Also known as: privity rules · privity of contract
Written by attorneys — see sources below.
2 senses
A rule that determines whether a transferor of an interest in leased property remains obligated to perform an express lease promise after the transfer. The obligation survives if it rests on privity of contract and the enforcing party has not granted relief, or if it rests solely on privity of estate and the transfer does not end that privity.
A rule that determines whether a transferor of an interest in leased property remains obligated to perform an express lease promise after the transfer. The obligation survives if it rests on privity of contract and the enforcing party has not granted relief, or if it rests solely on privity of estate and the transfer does not end that privity.
A historical doctrine that barred a plaintiff from recovering against a manufacturer or seller for a defective product in the absence of a direct contractual relationship with the defendant.
Paula Pierce bought a carriage from a retailer. The carriage had a latent defect that caused an accident injuring her passenger. Paula sued the manufacturer. The court dismissed the claim because the passenger lacked any contractual relationship with the manufacturer.
A historical doctrine that barred a plaintiff from recovering against a manufacturer or seller for a defective product in the absence of a direct contractual relationship with the defendant.
Each sense below has its own examples, sources, and questions.
Patrick Phan leased commercial space to Pedro Pacheco under a lease containing an express promise to upgrade rooftop antennas. Pedro assigned the lease to Paige Porter in a writing that contained no release. When Paige stopped performing the upgrades, Patrick sued Pedro. The court held Pedro liable because the promise created privity of contract that survived the assignment.
Perry Pratt leased property to Penelope Price with an express maintenance covenant. Penelope assigned the lease to Platinum Partners and promised in writing to perform the covenant. Platinum later assigned to Peak Performance. When the maintenance failed, Perry sued Platinum. The court held Platinum liable on privity of contract that survived its own later assignment.
2 common questions
No. When the covenant rests on privity of contract, the original tenant remains liable after assignment unless the landlord expressly relieves the tenant of the obligation.
Supporting sources
Privity of contract arises from the original lease promise and survives assignment. Privity of estate arises from possession and ends with the transfer of the leasehold interest.
Supporting sources
The plaintiff, Winterbottom, initiated legal proceedings against the defendant, Wright, following an injury sustained in the operation of a mail coach. Wright had previously entered into a contract with the Postmaster-General under which he assumed responsibility for the repair and maintenance of the mail coaches. Winterbottom was employed by Atkinson, who had a separate contract with the Postmaster-General to provide the horses and drivers for the mail service, and the coach in question was supplied to Atkinson by the defendant. Subsequently, the coach overturned due to its defective condition, resulting in personal injury to the plaintiff. The declaration in the action alleged that the defendant had taken upon himself the sole and exclusive duty to keep the mail coach in a fit, proper, safe, and secure state and condition by virtue of his contract with the Postmaster-General. The plaintiff was not a party to the contract between Wright and the Postmaster-General. The case was heard before the Court of Exchequer, with opinions delivered by Lord Abinger, C.B., Alderson, B., and Rolfe, B. The proceedings culminated in the entry of judgment for the defendant after consideration of the parties' positions.
View casePrism Analytics purchased a vehicle whose wheel collapsed, injuring a passenger who was not the buyer. The passenger sued the manufacturer. The court allowed the claim even though the passenger had no direct contract with the manufacturer.
The defendant Buick Motor Company manufactured automobiles and purchased ready-made wheels from the Imperial Wheel Company of Flint, Michigan. The Imperial company had furnished the defendant with eighty thousand wheels, none of which had proved defective prior to this incident. The defendant sold one such automobile to a firm of automobile dealers in Schenectady, who in turn sold the car to the plaintiff. While the plaintiff was driving the automobile at a speed of only eight miles an hour, a wheel collapsed because it was made of defective wood whose spokes crumbled into fragments. The plaintiff was thrown out and injured. The wheel had been bought from the outside manufacturer rather than produced by the defendant. Evidence showed that the defects could have been discovered by reasonable inspection, which the defendant omitted. There was no claim that the defendant knew of the defect and willfully concealed it. The car was designed to go fifty miles an hour. It had seats for three persons. The plaintiff commenced an action for negligence against the defendant. The case was tried to a jury. The New York Court of Appeals affirmed the judgment with costs.
View casePacific Bank relied on an audit report prepared for a client. The report contained errors that caused the bank loss. The bank sued the auditor. The court denied recovery because the bank was not in privity with the auditor.
