THE

NIGERIAN JURIDICAL REVIEW

Vol. 12 (2014)
Articles Pages
Emancipation of Female Rights to Intestate Succession
under Igbo Customary Law
~ E. I. Nwogugu 1

Justifying the Right to Healthcare in Nigeria: Some Comparative Lessons

~ Edoba Bright Omoregie & Daud Momodu 13

The United States and Use of Unilateral Sanctions in International Law:

A Case for Proscription
~ Eric Edmundson Echa 33

Framework in International Humanitarian Law for the Construction

of the Legal Status and Rights of Non-State Actors in Contemporary
Armed Conflict
~ Emeka Adibe & Ijeamaka Anika 67

Exercise of Delegated Power in Disciplinary Proceedings in Nigerian

Administrative Law - Morenkeji v. Osun State Polytechnic & Ors. Revisited
~ Chukwunweke. A. Ogbuabor & Obinne Obiefuna 83

Challenges of the Practice of Customary Arbitration in Nigeria

~ Abdulrazaq A. Daibu & Lukman A. Abdulrauf 103
Consumer Protection in the Regulation of Telecommunications
Services in Nigeria: Not Yet “UHURU” for Consumers
~ Festus O. Ukwueze 125

Does Nigeria Follow the Contemporary Global Trend in Tax

Dispute Resolution Strategy?
~ J. J. Odinkonigbo & J. J. Ezeuko 151

Reforming the Privity of Contract Rule in Nigeria

~ Gabriel O. Arishe & Emmanuel C. Akpeme 185

FACULTY OF LAW
UNIVERSITY OF NIGERIA, ENUGU CAMPUS
 THE
NIGERIAN JURIDICAL REVIEW
Vol. 12 (2014)

FACULTY OF LAW
UNIVERSITY OF NIGERIA, ENUGU CAMPUS
 EDITORIAL BOARD

General Editor
Dr. Edith O. Nwosu, LL.B., LL.M., Ph.D., B.L

Assistant Editor
Dr. Chukwunweike A. Ogbuabor, LL.B., LL.M., Ph.D., B.L

Statute and Case Note Editor

Professor Ifeoma P. Enemo, LL.B., LL.M., Ph.D., B.L

Book Review Editor

John F. Olorunfemi, LL.B., LL.M., B.L

Distribution Coordinator
Damian U. Ajah, LL.B., LL.M., B.L
 EDITORIAL ADVISORY BOARD

Professor Boniface O. Okere, Professor Obiora Chinedu Okafor

Docteur d’Universite de Paris LL.B (Nig), LL.M, (Nig) LL.M,
Professor, Faculty of Law (Canada) Professor, Osgoode Hall
University of Nigeria Law School Canada, Chairperson,
UN Human Rights Council
Advisory Committee; General
Editor, The Transnational Human
Rights Review

Professor Chukwunonso Okafo Professor G. Chukwuemeka Nnona

LL.B (Nig), LL.M, Ph.D LL.B (Ife), LL.M (Lagos) LL.M
Professor of Law, University of (Harvard) Ph.D (Harvard)
Nigeria. Professor of Law, University of
Nigeria

Professor Ikechi Mgbeoji Dr. Damilola [Link]

LL.B (Nig), LL.M, JSD LL.M (Calgary), LL.M (Harvard),
Professor of Law, Ph.D (Oxford), Director, Institute
Osgoode Hall Law School for Oil, Gas, Energy,
Environmental and Toronto,
Canada Sustainable Development,
Afe Babalola University, Ado-
Ekiti, Nigeria

Professor Anthony O. Nwafor Hon. Justice Centus Chima Nweze

LL.B (Jos), LL.M (Nig), Ph.D (Jos) Justice of the Supreme Court of
Professor of Law, University of Nigeria,
Venda South Africa Abuja, Nigeria.
Professor Obi Aginam Professor Dakas C. J. Dakas, SAN
Senior Research Fellow & Head, LL.B (Jos), LL.M., Ph.D
Governance for Global Health Professor of Law,
United Nations University- University of Jos, Nigeria.
International
Visiting Professor, IR3S Ben Nwabueze
University of Tokyo; Adjunct Distinguished Professor of Law,
Research Professor of Nigerian Institute of Advanced
Law, Carleton University, Legal Studies,
Ottawa, Canada Abuja, Nigeria
 NIGERIAN JURIDICAL REVIEW

VOLUME 12 (2014)

To be cited as: (2014) 12 Nig. J. R.

ISSN: 0189 - 4315

© Faculty of Law, University of Nigeria, Enugu Campus

CONTRIBUTIONS
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THE NIGERIAN JURIDICAL REVIEW Vol. 12 [2014]

REFORMING THE PRIVITY OF CONTRACT RULE IN NIGERIA* ♦

Abstract

By the doctrine of privity of contract, a contract cannot confer rights

or impose obligations arising under it on any person except the
parties to it. The non-conferral of rights or benefits on third parties is
an aspect of the privity doctrine which is heavily criticised for its
inability to give effect to the intention of contracting parties to allow
a third party to enforce a contract for promises made in his or her
favour. The academic and judicial criticisms of the privity doctrine
need to be reviewed so as to make a strong case for the abolition of
the common law doctrine of privity of contract in Nigeria. It will be
seen that the adoption of statutory recognition of third party rights
in a contract has the potential of making Nigeria’s business
environment globally attractive and competitive.

Keywords: Privity of Contract, Privity Doctrine, Third Party, Reform, Promisor,

Promisee.

1. INTRODUCTION

The doctrine of privity of contract says that as a general rule, a

contract cannot confer rights or impose obligations arising under it
on any person except the parties to it. In other jurisdictions, the
privity rule is heavily criticised for its inability to give effect to the
intention of contracting parties to allow a third party to enforce a
contract for promises made in his or her favour. The shortcomings
of the privity doctrine and support for its reform have received much
academic attention in the United Kingdom as well as Australia. In
those countries, legislative interventions have helped to reform the
privity rule to a large extent. Unfortunately, Nigeria still relies on the
antiquated rules of privity developed under the common law and the
provisions of the statutes of general application in force in England

* Gabriel O. Arishe, LL.B, LL.M, Ph.D, B.L.; Senior Lecturer, Department of Public
Law, University of Benin, Benin City, Nigeria. Email: arishe@[Link].
♦
Emmanuel C. Akpeme, LL.B, LL.M, B.L., Legal Practitioner, Benin City, Nigeria.
Email: emmanuelakpeme@[Link].

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 Reforming the Privity of Contract Rule in Nigeria ~
G. O. Arishe & E. C. Akpeme
as at January 1, 1900 to guide issues of third party interest in
contracts. This has made the Nigerian law to be behind other
common law countries in contract law as it relates to third party
interest.
It must be admitted that in order to mitigate the difficulty posed
by the common law rule of privity, courts have developed exceptions
to the rule. This article examines those exceptions and finds that
they are fragile and inadequate in mitigating the hardship in the
privity doctrine and in suiting into today’s international contracts.
For example, the exception created by the Australian High Court in
Trident General Insurance Co. Ltd. v. McNiece Bros Pty Ltd. 1 has
limitations in the uncertainty of the extent of its scope. The cases
decided after Trident show that there are two views on this matter:
first, the cases that limit the application of the exception to insurance
contracts only 2 and second, cases that apply the exception to
situations outside the context of insurance contracts. 3 In the United
Kingdom where we inherited the common law from, the
inadequacies of the privity doctrine have been recognised and
legislative intervention has followed. 4
In view of these developments, this article further examines
judicial decisions and finds that the hardship evident in other
jurisdictions from the application of the privity rule is also clearly
manifest in Nigeria. This article, therefore, makes a strong case for
the replacement of the common law doctrine of privity of contract in
Nigeria with statutory provisions that would, amongst other things,
give recognition to third party rights in a contract in deserving cases
in order to make her business environment globally attractive and
competitive. The significance of this article is the need for reform
which it proffers, that it should be possible for contracting parties to
confer on third parties the right to enforce a benefit conferred on
them (third parties) by the contract. This article believes that though

1 (1988) 165 CLR 107.

