Glossary
Privity of contract
privity of contractPrivity of contract means only the parties can sue on the bargain. The Contracts (Rights of Third Parties) Act 1999 s.1 lets a named third party enforce a term that benefits them, unless the contract says otherwise. Most commercial papers exclude the Act. A subcontractor cannot sue the end client without a warranty or a 1999 Act right.More in the glossary means only the parties can sue on the bargain. The third-party rightsThird-party rights are the ability of someone who did not sign to enforce a term. The default common-law rule is privity. The Contracts (Rights of Third Parties) Act 1999 creates a limited exception. Commercial drafts usually exclude the Act, then grant a named right to a specific affiliate, funder or end client where one is actually needed.More in the glossary 1999 s.1 lets a named third party enforce a term that benefits them, unless the contract says otherwise. Most commercial papers exclude the Act. A subcontractor cannot sue the end client without a warrantyA warranty is a promise that something is true, such as “this work is original” or “we have the right to grant this licence.”More in the glossary or a 1999 Act right.
Last updated 28 October 2026
Dunlop v Selfridge [1915] AC 847 is the old common-law picture: a stranger to the contract cannot sue on it. That is why a freelancer on a studio’s paper has no claim against the studio’s client, and why the client has no claim against the freelancer’s unpaid subcontractor, unless someone has built a bridge. The 1999 Act is that bridge, and most drafts close it.
We exclude the Act as a default, then open a named door if an affiliate, funder or end client actually needs to enforce a clause — usually confidentialityConfidentiality is a promise to keep shared information private and to use it only for the agreed purpose.More in the glossary or IP. Lex will not give “any group company” a free run at the liability cap. See third-party rights and assignment.
Can a subcontractor sue the end client?
Not on the head contract, unless the 1999 Act is left on and the term purports to benefit them, or they have a collateral warranty. Privity is why construction uses collateral warranties and why agencies keep the subcontractor on a back-to-back paper with the studio, not with the brand.
How did the 1999 Act change the rule?
Section 1 lets a third party enforce a term if the contract expressly says they may, or if the term purports to confer a benefit on them and the contract does not show a contrary intention. Parties can — and usually do — say the Act does not apply. That restores privity.
Should we exclude third-party rights?
Yes, as the default, then grant a named right where you need one. A blanket exclusion plus a one-line “Clause 8 may be enforced by the named End Client” is the clean pattern. See third-party rights.
Is novation a way around privity?
novationNovation replaces one contract with a new contract, swapping in a new party and releasing an old one. In England and Wales it needs the consent of everyone involved: outgoing, incoming and remaining. Unlike assignment, novation can move obligations as well as rights, because the original deal is discharged.More in the glossary replaces the contract so the new party is a party. That is not a third-party right; it is a new bargain. Assignment moves rights but leaves duties behind. Do not use one word for the other three devices.
A worked example
A brand hires a studio; the studio hires a freelancer. The freelancer is not paid. They cannot sue the brand on the head contract: they are not a party, and the MSA excludes the 1999 Act. They sue the studio on their own paper. If the brand had wanted a direct right in the freelancer’s confidentiality clause, the studio would have named the brand in a 1999 Act line, or taken a collateral warranty.
How it shows up in a contract
Sample wording · our own drafting
A person who is not a party to this agreement has no right under the Contracts (Rights of Third Parties) Act 1999 to enforce any term, except that [named person] may enforce [clause]. The parties may vary or rescind this agreement without that person's consent, except for that clause.
In Plain English
Outsiders cannot sue on this contract. The 1999 Act is switched off, except for one named person on one named clause. Everyone else stays behind privity.
Common mistakes
- Assuming a subcontractor can chase the end client for the fee.
- Leaving the 1999 Act on by silence, so an unnamed “beneficiary” later claims a right.
- Granting “any affiliate” a right to enforce the whole contract, including the cap on the wrong side.
- Calling a novation a third-party right.
What the legislation says
A person who is not a party can enforce a term if the contract expressly says so, or if the term purports to confer a benefit on them, unless the contract shows the parties did not intend that. Contracts commonly exclude this right.
Source: Contracts (Rights of Third Parties) Act 1999, s.1Checked 7 October 2026Pending lawyer review
Sources
- Contracts (Rights of Third Parties) Act 1999, s.1Checked 7 October 2026Pending lawyer review
Frequently asked questions
What is privity of contract?
The rule that only the parties can sue on the bargain. Dunlop v Selfridge [1915] AC 847 is the common-law case. The 1999 Act is the limited statutory exception.
Can a subcontractor sue the end client?
Not on the head contract, unless the 1999 Act is left on and the term benefits them, or they have a collateral warranty.
How did the 1999 Act change the rule?
Section 1 lets a third party enforce a term that is expressed to be for them, or that purports to benefit them, unless the contract says otherwise.
Should we exclude third-party rights?
Yes, as the default, then grant a named right where you need one. See /glossary/third-party-rights.
Related
The legal wording governsLast reviewed 28 October 2026Pending lawyer review