In contract law, privity refers to the relationship between the parties who have entered into a contract, and it determines who can enforce or be bound by the terms of the contract. The general rule of privity is that only parties to a contract can enforce or be bound by its terms.
Third party rights, on the other hand, refer to the ability of a third party to benefit from a contract between two other parties, even though the third party is not a party to the contract.
Under the common law rule of privity, a third party generally has no rights under a contract. This means that a third party cannot sue for breach of contract, even if the third party has been affected by the breach. For example, if A and B enter into a contract for the sale of goods, a third party C cannot sue either A or B for breach of the contract, even if the third party has been affected by the breach.
There are, however, some exceptions to the rule of privity. These exceptions allow third parties to enforce or be bound by the terms of a contract in certain circumstances. Some common exceptions to the rule of privity include:
Intended third-party beneficiary: When a contract is made for the benefit of a third party, that third party can enforce the contract.
Assignment: When a party assigns their rights or obligations under a contract to a third party, that third party can enforce the contract.
Agency: When an agent acts on behalf of a principal in entering into a contract, the principal can be bound by the terms of the contract.
Trusts: When a trust is created, the trustee can enforce the contract on behalf of the beneficiary.
Overall, privity is an important concept in contract law as it determines who can enforce or be bound by the terms of a contract. While the general rule is that only parties to a contract are bound by its terms, there are some exceptions to this rule which allow third parties to be bound by the contract or to enforce its terms.