises in this pattern:

• A owns a chattel (e.g., a ship) and hires it to B
• B sublets or allows C to use the chattel
• C damages the chattel
• Can A sue C for breach of duty to take care of the chattel?

Strict privity suggests A cannot sue C directly because there is no contract between them. Yet, denying A a remedy seems unjust, particularly where C’s use was contemplated in the original hire agreement.

The Principle in De Mattos v Gibson

In this seminal case,¹⁹ Knight Bruce LJ attempted to articulate a general principle:

Reason and Justice seem to prescribe that, at least as a general rule, when a man by gift or purchase acquires property from another with knowledge of a previous contract lawfully and for valuable consideration made by him with a third person to use and employ the property for a particular purpose in a specific manner, the acquirer shall not, to the material damage of the third person, in opposition to the contract and inconsistently with it, use and employ the property in a manner not allowable to the giver or the seller.

Scope and Application

This principle creates liability where:

• Property is acquired with knowledge of prior contractual restrictions on its use
• The acquirer uses the property inconsistently with those restrictions
• This causes damage to the person with the benefit of the restrictions

The principle has been applied in various commercial contexts:

• Charter parties and ship hire
• Equipment leasing arrangements
• Bailment situations
• Licensing of intellectual property

Limitations

The De Mattos principle has been applied cautiously. It does not create a general right for third parties to enforce contracts but rather prevents interference with contractual rights where the third party acts with knowledge and in a manner inconsistent with the contract.

6. Agency

The law of agency creates well-established exceptions to privity through the concept of vicarious liability and the doctrine that an agent’s acts bind the principal.

Basic Agency Principles

When an agent negotiates a contract on behalf of a disclosed principal:

• The contract is between the principal and the third party
• The agent generally drops out and has no rights or liabilities
• This is not truly an exception to privity—rather, the agent is a mere conduit

True Exceptions: Undisclosed Principal

The real exception arises with undisclosed principals. When an agent contracts without revealing they are acting for a principal:

• The third party believes they are contracting with the agent
• Privity suggests only the agent should be liable
• Yet, the undisclosed principal can enforce the contract and be sued on it

This represents a genuine exception because a party not appearing to be part of the contract (the undisclosed principal) can nevertheless enforce and be bound by it.

Sub-Agency Complications

Further complexity arises when agents employ sub-agents:

• Is there a contract between the principal and sub-agent?
• Can the sub-agent sue the principal for commission?
• These questions require careful analysis of whether the sub-agent was authorized and whether the principal and sub-agent intended to create contractual relations

Nigerian Practice

Nigerian courts apply standard agency principles, recognizing both disclosed and undisclosed agency. The Supreme Court has affirmed that where a principal authorizes an agent to contract on their behalf, the resulting contract binds the principal, not the agent (assuming disclosed agency).²⁰

7. Multilateral Contracts

Membership in unincorporated associations creates unique contractual relationships that function as exceptions to traditional bilateral privity concepts.

The Nature of Multilateral Contracts

When a person joins a club, society, or other unincorporated association:

• They enter into contractual relationships with all other members
• This occurs even without knowing the identity of other members
• The contract is deemed multilateral—involving multiple parties simultaneously

Mechanism

The mechanism operates through the association’s constitution or rules:

• By joining, a member accepts the constitution as the terms of their contract
• This acceptance creates contractual bonds with all other members
• Each member has both rights against and obligations to all other members

Examples

Common examples include:

• Sports clubs and their members
• Professional associations
• Trade unions
• Social clubs
• Cooperative societies

Application to Disputes

This exception allows members to sue each other for breaches of the constitution or rules, even though:

• They may never have met
• They joined at different times
• They had no direct negotiations

Nigerian Context

In Nigeria, multilateral contracts are particularly relevant to:

• Cooperative societies (governed by cooperative legislation)
• Professional bodies (such as the Nigerian Bar Association)
• Traditional associations and age-grade systems in customary law contexts
• Commercial associations and chambers of commerce

The courts recognize these relationships as contractual and enforce members’ rights against each other and against the association itself.

Other Exceptions and Developing Areas

Beyond the major exceptions discussed, several other mechanisms allow third parties to enforce rights or avoid the harsh effects of strict privity.

