Privity Definition and Legal Meaning

On this page, you'll find the legal definition and meaning of Privity, written in plain English, along with examples of how it is used.

What is Privity?

n.The mutual, close and successive relationship between two parties for a particular transaction or property or contract where they both share a common interest.Thus, it’s a relationship close enough such that one party can support the legal claims for or against the party in above relation. In the absence of privity, the subcontractor cannot claim any damages to contract with the prime party who signed the contract with the main contracter.

History and Meaning of Privity

The concept of privity in law dates back to medieval times and originally referred to a relationship of mutual interest between lords and their vassals. In modern times, privity refers to the relationship between parties who have a mutual interest in a particular transaction, contract or property.

The privity relationship is a close and successive one that enables one party to support legal claims for or against the other party. This means that if there is privity between two parties, one party can sue the other for a breach of contract or for damages resulting from the transaction.

Examples of Privity

  1. A property owner who sells a house and signs a contract with the buyer has privity with the buyer. If there are any issues with the sale, the buyer can sue the seller for damages.

  2. A company that hires a subcontractor to do work on a construction project has privity with the subcontractor. If the subcontractor does not perform the work as agreed, the company can sue the subcontractor for damages.

  3. An individual who takes out a loan from a bank has privity with the bank. If the bank violates the terms of the loan agreement, the borrower can sue the bank for damages.

Legal Terms Similar to Privity

  1. Third-party beneficiary: This refers to a person who benefits from a contract between two other parties, even if they are not a direct party to the contract.

  2. Assignee: This is a person who receives the benefit of a contract from one of the original parties to the contract.

  3. Novation: This is a process by which a new contract is substituted for an old one, often as a way of introducing a new party to the original contract.