2 See for example, Rail Corporation of New South Wales v Fluor Australia Pty. Ltd.
[2008] NSWSC 1348.
3 Westina Corporation Pty. Ltd. v BCG Contracting Pty. Ltd. [2008] WADC 183,

District Court of Western Australia.

4 See M. Chen-Wishart, Contract Law, 3rd edn. (Oxford: Oxford University Press,

2010), 189-190.

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THE NIGERIAN JURIDICAL REVIEW Vol. 12 [2014]
there are exceptions to the privity doctrine which apply to Nigeria as
common law rules, judicial reform is limited. Statutory interventions
in other common law jurisdictions indicate that statutory
recognition may be the best way forward. Statutory reform has the
added benefit of internationalising Nigerian contract law particularly
given the global recognition for third party rights. As globalised
trade is key for Nigeria’s economy, internationalising Nigerian
contract law will make trading relationships easier and smoother.
Therefore, concern of this article is limited to the conferral of rights
or benefits on third parties in a contract and the basic philosophy
behind this is the need to give effect to the intention of parties to the
contract.

2. GENERAL PRINCIPLES OF PRIVITY OF CONTRACT

A contract or its performance can affect a third party. 5 However, the
doctrine of privity means that, as a general rule, a contract cannot
confer rights or impose obligations arising under it on any person
except the parties to it. 6 The privity of contract doctrine dictates that
only persons who are parties to a contract are entitled to take action
to enforce it. A person who stands to gain a benefit from the contract
(a third party beneficiary) is not entitled to take any enforcement
action if he or she is denied the promised benefit. For example, A
promises B, for consideration moving from B, to pay C ₦100. A and B
are parties to the contract – privy to the contract – and can sue each
other if there is a breach by the other. C is not a party to the contract
and cannot sue A if A fails to pay C the sum of ₦100. The general
principle of privity of contract is succinctly stated thus: “As a general
principle a contract affects the parties to it, and cannot be enforced
by or against a person who is not a party, even if the contract is made

5 As when C guarantees a debt owed by A to B and A pays, thus releasing C who

thereby indirectly gains a benefit. See G. H. Treitel, The Law of Contract, 11th
edn. (London: Thomson, Sweet & Maxwell, 2003), p. 551.
6 Indeed, before Donoghue v Stevenson [1932] AC 562, the privity doctrine was
seen as precluding actions in tort by third parties arising from negligence by a
party to a contract in carrying it out: Winterbottom v Wright (1842) 10 M & W
109; 152 ER 402.

187
 Reforming the Privity of Contract Rule in Nigeria ~
G. O. Arishe & E. C. Akpeme
for his benefit and purports to give him the right to sue, or to make
him liable upon it.” 7
A classic authority for the doctrine is Dunlop Pneumatic Tyre Co.
Ltd. v. Selfridge Ltd. 8 where Lord Haldane said:
My Lords, in the law of England certain principles are
fundamental. One is that only a person who is a party to a
contract can sue on it. Our law knows nothing of a jus
quaesi tumtertio arising by way of contract. Such a right
may be conferred by way of property, as, for example,
under a trust but it cannot be conferred on a stranger to a
contract as a right to enforce the contract in personam.
It is generally agreed that the modern third party rule was
conclusively established in 1861 in Tweddle v. Atkinson. 9 In this case,
in consideration of the intended marriage between his daughter and
the plaintiff, Guy made a contract with the plaintiff’s father whereby
each promised to pay the plaintiff a sum of money. Guy failed to pay
and the plaintiff sued his executor. The action was dismissed on the
ground that the plaintiff was a stranger to the contract. The authority
of Tweddle v. Atkinson was soon generally acknowledged. In Gandy v
Gandy, Bowen LJ said that, in spite of earlier cases to the contrary,
Tweddle v. Atkinson had laid down “the true common law doctrine.” 10
The decision in Dunlop Pneumatic Tyre Co. Ltd. v Selfridge
Ltd. 11further illustrates the doctrine of privity. In this case, Dunlop
sold their tyres to a wholesaler, Dew & Co. In order to maintain the
prices of their tyres, they included a term in their contract of sale
requiring Dew to obtain from any trade customers to whom they
resold the tyres an undertaking in writing that, in consideration for
being allowed a discount off the list prices of the tyres, they would
observe the list prices on any further resale to a consumer and
would pay Dunlop £5 for every tyre sold in breach of that agreement.
Dew sold a tyre to Selfridge and duly obtained the undertaking in

7 Halsbury’s Laws of England, 3rd Edition, p. 66, para. 110.

8 [1915] A.C. 847 at 853. See also Coulls v. Bagot’s Executor & Trustee Co Ltd (1967)
119 CLR 460, at 478, per Barwick CJ.
9 (1861) 1 B & S 393; 121 ER 762.
10 (1885) 30 Ch. D 57, 69.
11 Above note 8.

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THE NIGERIAN JURIDICAL REVIEW Vol. 12 [2014]
favour of Dunlop from Selfridge. Selfridge sold the tyre in breach of
this agreement and Dunlop sued for the £5. The action failed because
Dunlop gave no consideration to Selfridge for the latter’s promises to
observe the list price and to pay Dunlop £5 if they failed to do so. It
was held that no consideration moved from them to Selfridge, and
that the contract was unenforceable by them. In clear terms, there
was no privity of contract between them and the defendants,
Selfridge.
Given Nigeria’s importation of the common law rules, the
principle firmly enunciated in Tweddle v. Atkinson found expression
in a plethora of cases. For example, in Negbenebor v. Negbenebor, 12
the Federal Supreme Court reversed an order compelling the
appellant to repay the loan obtained by his wife from the Lagos
University Teaching Hospital with which she purchased a car
because there was no privity of contract between him and the Lagos
University Teaching Hospital, and in addition, the car was not a
necessity for his wife.
There are two aspects of the common law doctrine of privity.
These are: (i) No one except a party to a contract can acquire rights
under it, and (ii) No one except a party can be subjected to liability
under it. 13 The justification for the second aspect is that a person
should not, as a general rule, have contractual obligations imposed
on him without his consent. The first principle is however difficult to
justify. 14 It is this first principle that this article criticises and calls
for reforms on.
An illustration of how the second principle of privity of contract
works is shown by the case of UBA PLC & Anor. v. Jargaba. 15 In this
case, the respondent was introduced to the second appellant, who
was manager in one of the branches of the first appellant in Kaduna
for the purpose of purchase of fertilizer in commercial quantities.
The second appellant had assured the respondent that the first
appellant had fertilizer for sale in commercial quantity. Based on the

12 (1971) 1 All NLR 210.

13 Treitel, above note 5, p. 588.
14 L. Atsegbua, Law of Contract (Benin City: Justice Jeco Printing and Publishing

Global, 2013), 228.

15 [2007] 11 NWLR (pt. 1045) 247.

