What is meant by "privity of contract"?

The term "privity of contract" refers to the legal principle that only the parties who are directly involved in a contract—the original parties—have the rights and obligations stemming from that contract. This means that if a contract is formed between two parties, only those two parties can enforce the terms of the contract or be held accountable for its obligations in a legal context.

This principle ensures that individuals or entities who are not parties to the contract cannot enforce any terms or seek legal recourse based on that contract. For example, if a contract exists between a contractor and a client, a third party—such as a friend of the contractor—cannot claim any rights or take legal action based on this contract, no matter how much they may be impacted by the outcomes of the agreement.

Understanding this concept is crucial in contractual law, as it highlights the importance of clearly defined relationships within agreements and protects the integrity of the contractual obligations agreed upon by the involved parties.