Law Reform Commission of Ireland Report on Privity of Contract and Third Party Rights

1. This Report forms part of the Commission‘s Second Programme of Law Reform 2000-20071 and follows the publication in 2006 of a Consultation Paper on Privity of Contract: Third Party Rights. 2. A contract is usually described as an agreement between two parties, whether corporate entities or individuals. The agreement is legally enforceable if it is based on genuine consent and involves an exchange of economic value, usually called consideration. For example, if A and B agree that A will paint B‘s fence and that in return B will pay A €100, both parties have provided consideration and the agreement will be enforced by the courts. Closely related to the requirement of consideration is the concept of privity of contract. In essence, privity means that only the parties to a contract – those privy to it – have enforceable rights and obligations under that contract. 3. This Report is concerned with identifying the role of privity of contract in the modern law of contract. Its purpose is to analyse whether the needs of those affected by privity would be best served by its reform and whether third parties should be able to enforce rights under contracts made for their benefit. In the Consultation Paper, the Commission provisionally recommended statutory reform and this Report contains the Commission‘s final views and recommendations. It takes into account developments since the Consultation Paper was published, comments made in submissions to the Commission and the views expressed at the seminar held by the Commission on 14th March 2007