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 Reforming the Privity of Contract Rule in Nigeria ~
G. O. Arishe & E. C. Akpeme
assurances, the respondent made payment in bank drafts to the tune
of ₦12,690,000.00 for the truck loads of fertilizer to the first
appellant on the instruction and directives of the second appellant.
When the respondent went to the second appellant to evacuate his
truck loads of fertilizer, he was directed by the second appellant to
the warehouse/premises of a company called Barmani Holdings
Company (Nig) Ltd in Kaduna, where the third party company told
him that there was a price increment ₦50.00
of per bag. The
respondent conceded to pay the increment for the truck loads of the
fertilizer despite his initial protest and reluctance. On evacuating the
9th truck load of fertilizer at Barmani Holdings (Nig) Ltd at a later
date, the respondent was informed that there was no more fertilizer
to evacuate. At this time, respondent’s outstanding balance was
₦6,960,000.00 hence the respondent went back to the second
appellant to demand a refund of the said balance. On this demand,
the respondent was paid the sum of ₦5 million, leaving a balance of
₦l,960,000.00. In an action by the respondent, the appellants claimed
that they were not responsible for this balance but Barmani Holdings
(Nig) Ltd. The High Court, Court of Appeal and the Supreme Court
arrived at the same decision that the doctrine of privity of contract is
all about sanctity of contract between the parties to it. The doctrine
will not apply to a non-party to the contract who may have
unwittingly, been dragged into the contract with a view to making
him a shield or scapegoat against the non-performance by one of the
parties. In the instant case, Barmani Holdings (Nig) Ltd was a
complete stranger to the contract between the appellants and the
respondent and so, only the appellants were held liable for the
unpaid balance of the money.
Also in Cross Rivers State Water Board v. Nugen Consulting
Engineering Ltd. & Ors., 16 the first and second respondents entered
into a contract with the appellant. The first and second respondents
completed their contract, and various interim payment certificates
totalling ₦3,604,736.69 were approved for payment but the
appellant, the third and fourth respondents refused to pay the said
amount. Consequently, the first and second respondents filed a suit
against the appellant, the third and fourth respondents for the sum

16 [2006] 13 NWLR (pt. 998) 589.

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THE NIGERIAN JURIDICAL REVIEW Vol. 12 [2014]
of ₦3,604,736.68 being the total amount due to them from the
appellant for the design and supervision of construction of water
supply scheme in Calabar. In response, the appellant, the third and
fourth respondents argued that the first and second respondents
were aware that the contract sum was to be paid by a non-
contracting third party, Hold Trade Co Ltd., on the recommendation
of the appellant. Consequently, the appellant, the third and fourth
respondents denied owing the first and second respondents, and
argued that Hold Trade Co. Ltd. should have been sued instead by
the claimants. The High Court and the Court of Appeal came to the
same conclusion that Hold Trade Co. Ltd., not being a named party to
the contract agreement but a total stranger to it, could not be
subjected to any obligations under it.
No doubt, the doctrine of privity of contract has close
relationship with the doctrine of consideration in contract. With very
few exceptions, a contract is enforceable only where there is a
consideration furnished by the promisee. In addition, privity of
contract requires that the consideration must move from the
promisee himself/herself in order to be entitled to enforce the
contract. Thus, if A gives consideration to B, the promisor, A is a
party (privy) to the contract and can enforce the promise. 17
However, as Halsbury explained, the fact that a person who is a
stranger to the consideration of a contract stands in such near
relationship to the party from whom the consideration flows does
not entitle him to sue upon the contract. 18
In CAP PLC v Vital Investment Ltd., Salami JCA (as he then was)
gave a further reason why the principle in Tweedle should be held
sacrosanct thus:
The reason for the enunciation of the principle of privity of contract
is based on consensus ad idem; it is only the contracting parties that
know what their enforceable rights or obligations are and therefore
a stranger should not be saddled with the responsibility. 19

17R. Brownsword, A Casebook on Contract, 12thedn. (London: Thomson, Sweet &

Maxwell, 2009), 289.
18 Above note 7.
19 [2006] 6 NWLR (pt. 976) 220 at 264.

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 Reforming the Privity of Contract Rule in Nigeria ~
G. O. Arishe & E. C. Akpeme
Consensus ad idem means that there was a meeting of the mind by
both parties to the contract, which is based on the intention to be
bound on certain commonly agreed terms. Knowledge is an
unsatisfactory explanation for the privity doctrine because a third
party may be aware of an obligation and yet not be bound unless
there is a clear intention on his/her part to be so bound. Conversely,
where there is a proper reform of the privity rule, a third party may
be able to claim a benefit which he/she had no knowledge of as at
the time of its creation. The case of CAP PLC itself illustrates the
inadequacy of knowledge as a basis for the privity doctrine. In that
case, the respondent supplied some chemicals to the appellant at the
appellant’s request. Under the terms of the contract, the appellant
was to pay the full value of the goods to the respondent within 30
days of delivery. However, the appellant completed payment eight
months after the stipulated time. The respondent claimed it sourced
the funds for the execution of the contract from a finance company to
the knowledge of the appellant, and under the terms of the finance
facility, the respondent was liable to pay a penalty of ₦1, 135, 750.00
per month in the event of delay in repayment of the facility. Since it
could not repay the loan due to the default of the appellant to pay
within 30 days, the respondent claimed against the appellant for the
penalty charges, loss of profit and loss of goodwill in the total sum of
₦15, 923, 250.00 with interest. The Court of Appeal in reversing the
decision of the Lagos High Court held that where there is no privity,
it cannot confer enforceable obligation on a person or persons who
are not parties to the contract even where the contract is for its
benefit. This meant that the appellant was not liable to pay the
accrued sum from the loan facility entered into by the respondent.
Harsh as the outcome of this decision may seem, it aptly
demonstrates the second principle of privity that an obligation
cannot be imposed on a party without his/her consent evidenced by
a clear intention. The respondent suffered for leaving out a vital term
in its contract agreement: penalty on the appellant for failure to pay
within 30 days. In addition, obviously there was no intention or
agreement between the respondent and the finance institution to
bind the appellant, and if such an agreement had existed, the
appellant would not have been bound by such an obligation in the

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THE NIGERIAN JURIDICAL REVIEW Vol. 12 [2014]
light of the second principle of privity which is a reasonable
principle.
Lord Denning had attempted to put the records straight as to the
correct position of the privity of contract rule years after its
formulation in Tweedle. This was in Drive Yourself Hire Co. (London)
Ltd. v. Strutt where His Lordship contended that:
It is often said to be a fundamental principle of our law that only a
person who is a party to a contract can sue on it. I wish to assert, as
distinctly as I can, that the common law in its original setting knew
no such principle. Indeed, it said quite the contrary. For the 200
years before 1861 it was settled law that, if a promise in a simple
contract was made expressly for the benefit of a third person in
such circumstances that it was intended to be enforceable by him,
then the common law would enforce the promise at his instance,
although he was not a party to the contract. 20
Denning LJ cited several cases to support his view. In Dutton v.
Poole, 21 a son promised his father that, in return for his father not
selling a wood, he would pay £1000 to his sister. The father refrained
from selling the wood, but the son did not pay. It was held that the
sister could sue, on the ground that the consideration and promise to
the father may well have extended to her on account of the tie of
blood between them. In Marchington v. Vernon, 22 Buller J said that,
independently of the rules prevailing in mercantile transactions, 23 if
one person makes a promise to another for the benefit of a third, the
third may maintain an action upon it. In Carnegie v Waugh, 24 the
tutors and curators of an infant, C, executed an agreement for a lease
with A, for an annual rent to be paid to C. It was held that C could sue

20 [1954] 1 QB 250 at 272.

21 (1678) 2 Lev 210; 83 ER 523. This decision was supported, obiter, by Lord
Mansfield in Martyn v Hind (1776) 2 Cowp 437, at 443; 98 ER 1174, at 1177.
22 (1797) 1 Bos & P 101, n (c); 126 ER 801, n (c).This case was described as “but a

loose note at Nisi Prius” by counsel in the interesting case of Phillips v Bateman
(1812) 16 East 356, 371;104 ER 1124, 1129, where A, in the face of a run on a
banking house, promised to support the bank with £30,000, whereupon note
holders stopped withdrawing their money. When the bank subsequently
stopped paying out, A was held not liable to an action by individual holders of
banknotes.
23 The case itself involved a bill of exchange.
24 (1823) 1 LJ (OS) KB 89.