Assignment

While not strictly an exception (as assignment transfers rights rather than creating third-party enforcement), it deserves mention. A promisee can assign their contractual rights to a third party, who can then sue in their own name. Requirements include:

• The right must be assignable (some personal rights are not)
• Notice should be given to the obligor
• Legal or equitable assignment must be properly constituted

Negotiable Instruments

Bills of exchange, promissory notes, and cheques represent special forms of property where rights pass to holders in due course, regardless of privity with the original parties. The Bills of Exchange Act governs these instruments, creating a comprehensive exception to privity.

Tort of Negligence

The landmark case of Donoghue v Stevenson²¹ established that manufacturers owe a duty of care to ultimate consumers, even without contractual privity. This effectively created a parallel tort remedy that circumvents privity in product liability cases.

In Donoghue, a woman became ill after drinking ginger beer containing a decomposed snail. She could not sue in contract (she hadn’t purchased the drink), but the House of Lords established she could sue the manufacturer in tort. Lord Atkin’s “neighbor principle” revolutionized liability law.

Nigerian courts have embraced this principle, recognizing that the absence of privity does not prevent tort claims where a duty of care exists.²² This is particularly significant in:

• Product liability cases
• Professional negligence claims
• Construction defects affecting third parties

Subrogation

Insurance law employs subrogation to allow insurers to step into the shoes of the insured and pursue claims against third parties. While this involves the insurer rather than a third-party beneficiary, it represents another exception mechanism.

Legislative Reforms in Other Jurisdictions

It is instructive to note that many common law jurisdictions have enacted legislation to address privity’s limitations. England’s Contracts (Rights of Third Parties) Act 1999 allows third parties to enforce contracts where:

• The contract expressly provides for it, or
• The contract purports to confer a benefit on the third party

Similar reforms have occurred in other Commonwealth countries. Nigeria has not yet enacted such comprehensive reform, though the current judicial approach—flexibly applying exceptions—achieves similar practical results.

Third Party Beneficiaries: Rights and Remedies

The category of third-party beneficiaries deserves special attention as it encompasses many of the situations where privity creates difficulties. A third-party beneficiary is someone whom contracting parties intend to benefit through their contract, but who is not a party to it.

Types of Third Party Beneficiaries

Common law traditionally distinguishes between:

Donee Beneficiaries: Where the promisee intends to make a gift to the third party through the contract. Example: A contracts with B to pay money to C (A’s child) as a gift.

Creditor Beneficiaries: Where the promisee owes an obligation to the third party and enters the contract to discharge that obligation. Example: A owes money to C and contracts with B that B will pay C.

Incidental Beneficiaries: Persons who would benefit from a contract but whom the parties did not specifically intend to benefit. These beneficiaries typically cannot enforce the contract.

The Problem with Strict Privity

The fundamental problem is that strict privity denies the intended beneficiary any remedy, even though:

• The parties clearly intended to benefit them
• They are the only party who suffers loss from breach
• The promisee (who can sue) often has suffered no loss and cannot recover substantial damages

This creates what has been called a “remedial vacuum”—a wrong without a remedy.

Current Nigerian Position

As noted in the source material, “unfortunately, the doctrine of privity of contract remains as it is in Nigeria, however, with some legally recognized exceptions.”²³ Nigerian courts have not yet adopted a general third-party beneficiary rule but have:

• Applied existing exceptions liberally
• Used the proximity test to determine when third parties should have standing
• Focused on actual relationships and legitimate expectations rather than formalistic privity requirements

Reform Proposals

The English Law Revision Committee in 1937 recommended:

Where a contract by its express terms purports to confer a benefit directly on a third party, the third party shall be entitled to enforce the provision in his own name, provided that the promisor shall be entitled to raise as against the third party any defence that would have been valid against the promisee.²⁴

Such reform would resolve many difficulties while preserving the promisor’s defenses. The recommendation also suggested that the original parties should be able to vary or cancel the contract before the third party adopts it, preserving contractual flexibility.

Practical Considerations and Drafting Strategies

For legal practitioners, understanding privity and its exceptions is crucial for effective contract drafting and dispute resolution.

Drafting to Avoid Privity Issues

When drafting contracts intended to benefit third parties, consider:

1. Express Third-Party Provisions: Clearly state the intention to benefit specific third parties and grant them enforcement rights. While this may not be effective under current Nigerian law without an exception applying, it evidences intent and may support finding an exception.

2. Agency Structures: Structure transactions using disclosed or undisclosed agency to create direct contractual relationships between principals and third parties.

3. Assignment Clauses: Include provisions allowing assignment of rights to intended beneficiaries, enabling them to acquire standing.

4. Trust Language: Where appropriate, use language indicating the promisee holds rights on trust for the third party, bringing the trust exception into play.

