ABSTRACT
A contract cannot, as a general rule, confer benefits or impose obligations on any person except the parties to the contract. This rule is known as the doctrine of privity of contract. It is very similar to a rule of consideration, that consideration must move from the promisee. The reason for the doctrine of privity is that a person ought not to have obligations imposed upon him without his consent. The rule which prevents the contract from conferring benefits on third parties is, however, subject to a number of well known exceptions. For instance, assignment can allow the benefit (but not a burden) of a contract to be transferred to another person, and under the law of agency a person can act on behalf of another. In relation to a contract between two parties, a collateral contract may arise in favour of a third party, and, in the law of trusts, a beneficiary under a trust can enforce the trust. Other examples are in relation to s 56 of the Law of Property Act 1925, negotiable instruments, bankers’ commercial credits, bills of lading, certain insurance contracts and s 14 of the Companies Act 1985.