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 Reforming the Privity of Contract Rule in Nigeria ~
G. O. Arishe & E. C. Akpeme
on the instrument, even though he was not a party to it. In spite of
the respectable line of authorities cited by Lord Denning to support
his compelling interpretation of the correct position of the privity
doctrine, His Lordship’s exposition was not followed by judges in
subsequent cases and so continued a complex rule of law in contract
with its attendant hardship.

3. EXCEPTIONS TO THE DOCTRINE OF PRIVITY OF CONTRACT

There are a number of exceptions to the privity of contract rule. 25

The first sets of exceptions are the general law exceptions which
include:
3.1. Agency
Agency is the relationship which exists between two persons, one of
whom (the principal) expressly or impliedly consents that the other
(the agent) should act on his behalf, and the other of whom (the
agent) similarly consents so to act or so acts. 26 One consequence of
this relationship is that the principal acquires rights (and liabilities)
under contracts made by the agent on his behalf with third parties.
Therefore, under an agency, a contract entered into with a third
party by the agent when exercising his authority is enforceable both
by and against the principal. 27 The limitation in this exception is that
contracts that do not include principal/agent relationship are not
covered.
3.2. Covenants Relating to Land
The law allows certain covenants (whether positive or restrictive) to
run with land so as to benefit (or burden) people other than the
original contracting parties. The relevant covenant may relate to
freehold land or leasehold land. The law relating to the running of
covenants is an illustration of where, for commercial and ethical
reasons, the privity of contract doctrine has been departed from

25 I. E. Sagay, Nigerian Law of Contract, 2nd edn. (Ibadan: Spectrum Books, 2000),
495-517.
26 F. M. B. Reynolds (ed.), Bowstead and Reynolds on Agency, 16th edn. (London:

Sweet & Maxwell, 1996) paras. 1-001; M. P. Furmston (ed.), Cheshire, Fifoot and
Furmston’s Law of Contract, 13th edn., (London: Butterworths, 1996), 483.
27UBA PLC v Ogundokun [2009] 6 NWLR (pt. 1138) 450.

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THE NIGERIAN JURIDICAL REVIEW Vol. 12 [2014]
through the development of a separate body of “non-contractual”
principles (here the principles being categorised as belonging to the
law of real property). The doctrine of privity created difficulty when
land is sold which has a covenant running with it. In the case of Tulk
v. Moxhay, 28equity created an exception to the privity doctrine.
3.3. Assignment of a Chose in Action
An assignment is the act of transferring to another all or part of one’s
property, interest or rights. 29 The owner of a contractual right can
transfer his interest to a third party, and the third party can enforce
the right against the debtor or obligation. Except when personal
considerations are at its foundation, the benefit of a contract may be
assigned (that is, transferred) to a third party. 30 The assignment is
effected through a contract between the promisee under the main
contract (that is, the assignor) and the third party (that is, the
assignee). In addition to assignment by an act of the parties, there
exists assignment by operation of law. Assignment may deprive
promisors of their chosen contracting party, although safeguards are
imposed to protect promisors.
3.4. Trust and Privity of Contract
Trust is a concept created by the courts of equity. A trust arises
where property is handed over to ‘B’ (trustee) by ‘A’ to hold for the
benefit of ‘C’ (beneficiary). The concept of trust is an exception to the
privity of contract rule. The beneficiary who is not a party to the
contract, but for whose benefit the trusteeship was created, can sue
the trustee. 31
3.5. Estoppel
Following the decision in Waltons Stores (Interstate) Ltd. v Maher, 32 a
third party may be able to seek relief against a promisor on the basis

28 (1848) 2 PH 774.
29 Black’s Law Dictionary, 9th Edition, 2009.
30 M. P. Furmston, op. cit.
31 See Southern Water Authority v Carey [1985] 2 All ER 1077, 1083 and Norwich

City Council v Harvey [1989] 1 WLR 828.

32 (1988) 164 CLR 387.

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 Reforming the Privity of Contract Rule in Nigeria ~
G. O. Arishe & E. C. Akpeme
of promissory estoppel principles. To succeed the third party would
need to establish the elements of promissory estoppel. 33
The second sets of exceptions are the statutory exceptions. Those
which exist in Nigeria include:
3.6. Insurance Contracts
Contracts relating to insurance are exceptions to the privity of
contract rule. Section 11 of the UK’s Married Women’s Property Act
1882 provides that:
Where a man insures his life for the benefit of his wife or children
or where a woman insures her life for the benefit of her husband or
children, the policy shall create a trust in favour of the objects
therein named.
This statute is of general application in Nigeria, except in the
Western States (including Edo and Delta States). This is because in
1958, the Married Women’s Property Law was passed in the
Western States. According to Sagay, 34 section 11 of the 1882 was not
included in the 1958 Law. Consequently, the common law and equity
apply when the rights of spouses or children who are beneficiary
under a life insurance policy come up for determination in the
former Western States. Under section 11 of the 1882 Act, a spouse or
children of an insured can bring an action to claim the benefit of the
policy against the insurance company, even though they are not
parties to the insurance contract. By section 11 of this provision, a
policy of assurance effected by any man on his own life and
expressed to be for the benefit of his wife, or of his children, or of his
wife and children, or of any of them, or by any woman on her own
life, and expressed to be for the benefit of her husband, or of her
children, or of her husband and children, or of any of them, shall
create a trust in favour of the objects therein named, and the moneys
payable under any such policy shall not, so long as any object of the

33 See Trident General Insurance Co Ltd v McNiece Bros Pty. Ltd., above note 1, at
145, per Deane J.
34 I. E. Sagay, above note 25, p.504.

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trust remains unperformed, form part of the estate of the insured, or
be subject to his or her debts. 35
Another exception to the privity of contract rule is to be found in
section 6(3) of the Motor Vehicles (Third Party) Insurance Act. 36 It
provides that:
Notwithstanding anything contained in any written law, a
person issuing a policy of insurance under this section shall be
liable to indemnify the persons or classes of persons specified
in the policy in respect of any liability which the policy
purports to cover in the case of these persons or classes of
persons.

A third party can sue an insurance company, even though he is not a

party to the contract between the insurance company and the
insured.
3.7. Property and Conveyancing Law
Under section 81(1) of the Property and Conveyancing Law, (Western
Nigeria), 37 it is provided as follows:
A person may take an immediate or other interest in land or other
property, or the benefit of any condition, right of entry, covenant or
agreement over or respecting land or other property, although he
may not be named as a party to the conveyance or other
instrument.
According to Sagay, 38 the effect of the above section would with one
stroke sweep away the doctrine of privity, and would entitle any
third party named in a contract to bring an action to enforce any
provision relating to any type of property made for his benefit.
However, in Beswick v. Beswick, 39 the House of Lords placed a
restriction on the interpretation of section 81(1). In this case, by an

35 This provision can also be found in s. 272(1) Contract Law, Cap. 32, Revised
Laws of Anambra State, 1991; and, s. 280(1) Contract Law, Cap. 26. Revised
Laws of Enugu State, 2004.
36 Cap. M22, LFN, 2004.
37 This section was copied from section 56 of the English Law of Property Act,