Osborne Computer Corporation was founded in 1980 by entrepreneur Adam Osborne and began manufacturing the Osborne I portable personal computer for the mass market, with shipments starting in 1981. By fall 1982, sales of the company's sole product had reached $10 million per month, making the company one of the fastest growing enterprises in the history of American business. In 1981 and again in 1982, the company retained Arthur Young & Company to audit its financial statements and issue audit reports. Arthur Young issued unqualified audit opinions on the company's 1981 and 1982 financial statements. The 1982 opinion was issued on February 11, 1983, appeared on Arthur Young's letterhead addressed to the company, and 100 copies of the professionally printed opinion were personally delivered to the company. The 1982 financial statements reported a modest net operating profit of $69,000 on sales of more than $68 million. In late 1982 the company postponed a planned initial public offering and instead issued warrants to investors in exchange for bridge financing loans or letters of credit. Plaintiffs, a group that included individuals as well as pension and venture capital funds, invested in the company in early 1983; one plaintiff, Robert Bily, purchased 37,500 shares of stock from Adam Osborne for $1.5 million. With one exception, plaintiffs testified that they made their investments in reliance on Arthur Young's unqualified 1982 audit opinion. After the warrant transaction closed on April 8, 1983, sales declined sharply because of manufacturing problems with the company's new Executive model computer, the public offering never occurred, and the company filed for bankruptcy on September 13, 1983, causing plaintiffs to lose their investments. Plaintiffs brought separate lawsuits against Arthur Young in Santa Clara County Superior Court that were consolidated for trial. Plaintiffs' expert witness identified more than 40 deficiencies in the 1982 audit amounting to gross professional negligence, including an understatement of liabilities by approximately $3 million that turned the reported $69,000 profit into a loss of more than $3 million, and testified that Arthur Young had discovered but failed to disclose material weaknesses in the company's internal accounting controls. After a 13-week trial the jury returned a verdict for plaintiffs on the professional negligence claim and awarded approximately $4.3 million in compensatory damages, but found for Arthur Young on the fraud and negligent misrepresentation claims. The trial court granted Arthur Young's motion for judgment notwithstanding the verdict on the negligence claim. The Court of Appeal reversed the judgment in favor of Arthur Young. The Supreme Court of California granted review.
View caseA worker was injured by a defective power tool purchased by his employer. The worker sued the manufacturer. The court permitted the suit without requiring the worker to show a direct purchase from the manufacturer.
In the mid-1960s through 1987, the plaintiffs worked as grinders at the General Dynamics Corporation Electric Boat facility in Groton, Connecticut, where their duties required them to use pneumatic hand tools manufactured by the defendants Chicago Pneumatic Tool Company, Stanley Works, and Dresser Industries, Inc., to smooth welds and metal surfaces. During this employment the plaintiffs developed permanent vascular and neurological impairment of their hands, manifesting as blanching of the fingers, pain, numbness, tingling, reduction of grip strength, cold intolerance, and clumsiness, symptoms diagnosed as hand arm vibration syndrome. Ronald Guameri, an industrial hygienist at Electric Boat, performed extensive testing of tools used at the shipyard and found that a large number of the defendants' tools violated vibration exposure limits established by the American National Standards Institute and exceeded the threshold limit promulgated by the American Conference of Governmental and Industrial Hygienists. Richard Alexander, a mechanical engineering professor, testified that methods to reduce vibration through isolation, dampening, and balancing had been available to manufacturers for at least thirty-five years. Charles Suggs, a research engineer, testified that he had reduced vibration hazards in chain saws by inserting rubber mounts in the 1960s, reduced vibration by 70 percent in tools without handles in the 1970s by wrapping them with resilient foam rubber and a metal sleeve, and in 1988 reduced vibration levels in the defendants' die grinders by between 35 and 60 percent using similar techniques. After a six-week trial the jury returned verdicts awarding the plaintiffs compensatory damages on their design defect claims, found that the defendants had provided inadequate warnings but awarded no damages on that claim because the plaintiffs failed to prove causation, and declined to award punitive damages. The defendants appealed from the judgment, and the plaintiffs cross-appealed. The Supreme Court of Connecticut transferred the appeal and cross-appeal from the Appellate Court to itself pursuant to Practice Book § 4023 and General Statutes § 51-199(c). Electric Boat followed a regular maintenance program involving daily inspection of tools. It purchased chucks and other replacement parts from outside vendors. It periodically removed certain safety features and used longer burr attachments on the tools.
View case2 common questions
MacPherson abolished the privity requirement for negligence claims involving defective products that are dangerous if defective, and the rule was later extended to all products-liability negligence actions.
Most jurisdictions have abandoned or relaxed the strict privity rule, allowing intended beneficiaries such as will beneficiaries to sue negligent drafters, though a minority of states retain the rule.