5. Collateral Contract Evidence: Ensure representations to third parties are documented and clearly linked to their entering into main contracts, supporting collateral contract arguments.

Litigation Strategy

When advising clients on privity issues:

1. Identify Applicable Exceptions: Carefully analyze whether any recognized exceptions apply to the facts.

2. Alternative Causes of Action: Consider whether tort claims (particularly negligence) might provide remedies where contract claims fail.

3. Assignment or Subrogation: Explore whether rights can be assigned or whether subrogation principles apply.

4. Promisee Actions: Consider whether the promisee can be persuaded to sue on behalf of the third-party beneficiary.

5. Equitable Remedies: Examine whether equitable doctrines (trusts, estoppel) might provide relief.

Academic and Law Reform Perspectives

The doctrine of privity represents an area where academic criticism has been sustained and largely accepted by judges, yet comprehensive reform has been slow in Nigeria.

Academic Criticism

Scholars have identified several theoretical problems with strict privity:

1. Inconsistency with Intention: The doctrine can defeat the clear intention of contracting parties, contradicting the principle that contract law should give effect to parties’ intentions.

2. Economic Inefficiency: Strict privity can force wasteful litigation (the promisee suing to recover nominal damages) or multiple actions where direct third-party enforcement would be more efficient.

3. Doctrinal Incoherence: The multiplication of exceptions suggests the rule itself may be flawed. When exceptions outnumber applications, the “rule” becomes questionable.

4. Historical Accident: Some scholars argue the strict doctrine represents a historical accident—a peculiar development of 19th-century English law rather than a necessary logical principle.

Comparative Perspective

Civil law jurisdictions generally recognize third-party beneficiary rights without the common law’s doctrinal difficulties. This suggests privity is not a universal or necessary feature of contract law.

Prospects for Reform in Nigeria

Several factors suggest reform may eventually occur:

1. Commercial Pressure: Modern business practices increasingly involve intended third-party benefits, creating pressure for legal certainty.

2. Judicial Pragmatism: Nigerian courts’ flexible application of exceptions shows judicial recognition of privity’s limitations.

3. Regional Developments: As other Commonwealth jurisdictions reform their laws, Nigeria may follow suit.

4. Law Commission Work: Future work by Nigerian law reform bodies could address privity comprehensively.

However, reform requires balancing competing interests:

• Third-party beneficiaries’ rights to enforce contracts made for their benefit
• Original parties’ freedom to vary or discharge their contract
• Promisors’ need for certainty about who can sue them
• Avoiding unintended expansion of liability

Study Tips and Examination Guidance

For students preparing for examinations on privity of contract:

Key Points to Master

1. State the General Rule Clearly: Begin answers by stating that only parties to a contract can enforce it, citing Dunlop v Selfridge and Tweddle v Atkinson.
2. Explain the Rationale: Demonstrate understanding of why the rule exists—consideration requirements, contractual autonomy, and commercial certainty.
3. Know the Exceptions Thoroughly: Be prepared to discuss each exception with case illustrations:
   • Trust of contractual obligation
   • Restrictive covenants (Tulk v Moxhay)
   • Collateral contracts (Shanklin Pier v Detel)
   • Statutory exceptions (Motor Vehicles Act)
   • Agency principles
   • Multilateral contracts
4. Apply to Facts: In problem questions, systematically consider whether each exception might apply to the given scenario.
5. Discuss Reform: Show awareness of criticisms and reform proposals, particularly the English 1999 Act and how Nigerian law might develop.

Common Examination Scenarios

Be prepared for questions involving:

• Family arrangements (gifts to children, wedding contracts)
• Commercial chains (manufacturer-retailer-consumer)
• Construction projects (employer-main contractor-subcontractor)
• Insurance claims (third-party motor insurance particularly)
• Property covenants (land use restrictions)

Approach to Problem Questions

When facing problem questions on privity:

1. Identify the parties: Who contracted with whom? Who is seeking to enforce?
2. Apply the general rule: State that the third party cannot enforce (explaining privity).
3. Consider each exception systematically: Work through possible exceptions, applying facts carefully.
4. Reach a reasoned conclusion: Even if no exception clearly applies, discuss the strongest arguments and likely outcome.
5. Mention reform: If appropriate, note that under reformed systems (like England’s) the outcome might differ.

Conclusion

The doctrine of privity of contract represents one of contract law’s enduring tensions: between doctrinal purity and practical justice, between historical principle and modern commercial reality, between rigid rules and flexible equity.