1925. See Sagay, above note 25.

38 Ibid, at p. 513.
39 [1965] A.C. 58.

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agreement in writing made in March 1962, P.B. then aged over 70
and in poor health, agreed with his nephew, the defendant, that he
would transfer to the nephew the goodwill and trade utensils of his
business in consideration of the nephew’s employing him as
consultant at £6 10s. a week for the rest of his life, and by clause 2
the nephew agreed for the same consideration to pay to P.B.’s wife
after his death an annuity charged on the business at the rate of £5 a
week for life. P.B.’s wife was not a party to the agreement. The
nephew took over the business and in November, 1963 P.B. died. The
nephew paid one sum of £5 to the widow, then aged 74 and in poor
health, but refused to pay any further sum. The widow, having taken
out letters of administration to her late husband’s estate, brought an
action against his nephew in her capacity as administratrix and also
in her personal capacity asking inter alia for specific performance of
the agreement. It was held that:
(i) The widow, as administratix of a party to the contract, was
entitled to an order for specific performance of the promise
made by the nephew and was not limited to recovering merely
nominal damages on the basis of the loss of the estate.
(ii) The widow was not entitled to enforce the obligation in her
personal capacity, since section 56 of the Law of Property Act
1925 (similar to section 81(1) of the Property and Conveyancing
Law of Western Nigeria) was a consolidation Act and did not
effect a fundamental change in the law so as to allow a third
party, not a party to a contract, to enforce it. In his own
contribution, Lord Upjohn said:
I find it difficult to dissent from the proposition that section 56
should be limited in its application to real property, but equally
difficult to agree with it. It may be that parliament inadvertently
altered the law by abrogating the old common law rule in respect of
contracts affecting personal property as well as real property, but it
never intended to alter the fundamental rule laid down in Tweddle
v. Atkinson.
The decision in Beswick v. Beswick is not binding on courts in States
in former Western Nigeria. We do not share the view of the House of
Lords in Beswick v. Beswick. The decision is irreconcilable with
section 81(1) of the Property and Conveyancing Law. The section is
clear enough. It applies to interest in land or other property, or the

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benefit of any condition, right of entry, covenant or agreement over
or respecting land or other property. Commenting on Beswick v.
Beswick, Cheshire, et. al, stated that:
Their Lordships admitted that, if section 56(1) (similar to section
81(1) was to be literally construed, its language was wide enough
to support the conclusions of Lord Denning and Danckwerts, LJ
(Court of Appeal Judgment in Beswick v. Beswick). But they were
reluctant to believe that the legislature, in an Act devoted to real
property, had inadvertently and irrelevantly revolutionised the law
of contract. The avowed purpose of the 1925 Act, according to its
title, was to consolidate the enactment relating to conveyance and
the law of property in England and Wales. It must therefore be
presumed that the legislature designed no drastic changes in such
enactments and the presumption was to be rebutted only by plain
words. 40
Cheshire, et al, had earlier observed that:
Beswick v Beswick appears to be a sanguinary defeat for those
who would hope to see the doctrine of privity curbed, if not
abolished. We believe that the intention of section 81(1) of
the Property and Conveyancing Law, was clear and definite.
This section abolishes the doctrine of privity of contract rule.
This common law rule has lost its usefulness. It serves no
useful purpose and its continued use will cause injustice to
third parties for whose benefit many contracts were entered
into. 41
The general law exceptions are inadequate as evident from judicial
decisions. While the statutory exceptions are commendable, the
statutes considered are specifically meant for contracts of insurance.
In fact, in Anambra and Enugu States, it is provided expressly that:
“No one may be entitled to or be bound by the terms of a contract
unless he is party thereto.” 42 The only noticeable exception in the

40M. P. Furmston, above note 26.

41Ibid, p. 471.
42Sections 266 and 274 of Contract Laws of Anambra and Enugu States
respectively. Sections 173 and 179 of both the Anambra and Enugu States
Contract Laws further require that a third party furnishes consideration before
he/she can benefit from a contract.

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contract laws of Anambra and Enugu States is the conferral of
benefits on an undisclosed principal to a contract entered into by
his/her agent who acted within the scope of authority of the agency
agreement. 43 This exception has limitation as it is useful only in
contracts involving agency relationship. Where a third party is not
an undisclosed principal, the exception will not apply to confer a
third party benefit.
Regrettably too, a statute of general application as old as 1882
constitutes one of the laws governing third party interest in a life
insurance policy in Nigeria: this is obviously an outdated statute. The
Property and Conveyancing Law which is the only statute with broad
application is restricted to States in the former Western Region. In
modern highly technical, complicated and trans-boundary
contractual agreements, for example in the construction industry,
the extractive industry and perhaps, in procurement contracts, the
general law exceptions and the modicum of statutory exceptions are
grossly inadequate. This necessitates a reform of the current law on
privity of contract in Nigeria.

4. THE NEED FOR REFORM OF THE PRIVITY RULE IN NIGERIA

The need to reform privity of contract rule in Nigeria may be the

same as the pressure that led to the reform of the common law
privity rule in the United Kingdom. In the UK, the need arose from
two principal sources: one was simple third-party beneficiary cases
of the kind represented by Beswick v Beswick (same as Nigeria at
least in States not bound by the Property and Conveyancing Law);
the other was the kind of case generated by complex chains or
networks of commercial contracts, where one party (whether the
client, main contractor, or downstream sub-contractor) sought to
rely on provisions in a contract in the chain or network to which it
was not directly a party. Stated formally, one puzzle arises where A
is in contract with B, B is in contract with C, and A now seeks to
recover financial losses by suing C. If A’s claim is barred in contract
(because of lack of privity), there is tension if the same claim is
recognised as a matter of tort law. Inadequacies and inconsistencies

43 Ss. 267 and 685, ibid.

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of this nature in the privity doctrine necessitate the call for reform in
the privity rule.
Clearly, the differences in statutory exceptions applicable to the
privity rule between States in the former Western Nigeria and the
rest of the country is a major concern with regard to the recognition
of third party rights in a contract. This observationbrings to the fore
the question whether Nigeria’s contract laws need to be harmonised
with regard to the recognition of third party rights? The submission
made in this sub-head addresses this specific issue and submits
firstly that the common law privity doctrine should be abolished and
that third party rights should be statutorily recognised. This is so
because by its current nature, a contract is an agreement enforceable
only by and against the parties to it. Where however necessary
reforms as canvassed here permit, a contract will empower a third
party to enforce a right or benefit conferred on him/her going by the
intention or agreement of the main parties to it. Secondly, the present
statutory laws providing for third party rights in States in Western
Nigeria, Edo and Delta States need to be harmonised in line with a
new national policy on third party rights to be adopted by all the
states of the Federation. Such a development will lead to uniformity
in view of the trans-boundary nature of modern contracts with the
use of information technology.
The privity rule has been heavily criticised for its inability to give
effect to the intention of contracting parties to allow a third party to
enforce a contract for promises made in his or her favour. As earlier
mentioned, the shortcomings of the privity doctrine and support for
its reform have received much academic attention in the United
Kingdom 44 as well as in Australia. 45 Although the Australian High

44 See for e.g., R. Flannigan, “The End of an Era (Error)” (1987) Vol. 103 No. 4 (Law
Quarterly Review) 564-593; J. N. Adams, D. Beyleveld and R. Brownsword,
“Privity of Contract – the Benefits and the Burdens of Law Reform” (1997) Vol.
60 (Modern Law Review) 238–264; J. Beatson, “Reforming the Law of Contracts
for the Benefit of Third Parties: A Second Bite at the Cherry”(1992)Vol. 45 No. 2
(Current Legal Problems) 1-28; A. L. Corbin, “Contracts for the Benefit of Third
Persons” (1930) Vol. 46 (Law Quarterly Review) 12-45; F. Dowrick, “A Jus
Quaesitum Tertio By Way of Contract in English Law” (1956) Vol. 19 (Modern
Law Review) 374-393; M. Furmston, “Return to Dunlop v. Selfridge?” (1960) Vol.
23 (Modern Law Review) 373-398; J. Wylie, “Contracts and Third Parties” (1966)
Vol. 17 (Northern Ireland Legal Quarterly) 351; B. Markesinis, “An Expanding

