Legal Definitions - privity

Privity refers to a direct, legally recognized connection or relationship between two or more parties concerning a particular matter, such as a contract, a piece of property, or a legal dispute. This connection establishes mutual rights and obligations between them, meaning they share a common interest or are directly affected by the same legal issues or transactions.

Here are some examples illustrating the concept of privity:

• In Contract Law: Imagine a software development company licenses its specialized accounting software to a large corporation. The license agreement specifies how many users can access the software and for what purposes. If an employee of that corporation uses the software in a way that violates the terms of the original license agreement (e.g., installing it on more computers than allowed), the software development company typically cannot directly sue the employee for breach of contract. This is because the legal relationship, or privity of contract, exists solely between the software development company and the corporation, not between the software company and individual employees.

• In Property Law: Consider a situation where a homeowner sells their house. The previous owner (the seller) had a written agreement with a neighbor, granting the neighbor an easement – a right to use a specific part of the property, like a driveway, to access their own land. When the new owner buys the house, they are now in privity of estate with the neighbor regarding that easement. This means the new owner is legally bound by the terms of the easement, even though they did not personally sign the original agreement, because the easement creates a direct legal relationship between successive property owners and the neighbor.

• In Litigation: Suppose a state government successfully sues a pharmaceutical company for misleading marketing practices concerning a particular drug, resulting in a large financial judgment against the company. Later, a consumer advocacy group, whose mission is to protect public health and whose interests were effectively represented by the state in the initial lawsuit, attempts to sue the same pharmaceutical company over the exact same misleading marketing practices. A court might rule that the consumer group is in privity with the state government for the purposes of that litigation. This means the consumer group would be bound by the previous judgment and generally prevented from re-litigating the same issues, as their interests were deemed adequately addressed in the prior action.