Nigerian Cases on Privity of Contract
Can a third party enforce terms of a contract between two parties? This legal question borders on the doctrine of privity of contract. The rule states that a contract cannot confer enforceable rights or impose obligations arising under it on any person, except parties to it. Below are some rationes decidendi on Privity of Contract from Nigerian cases.
What is Privity of Contract?
NOSPETCO OIL AND GAS LTD. V. PRINCE MATILUKO EMMANUELOLORUNNIMBE & ORS (2022) 1 NWLR (Pt. 1812) 495 – Court of Appeal
privity of contract is the relation between the parties in a contract, which entitles them to sue each other, but prevents a third party from doing so. Thus, the doctrine of privity of contract is all about the sanctity of contract between the parties to it, and it does not extend to others from outside.
BASINCO MOTORS LIMITED V. WOERMANN-LINE & ANOR (2009) LLJR-SC
From the forgoing, it becomes really necessary to explain what is privity of contract. The doctrine of privity of contract portrays that as a general rule, a contract affects the parties thereto and cannot be enforced by or against a person who is not a party to it. In short only parties to a contract can sue or be sued on the contract and a stranger to a contract can neither sue or be sued on the contract even if the contract is made for his….him liable upon it.
Moreover the fact that a person who is a stranger to the consideration of a contract stands in such near relationship to the party from whom the consideration proceeds that he may be considered a party to the consideration does not entitle him to sue or be used upon the contract. Negbenebor v. Negbenebor 19711 ALL NLR 210. Ikpeazu v. A.C.B Ltd 1965 NMLR 374. K.S.O. Allied Products, Ltd. V. Kofo Trading Co. Ltd. (1996) 3 NWLR pt. 436 pg 244.
ADAMS O.IDUFUEKO V PFIZER PRODUCTS LIMITED & ANOR (2014) (2014) LCN/4268(SC)
This appellant’s argument does not take into consideration the simple doctrine of privity of contract, which is that a contract cannot, as a general rule, confer or impose obligations arising under it on any person, except the parties to it.
In other words, only the parties to a contract can sue or be sued on the contract; a stranger to a contract can neither sue nor be sued on the contract. See CHUKWUMA MAKWE v. NWUKOR & ANOR (2001) 14NWLR (pt 733) 356 also CHITTY ON CONTRACTS Vol. 1 para. 19.002 p. 961.
Operation of the Doctrine of Privity of Contract
VITAL INVESTMENT LIMITED v. CHEMICAL AND ALLIED PRODUCTS PLC (2022) 4 NWLR (Pt. 1820) 205 – Supreme Court
A contract cannot confer enforceable rights or impose obligations arising under it on any person, except parties to it and this is referred to as the doctrine of privity of contract which is to the effect that a contract is a private relationship between the parties who made it and no other person can acquire rights to or incur liabilities under it.
In the instant case, the Court of Appeal was right in holding that there was no evidence of a contractual relationship or privity of contract between the respondent and the finance company.
EYIBOH v. MUJADDADI & ORS (2021) LPELR-57110(SC)
“It is settled in law on privity of contract and firmly settled that a person is not under any obligation to bear the burden of a contract to which he is not privy, even though the contract is in his favour or benefit. Only a person who is a party to a contract can sue on it.
The reason for the enunciation of the principle of privity to a contract is based on consensus ad idem. It is only the contracting parties that know what their enforceable rights and obligations are, and therefore a stranger should not be saddled with the responsibility.
Thus, in L.S.D.P.C v N.C. & S.F. LTD (1992) (PT. 244)653 AT 669-670, this Court per Olatawura J.S.C held thus: “The evidence led justified this observation. Is there any privity of contract between the 1st appellant and the respondent? The answer is No. Privity of contract is a common law doctrine.
Generally only parties as to a contract can enforce the contract. This general principle is stated with great lucidity in Dunlop Pneumatic Tyre C. Ltd v. Selfridges & Co. Ltd. (1915) A-C. 847.”
Exceptions to the Rule of Privity of Contract
ADIREJE WEST AFRICA LTD (2017) LPELR-47142(CA)
“In the instant appeal the Appellant contends that he had no privity of contract with the Respondent and as such he had no locus standi to sue him. The Respondent argued that it comes under the exception to the general rule of privity of contract as he had a contractual relationship with the Appellant through PW2, the Appellant’s agent.
Having well stated the general position of the law, I will now through the eyes of the facts on record determine whether the case at hand falls within the exception to the privity of contract doctrine. I do agree with the learned senior counsel for the Respondent that there are exceptions to the general rule.
The said exceptions are well set out in HALSBURY’S LAWS OF ENGLAND, VOL. 9 4TH EDITION, PARAS 336, 339 AND 342. Relevant to the case at hand which is also part of our legal jurisprudence is para 336 of Halsbury’s Laws of England (supra). This exception relates to the case of an agency relationship between a party to the contract as the principal and a third party as an agent.”
First Fuels Limited V. The Vessel ‘leona Ii’ & Anor (2002) LLJR-SC
However, counsel for the defendants have argued that there are exceptions to the general rule and that this case falls within the exception. They cited authorities, which shall presently be considered, to support propositions they canvassed as follows:
Craddock Brothers v. Hunt (1923) 2 Ch 136, (Rectification may be ordered against a 3rd Party purchaser with notice); Thompson v. Whitmore (1843 – 60) All ER 698, (A volunteer (3rd Party) beneficiary can seek rectification of a settlement); Smith v. Lliffe (1875) LR 20 & 666 (The courts can rectify a contract made in pursuance of a court’s order); Anddersfiedl Banking Coy. v. Henry (1895) 2 Ch. 273. They also referred to a passage in Halsbury’s Laws of England (Vol. 16) 4th Edition para. 783 as follows:
The doctrine of trust applies also to contracts; and, where equity can spell out a contract made between A and B for the benefit of C, the construction that B intended to contract as trustee for C, even though nothing was said about any trust in the contract, C is a beneficiary under the contract and is allowed in equity to enforce it.
A proper understanding of the principle stated above would show that it does not admit of such wide application as counsel for the defendants would want to make it. The principle is hedged by qualifications. Footnote 1 to paragraph 783 of the work cited contained one such qualification as follows:
The contract must, however, show a clear intention to create a trust in favour of a third party. It is not legitimate to import into contract the idea of a trust when the parties have given no indication that such was their intention: Re Schebsman, ex p Official Receiver, Trustee v. Cargo Superintendents (London) Ltd. and Schebsman (1994) Ch 83 at 89, (1943) 1 All ER 768 at 770.
See also:
– Nigerian Cases on Approbation and Reprobation
– Nigerian Cases on Unchallenged Evidence