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G. O. Arishe & E. C. Akpeme
Court decision in Trident General Insurance Co. Ltd. v McNiece Bros.
Pty. Ltd. created a new exception (the ‘Trident exception’), 46 there
are limitations in the uncertainty on the extent of its scope. The
cases decided after Trident show that there are two views on this
matter; first the cases that limit the application of the exception to
insurance contracts only and secondly, cases that apply the
exception to situations outside the context of insurance contracts. 47
However, cases necessitating the consideration of the Trident
exception are yet to arise in Nigeria, and so, the utility of this
exception to Nigeria is yet unknown.
The hardship inherent in the privity rule in Nigeria is most
illustrated by the Supreme Court case of Ikpeazu v. ACB Ltd. 48 In that
case, E was indebted to the respondent and could not repay the loan.
There was a deed agreement between E and the appellant who

Tort Law – The Price of a Rigid Contract Law” (1987) Vol. 103 (Law Quarterly
Review) 354; F. Reynolds, “Privity of Contract, the Boundaries of Categories and
the Limits of the Judicial Function” (1989) Vol. 105 (Law Quarterly Review)1; P.
Kincaid, “Third parties : Rationalising a Right to Sue” (1989) Vol. 48 No. 2
(Cambridge Law Journal) 243-270; J. Adams & R. Brownsword, “Privity and the
concept of a network contract” (1990) Vol. 10 No. 1 (Legal Studies)12;
[Link] & R. Brownsword, “Privity, Transitivity and Rationality” (1991) Vol.
54 (Modern Law Review)48; H. Beale, “Privity of Contract: Judicial and
Legislative Reform” (1995) Vol. 9 (Journal of Contract Law)103-124; J. Wilson, “A
Flexible Contract of Carriage – The Third Dimension?” (1996) Vol. 27 No. 2
(Lloyd’s Maritime & Commercial Law Quarterly) 187-201; and S. Whitaker,
“Privity of Contract and the Tort of Negligence: Future Directions” (1996) Vol. 16
(Oxford Journal of Legal Studies) 191-230.
45 M. Dean, “Removing a Blot on the Landscape – The Reform of the Doctrine of

Privity” (2000)Vol. 4 No. 1 (Journal of Business Law) 143–152; R. E. Forbes,

“Practical Approaches to Privity of Contract Problems”(2002) Vol. 37 No. 3
(Canadian Business Law Journal) 357-387; C. Macmillan, “Privity and the Third
Party Beneficiary: ‘The Monstrous Proposition’”(1994) (Lloyd’s Maritime &
Commercial Law Quarterly) 22–29; J. D. McCamus, “Loosening the Privity Fetters:
Should Common Law of Canada Recognise Contracts for the Benefit of Third
Parties?”(2001) Vol. 35 No. 2 (Canadian Business Law Journal) 173-215; C. Kelly,
“Privity of Contract – The Benefits of Reform” (2008) Vol. 8 No. 1 (Judicial
Studies Institute Journal) pp. 145-170.
46 Above note 1.
47 See for example Rail Corporation of New South Wales v. Fluor Australia Pty Ltd

[2008] NSWSC 1348; Westina Corporation Pty. Ltd. v. BCG Contracting Pty. Ltd.,
supra.
48 (1965) N.M.L.R. 374.

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incidentally was the Solicitor to the respondent. The agreement was
to the effect that the appellant should be running E’s business with a
view to paying proceeds after deduction of running cost to the
respondent bank until the debt was finally liquidated. By the terms
of the agreement, all the powers of E as Managing Director of the
business, including the collection and disbursement of revenue and
the control of staff and debt were relinquished to the appellant. A
copy of the agreement was deposited with the respondent bank by
the appellant. However, the appellant operated the business for
some time without paying the debt to the respondent and handed
over the business back to E. In an action by the respondent bank to
claim the debt from him and E, the appellant denied liability of any
kind with regard to the debt but lost at the High Court. He alone
appealed the High Court judgment. Relying on Tweedle and Dunlop
Pneumatic, the Supreme Court held that the bank was not privy to
the contract between the appellant and E, their customer debtor, and
therefore could not benefit under it. The appellant’s appeal
succeeded. Clearly, the intention of the agreement between E and the
solicitor was the management of the business of E by a party other
than E in order to get the funds needed for the repayment of his debt
to the respondent bank. By that agreement between E and the
solicitor, a benefit had been created in favour of the respondent bank
which was brought to its knowledge, and so should be enforceable
by it. Unfortunately, the common law rule of privity prevented the
bank from enforcing its right and benefit under that agreement.
In another case, the Supreme Court reiterated its earlier
position. 49 In that case, the second appellant took a lease of certain
industrial property from the first appellant with a covenant not to
sublease or assign without the written consent of the lessor which
consent should not be unreasonably withheld. The second appellant
subleased the property to the respondent. The first appellant
withheld assent and thereafter moved into the premises and pulled
down the building being erected by the respondent on the site. The
respondent brought an action against the appellants for specific
performance in which the Court held that only parties to an

49 LSDPC & Anor. v. Nigerian Land & Sea Foods Ltd.& Anor. [1992] 6 SCNJ (Pt. 11)
2243; [1992] 5 NWLR (Pt. 244) 653.

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agreement can enforce it. The Court’s opinion was that as there was
no privity of contract between the first appellant and the respondent
as the contract to sublet was between the second appellant and the
respondent, subject to the consent of the first appellant, an order for
specific performance could not be decreed against the second
appellant. As it was in Ikpeazu, a benefit was created for the
respondent which it properly took opportunity of. The failure to
comply with consent requirement is that of the second appellant and
not the respondent’s. The nullification of the sublease agreement
worked hardship on the respondent. Instances like this bring to the
fore the shortcomings of the privity of contract rule in today’s
modern business practices where chain contract is fast becoming an
everyday practice.
Some cases may appear quite confusing, but a proper analysis
will reveal their nature. In Attorney General of the Federation & Anor.
v. AIC Ltd., 50 the Supreme Court had an opportunity to consider one
of such cases. Here, the respondent (AIC Ltd) was appointed through
an oral agreement as the sole representative of an Italian company
engaged in the manufacture and sale of Aircrafts. The agreement was
that the respondent would receive 10 per cent commission on any
sale in Nigeria. The respondent informed the Italian company that it
had secured a contract with the Ministry of Defence and asked for
the 10 per cent commission. The Italian company denied the
existence of any agreement. The respondent claimed against the
Italian company the payment of the said commission and also
claimed against the Ministry of Defence and its agents an injunction
against any payment of the contract sum to the Italian company
without the Italian company agreeing to pay the 10 per cent
commission to the respondents. The Supreme Court refused to
uphold the claims of the respondent. In addition to the position of
the Ministry of Defence as a total stranger to the exclusive
representation agreement between the respondent and the Italian
company, two other factors were fatal to the claims of the
respondent company. Firstly, this was an oral agreement which
existence was denied by the Italian company. Secondly, there was no
agreement between contracting parties that created a benefit in

50 [2000] 10 NWLR (Pt. 675) 293.

