{"id":903810,"date":"2025-01-14T15:01:09","date_gmt":"2025-01-14T22:01:09","guid":{"rendered":"https:\/\/www.myconstructionexpert.com\/blog\/?p=903810"},"modified":"2025-01-14T15:01:10","modified_gmt":"2025-01-14T22:01:10","slug":"privity-of-contract-legal-concept","status":"publish","type":"post","link":"https:\/\/www.myconstructionexpert.com\/blog\/privity-of-contract-legal-concept\/","title":{"rendered":"The Legal Concept of Privity of Contract"},"content":{"rendered":"\n<p>Robert B. Nussbaum | <a href=\"https:\/\/www.saiber.com\/insights\/publications\/2025-01-09-the-saiber-construction-law-column-december-2024\" target=\"_blank\" rel=\"noreferrer noopener nofollow\">Saiber Construction Law Column<\/a><\/p>\n\n\n\n<p>The legal concept of \u201c<a href=\"https:\/\/www.myconstructionexpert.com\/blog\/privity-of-contract-mechanics-lien\/\">privity of contract<\/a>\u201d is a common law principle which provides that only parties directly involved in a contract can enforce its terms or be held liable for its obligations. This means that third parties generally cannot enforce a contract, even if they were intended to benefit from it. A court of appeal in California recently held that a geotechnical company could be held liable to a homeowner even though the company\u2019s contract to provide geotechnical services was with the general contractor and not the homeowner.<\/p>\n\n\n\n<p>In&nbsp;<em>Lynch v. Peter &amp; Associates etc.<\/em>, homeowners hired a general contractor to perform home improvement construction, including an addition on their residential property. The general contractor engaged Peter &amp; Associates (\u201cPeter\u201d) to perform a geotechnical inspection of the soil at a footing trench it had excavated for the work. Peter conducted a visual inspection of the trench and used a three-foot probe to check the feel of the soil before issuing a report to both the contractor and the homeowners which stated that the soils were geotechnically acceptable and suitable for the intended use of supporting the addition to the plaintiffs\u2019 home. Based on the report, the general contractor poured the footing for the project, but the soil proved inadequate, causing the footing to collapse and damaging the plaintiffs\u2019 home. Plaintiffs sued various parties, including Peter for its professional negligence. Peter moved to dismiss the action against it, claiming, among other things, that it had no contract with plaintiffs.<\/p>\n\n\n\n<p>The appeals court rejected the geotechnical company\u2019s claim. The court recognized that historically there had been no liability for negligence committed while performing a contract in the absence of privity, but noted that courts had more recently permitted plaintiffs not in privity to recover damages in situations involving the negligent performance of a contract. In Lynch, the California court agreed that there was no privity between plaintiffs and Peter, but the court also found that Peter knew its geotechnical services would directly impact the plaintiffs\u2019 home and, in addition, Peter\u2019s report was addressed to the homeowners. The court concluded that the Peter firm also knew that its agreement with the general contractor was for the benefit of the homeowners. Accordingly, the appeals court ruled that the homeowners should be permitted to show at trial that Peter failed to perform its geotechnical services with the skill expected of a professional in its position.<\/p>\n\n\n\n<p>Similarly, it is well-settled in New Jersey that there is no privity of contract defense to a claim of negligence. Consequently, contractors should understand that if they do something negligently in the performance of a contract which causes damage to a third party, the contractor could be held liable for the third-party\u2019s damages.<\/p>\n\n\n\n<hr class=\"wp-block-separator has-alpha-channel-opacity\"\/>\n\n\n\n<p><strong>When one of your cases is in need of a construction expert, estimates, insurance appraisal or umpire services in defect or insurance disputes &#8211; please call Advise &amp; Consult, Inc. at 888.684.8305, or email <a href=\"mailto:experts@adviseandconsult.net\">experts@adviseandconsult.net<\/a>.<\/strong><\/p>\n","protected":false},"excerpt":{"rendered":"<p>Robert B. Nussbaum | Saiber Construction Law Column The legal concept of \u201cprivity of contract\u201d is a common law principle which provides that only parties directly involved in a contract can enforce its terms or be held liable for its obligations. This means that third parties generally cannot enforce a contract, even if they were&hellip; <a class=\"more-link\" href=\"https:\/\/www.myconstructionexpert.com\/blog\/privity-of-contract-legal-concept\/\">Continue reading <span class=\"screen-reader-text\">The Legal Concept of Privity of Contract<\/span><\/a><\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"jetpack_post_was_ever_published":false,"_jetpack_newsletter_access":"","_jetpack_dont_email_post_to_subs":false,"_jetpack_newsletter_tier_id":0,"_jetpack_memberships_contains_paywalled_content":false,"_jetpack_memberships_contains_paid_content":false,"footnotes":"","jetpack_publicize_message":"","jetpack_publicize_feature_enabled":true,"jetpack_social_post_already_shared":true,"jetpack_social_options":{"image_generator_settings":{"template":"highway","enabled":false},"version":2}},"categories":[9],"tags":[9895,224,12120],"class_list":["post-903810","post","type-post","status-publish","format-standard","hentry","category-construction-contracts","tag-advise-consult","tag-construction-contract","tag-privity-of-contract","entry"],"jetpack_publicize_connections":[],"yoast_head":"<!-- This site is optimized with the Yoast SEO plugin v25.0 - https:\/\/yoast.com\/wordpress\/plugins\/seo\/ -->\n<title>The Legal Concept of Privity of Contract - Advise &amp; 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