A Study On The Exception-Regulation Of The Privity Principle

The rule of privity of contract, the fundamental principle of classical contract theory and the basis of morden contract law system, means only those involved in striking a bargain would have standing to enforce it, thus the contract is void to third party. However, with the development of society, transactional patterns have been greatly complified and diversified, sticking to the rule of privity may violate the rights of both contracting parties and third parties. Amendments have been seen in legislations as well as judical practices over the world, indicating that third party beneficiaries have been allowed to recover damages for breaches of contracts they were not party to under certain circumstances. It is called exceptions to privity of contract.While some regulations still need improvement, China sees the same tendency. In view of that, this essay makes researches on rule of exceptions to the privity of contract.From analysing practices from different contries, we divide the exceptions to the rule of privity into six specific types:first is the contract with terms purporting protection of interests of a third party, and the second is the contract exerting obligations on a third person, the third is the establishment of a creditor's subrogation and avoidance, the fourth is the expansion of contractual liability, including defect liability of the contract and post-contractual obligations, the fifth is when a third party maliciously infringes obligatory rights. Legislation and judical practice in China is no exception. In our current legislation, there are provisions concerning the exceptions to the rule of privity, which mainly on the security system for contract, the principle of "no break of lease with bargain" and the contract for the benefit of a third party. Nevertheless, our legislations on the exceptions to the rule of privity is very inperfect. For example, we have no clear provisions for maliciously infringing obligatory rights by a third party. The same is for the contract for the third party's interest. Therefore, our legislation needs a perfection on the liabily of the third party when he infringes other's obligatory rights and the contract for the third party's interest.