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favour of the respondent as a third party; rather, the respondent
sought to enforce its parole contract with the Italian Company in a
way that that would have imposed an obligation on a third party –
the Ministry of Defence. Placing an injunction on the Ministry of
Defence would have worked against freedom of contract law and
allowed needless meddlesomeness by a third party. Such
interference is not what is being canvassed here by way of reform. In
the light of this explanation, the AIC Ltd decision is supportable.
In the same vein, a third party cannot come in to create a benefit
for himself/herself outside the intention of the contracting parties in
the main contract. The conferral of benefit with the corresponding
power to sue should exist where contracting parties by their
intention create such a benefit. This was not the case in Onamade &
Anor. v. ACB Ltd. 51 In this case, the first appellant and the second
appellant entered into an agreement whereby the latter undertook
to pay the balance of the former’s mortgage debt to the respondent
bank. The respondent however refused to sign the deed of release
prepared by the second appellant and further refused to release the
title documents of the mortgage property to the second appellant
even after receiving the said balance sum from him via a cheque. The
Supreme Court rightly held that there was no privity of contract
between the second appellant and the respondent. This judgement is
supportable on the ground that there was no agreement between the
first appellant and the respondent to transfer the title documents to
the second respondent. 52 There was already an existing contract and
so the intervention of the second appellant (as a third party) was to
willingly undertake the obligation of the first appellant as pertaining
to the indebtedness and so could not have created a benefit for
himself in that process in the form of take-over of the mortgaged
property. Apart from these obvious cases which are clearly

51[1997] 1 NWLR (Pt.480) 123.

52 The decision of the Court was partly premised on the provisions of the Land Use
Act. The separate agreement entered into by the first and second appellants
purported to create a new mortgage in favour of the 2nd appellant or otherwise
to transfer the rights and benefits under the relevant mortgage from the
respondent to the 2nd appellant without the consent of the Governor of Oyo
State first had and obtained: ss. 22 & 26.

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supportable on principle, the current law as represented by Ikpeazu
and LSPDC is no longer useful.
In 1995, the UK Court of Appeal in Darlington Borough Council v.
Wiltshier Northern Ltd. in criticising the present law said:
The case for recognising a contract for the benefit of a third party is
simple and straightforward. The autonomy of the will of the parties
should be respected. The law of contract should give effect to the
reasonable expectations of contracting parties. Principle certainly
requires that a burden should not be imposed on a third party
without his consent. But there is no doctrinal, logical, or policy
reason why the law should deny effectiveness to a contract for the
benefit of a third party where that is the expressed intention of the
parties. Moreover, often the parties, and particularly third parties,
organise their affairs on the faith of the contract. They rely on the
contract. It is therefore unjust to deny effectiveness to such a
contract. 53
Other justices had similarly criticised the rule for its deficiencies. In
Beswick v. Beswick, 54 Lord Reid cited with approval the U.K. Law
Revision Committee’s proposals that when a contract by its express
terms purports to confer a benefit directly on a third party, it should
be enforceable by the third party in its own name. While implying
that the way forward was by legislation, he stated that the House of
Lords might find it necessary to deal with the matter if there was a
further long period of Parliamentary procrastination. In Woodar
Investment Development Ltd. v. Wimpey Construction UK Ltd., 55 Lord
Salmon (dissenting) regarded the law concerning damages for loss
suffered by third parties as most unsatisfactory and hoped that,
unless it were altered by statute, the House of Lords would
reconsider it. 56 Lord Scarman expressed “regret that [the] House has
not yet found the opportunity to reconsider the two rules which
effectually prevent [the promisee] or [the third party] recovering
that which [the promisor], for value, has agreed to provide.” 57 He
reminded the House that twelve years had passed since Lord Reid in
Beswick v. Beswick had called for a reconsideration of the rule, and
hoped that all the cases which “stand guard over this unjust rule”

53 [1995] 1 WLR 68, at 76, Steyn LJ. Emphasis added.

54 [1968] AC 58, at 72.
55 [1980] 1 WLR 277.
56 Ibid, at 291.
57 Ibid, at 300.

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might be reviewed. 58 Lord Scarman concluded his judgment with an
unequivocal call for reform:
[T]he crude proposition...that the state of English law is such that
neither [the third party] for whom the benefit was intended nor
[the promisee] who contracted for it can recover it, if the contract is
terminated by [the promisor’s] refusal to perform, calls for review
... now, not forty years on. 59
In Forster v. Silvermere Golf and Equestrian Centre Ltd., 60 Dillon J
referred to the effects of Woodar in the case before him as being a
blot on the law and thoroughly unjust. In Swain v. Law Society, 61 Lord
Diplock referred to the general non-recognition of third party rights
as “an anachronistic shortcoming that has for many years been
regarded as a reproach to English private law.” Later, Lord Goff and
Steyn LJ added their influential voices to the criticisms of the third
party rule. In The Pioneer Container, 62 Lord Goff called into question
the future of the rule, and in White v. Jones, 63 his Lordship said:
[O]ur law of contract is widely seen as deficient in the sense that it
is perceived to be hampered by the presence of an unnecessary
doctrine of consideration and (through a strict doctrine of privity of
contract) stunted through a failure to recognise a jus quaesitum
tertio. 64
Steyn LJ’s dicta in Darlington Borough Council v. Wiltshier Northern
Ltd. 65 are particularly notable for their forthright treatment of the
third party rule.

58 At p. 300. Lord Keith, at pp. 297-298, also associated himself with Lord
Scarman’s view.
59 [1980] 1 WLR 277, at 301.
60 [1981] 125 SJ 397.
61 [1983] 1 AC 598, at 611.
62 [1994] 2 AC 324, at 335.
63 [1995] 2 AC 207.
64 [1995] 2 AC 207, at 262-263.
65 Above note 1. Steyn LJ later went on to say, after referring to the UK

Consultation Paper, that there is a respectable argument that reform is best

achieved by the courts working out sensible solutions on a case-by-case basis.
“But that requires the door to be opened by the House of Lords reviewing the
major cases which are thought to have entrenched the rule of privity of contract.
Unfortunately, there will be few opportunities for the House of Lords to do so:”
at p. 78.

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Of the criticisms of the third party rule made by the judiciary in
common law jurisdictions, the judgments in the High Court of
Australia in Trident General Insurance Co Ltd v. McNiece Bros. Pty.
Ltd. 66 are particularly clear and rigorous. A company which operated
a limestone crushing plant took out a liability insurance policy with
the appellants (Trident), which was expressed to cover all
contractors at the plant. The respondent contractor (McNiece) fell
within the terms of the policy, but when it sought indemnification for
damages payable to one of its sub-contractors, the appellant
insurance company refused to indemnify the respondent on the
grounds that the latter was not a party to the contract of insurance.
The respondent succeeded before the High Court of Australia, 67 in a
decision which effectively reversed the decision of the legislature not
to make the Insurance Contracts Act 1984 retrospective. In doing so,
three of the Justices mounted an attack on the doctrine of privity.
Mason CJ and Wilson J were of the opinion that “[t]here is much
substance in the criticisms directed at the traditional common law
rules [of privity]...,” 68 and they accepted that reform was needed in
the area under consideration, as it was an example of “common law
rules which operate unsatisfactorily and unjustly.” 69 Toohey J was
even more vociferous, stating that the rule is “based on shaky
foundations and, in its widest form, lacks support both in logic or
jurisprudence”. 70 He was of the opinion that,
...when a rule of the common law harks back no further than the
middle of the last century, when it has been the subject of constant
criticism and when, in its widest form, it lacks a sound foundation
in jurisprudence and logic and further, when that rule has been so
affected by exceptions or qualifications, I see nothing inimical to

66 Supra. In Olsson v. Dyson (1969) 120 CLR 365, 392, Windeyer J. in the High Court
of Australia spoke of “...the rigidity of the obstacles the common law doctrine of
privity of contract places in the way of justice to third parties.”
67 Brennan and Dawson JJ dissenting.
68 Supra, at 118.
69 Ibid, at 123.
70 Ibid, at 168.