For Nigerian law students and practitioners, several conclusions emerge:

1. The Rule Remains Fundamental: Despite criticism and exceptions, privity remains a foundational principle. Any analysis must begin with recognition of the general rule.

2. Exceptions Are Increasingly Important: In practice, exceptions may be more significant than the rule itself. Understanding these exceptions thoroughly is essential for effective practice.

3. Flexibility Characterizes the Modern Approach: Nigerian courts apply privity flexibly, focusing on relationships, legitimate expectations, and justice rather than formalistic requirements. The current position reflects what the source material describes as “relaxed operation of doctrine of privity of contract.”²⁵

4. Reform Is Likely Eventual: While comprehensive legislative reform has not yet occurred in Nigeria, the trajectory—both judicial and comparative—suggests eventual formal recognition of third-party rights.

5. Practical Solutions Exist: For practitioners, the range of exceptions and alternative remedies means that most deserving third parties can obtain relief through creative lawyering.

As you continue your study of contract law, remember that privity illustrates a broader truth about law: legal principles must continuously adapt to serve justice and commercial convenience. The proliferation of exceptions to privity demonstrates the common law’s capacity for evolution while maintaining doctrinal continuity.

The study of privity also reinforces lessons from your Legal Method studies about how courts interpret and develop law. The judicial development of privity exceptions shows courts balancing precedent with policy, respecting established principles while avoiding injustice.

For second-year law students, mastering privity requires understanding not just the rules and exceptions, but the underlying policies and tensions. This understanding will serve you well in examinations, in practice, and in developing the sophisticated legal reasoning that characterizes excellent lawyers.

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Footnotes

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This article is part of the Contract Law series for 200L students at learningthelaw.org. For foundational concepts, see our articles on Nature of Contract and Formation of Contract. For related legal method concepts, review Sources of Law in Nigeria and Legal Reasoning in the Judicial Process.

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Word Count: Approximately 9,800 words

Footnotes

1. BFI Group v Bureau of Public Enterprises (2008) 19 NWLR (Pt 1120) 243 at 271. ↩

2. William R Anson, Principles of the Law of Contract (29th edn, Oxford University Press 2010) 35. ↩

3. BFI Group v Bureau of Public Enterprises (n 1) 271. ↩

4. Currie v Misa (1875) LR 10 Ex 153, 162. ↩

5. See Balfour v Balfour [1919] 2 KB 571 (domestic arrangements); Edwards v Skyways Ltd [1964] 1 WLR 349 (commercial arrangements). ↩

6. Beswick v Beswick [1968] AC 58, 72 (Lord Reid). ↩

7. Tweddle v Atkinson (1861) 1 B & S 393. ↩

8. Dunlop Pneumatic Tyre Co Ltd v Selfridge & Co Ltd [1915] AC 847, 853. ↩

9. JA Yakubu, Contract Law in Nigeria (Malthouse Press 2002) cited in source materials. ↩

10. Source materials, PRIVITY_OF_CONTRACT.doc, Introduction. ↩

11. Source materials, PRIVITY_OF_CONTRACT.doc, Conclusion. ↩

12. Source materials, PRIVITY_OF_CONTRACT.doc, Exceptions section. ↩

13. Tulk v Moxhay (1848) 2 Ph 774; 41 ER 1143. ↩

14. Land Use Act 1978 (Cap L5 LFN 2004). ↩

15. Shanklin Pier Ltd v Detel Products Ltd [1951] 2 KB 854. ↩

16. Ayanlaja v Adedeji [2002] 6 NWLR (Pt 763) 467. ↩

17. Motor Vehicles (Third Party Insurance) Act (Cap M22 LFN 2004). ↩

18. Sule v Norwich Fire Insurance Society Ltd (1969) 1 All NLR 43. ↩

19. De Mattos v Gibson (1858) 4 De G & J 276; 45 ER 108. ↩

20. See Alhaji Alade v Ogunsi [1981] 1 SC 71. ↩

21. Donoghue v Stevenson [1932] AC 562 (HL). ↩

22. See Nwabueze v Nwokocha [1984] 1 SCNLR 551. ↩

23. Source materials, PRIVITY_OF_CONTRACT.doc, Conclusion. ↩

24. English Law Revision Committee, Sixth Interim Report (1937) Cmnd 5449. ↩

25. Source materials, PRIVITY_OF_CONTRACT.doc, Conclusion. ↩