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principled development in this Court now declaring the law to be
otherwise... 71
In the event, Mason CJ and Toohey and Wilson JJ decided the case on
the basis of a specific abrogation of the third party rule in relation to
insurance contracts. Two reasons were advanced. First, it would be
unjust not to give effect to the contracting parties’ intentions.
Secondly, it was likely that third party beneficiaries would rely on an
insurance policy covering them and not insure separately. Deane and
Gaudron JJ favoured the use of a trust and the principle of unjust
enrichment 72 respectively, in order to avoid the injustice of the
operation of the third party rule, and even the two dissenting judges,
Brennan and Dawson JJ, based their dissent on maintaining coherent
and gradual development of the common law rather than justifying
their decision on the appropriateness of the rule itself.
The recognition of the inadequacies of the privity doctrine in the
United Kingdom led to legislative intervention 73 which resulted in
the passage of the Contract (Third Parties) Act 1999. The criticisms
and justifications for reform have been well summarised thus:
(1) the privity rule defeats the intention of contracting parties by
preventing third parties from suing when this was intended by
them, (2) the rule is unjust to third parties in defeating their
expectation and reliance interests, (3) the rule creates difficulties in
commercial life, (4) the rule creates a ‘legal black hole’ into which
contractual rights and liabilities simply disappear, (5) exceptions to
the privity rule are piecemeal, complex and uncertain and (6) the
rule has been abrogated throughout much of the common law
world including the United States, New Zealand and parts of

71 Ibid, at [Link] approach of Toohey J can be contrasted with that of

Iacobucci J. Iacobucci J. (with whom L’Heureux-Dube, Sopinka and Cory JJ
concurred) in London Drugs Ltd [Link] & Nagel International Ltd (1992) 97
DLR (4th) 261, at 340-370, spoke of the need for reform of the privity rule and,
while he did not think it appropriate for the courts to embark on major reform
or abolition, he recognised an obligation to ameliorate injustice by the
incremental relaxation of the rule in limited circumstances.
72 This is a novel and controversial approach in that the principle against unjust

enrichment is being used to protect expectations rather than to reverse benefits

acquired at the expense of the plaintiff: see [Link], “Privity of Contract and
Restitution” (1989) 105 (Law Quarterly Review) 4.
73 M. Chen-Wishart, above note 4.

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Australia. Moreover, the legal systems of most of the member
states of the European Union recognise and enforce the rights of
third parties under contracts. 74
It is useful to cite the view of Beale which may be considered as a fair
review of the UK law of 1999 as follows:
While it is perhaps too soon to claim that the Contracts (Rights of
Third Parties) Act 1999 has been an outstanding success, in that as
yet its use seems to be limited, I think we can say that it has
certainly not been a failure. Rather I regard it as useful but still
underused. 75
Similarly, the need for statutory modification of the privity doctrine
towards recognising third party rights to benefits created in their
favour has already been acted upon and initiated in three Australian
states of Western Australia, 76 Queensland 77 and the Northern
Territory. 78 It is noteworthy that the reform of the privity rule in the
UK and the three Australian States has modernised and
internationalised contract law in those jurisdictions. 79
The reforms canvassed for here are not totally strange to the
American jurisdiction as, in fact, recognition of third party right to
enforce a benefit created in his/her favour in a contract had been
applied in an interesting dimension long before the agitations for
reforms in the UK and Australia. In the American case of Ratzlaff v.

74 The Law Commission Report: “Privity of Contract: Contract for the Benefit of
Third Parties,” Law Com 242 Cm 3329, 1996 at [Link]
gov.ukdocslc242_privity_of_contract_for_the_benefit_of_third_parties.pdf. Last
accessed 26/11/2013, 2.30 pm.
75 See H. Beale, “A Review of the Contracts (Rights of Third Parties) Act 1999” in A.

Burrows and E. Peel, (eds.), Contract Formation and Parties (Oxford: Oxford
University Press, 2010), 225-250.
76 S. 11 Property Law Act 1969 (WA).
77 S. 55 Property Law Act 1974 (Qld).
78 S. 56 Law of Property Act 2000 (NT).
79 For a discussion of the legislative approaches in terms of statutory content in the

three Australian States, see M. F. Cheong and P. M. Tan, “Review of Australian

Contract Law: Submission on Privity of Contract and Third Party Rights” (2012)
at [Link]
ofAustralianContractLaw/Submission%20039%20-%20Contract%20Law%20
Review%20-%20Cheong%20and%[Link]. Last accessed 25/3/2014, 7.19
p.m.

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Franz Foods, 80
a third party was allowed to enforce a contract the
purpose of which was to benefit someone in his position, though he
was not expressly named in the contract. In that case, the respondent
in its business as a chicken processing and fertilizer plant, utilised
the sewers of the City of Green Forest, Arkansas, under a contract
which required and made it its duty to remove and eliminate from its
deposits into the sewer system some or all of the following refuse:
offal of fowls, blood, wastes and other unwholesome, offensive and
noxious waste products. The purpose of this contract was to prevent
the sewage facilities of the city from being oversaturated because if it
did, it would create harm to landowners located down-stream from
the city sewage facilities. The respondent knew of the purpose of this
contract. The appellants sued because the respondent violated its
contract with the City of Green Forest, Arkansas as it deposited all its
refuse inclusive of what should have been eliminated thereby
causing an oversaturation and consequent damage to the land of the
appellants. The appellate court held that the user who contracted not
to over-saturate the city’s treatment facilities because of the benefit
to certain unnamed landowners but who violated such a contract
and thereby caused pollution to the appellants’ lands is liable to
them. The respondent had attempted to hide under the immunity
arising from its lack of control of the city’s sewage facilities, but the
breach of the contract made in favour of the unnamed landowners
made it liable.
Judicial criticism of the privity doctrine has yet to be made in
Nigeria, at least from the cases reviewed in this article. Nigerian
judges have been content with applying the old common law privity
principle in Tweedle and Dunlop Pneumatic without an assessment of
its impact on modern contracts. Similarly, the level of academic
discourse which the privity doctrine has been subjected to in the UK
is yet to be replicated in Nigeria. But if it is felt that there is the need
to internationalise Nigerian contract law, coupled with the
realisation of the fact that England (from where Nigeria inherited the
common law) has already adopted changes, then, it is time to
seriously consider abolishing the privity rule and its archaic
statutory exceptions in favour of a new and modern national policy

80 (1971) 250 Ark. 1003, 468 S.W. 2d 239.

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on contract rules which will give birth to laws across Nigeria’s thirty-
six States and the federation that recognise third party rights to
enforce a contract if conditions that would be specified in the
statutes containing the reforms are met.

5. CONCLUSION

While it is self-evidently desirable, in view of the need to protect the

sanctity of mutual agreements, that a complete stranger to a contract
should not normally have contractual obligations forced upon him or
her without consent as typified by the case of Attorney General of the
Federation & Anor. v. AIC Ltd., the third party rule in the privity
doctrine (by which a third party cannot take rights under a contract
even where that is the intention of the contracting parties) has
outlived its usefulness. In the face of the damaging criticisms of the
rule against the conferral of benefit on a third party under a contract
in notable common law countries such as the United Kingdom and
Australia and the reforms already initiated in those jurisdictions,
Nigeria cannot continue to hold on to the old privity rule just for the
sake of precedent.
International contracts are very important tools in any thriving
modern economy. Antiquated laws of contract that slow down
contract processes and hold tenaciously to undue rigidity that has
long been abandoned in other climes are clear disincentives to the
attraction of international business groups and persons. This is so
because of the prominence of chain contracts in modern business
practices. Therefore, one requirement for Nigeria to meet its target
of becoming one of the twenty largest economies in the year 2020 is
the modernisation and harmonisation of its contract laws along the
line that has been canvassed in this article. Adopting necessary
reforms as suggested here would make the Nigerian business
environment contractually friendly to international investors.

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