American Contract Law for a Global Age, 2017a

An Introduction to
CONTRACT NONPARTIES
Are We Not Done Yet?! If you have proceeded through the previous units in
this book, you have gone through every step of the contract process.
▪ What law applies—common law, UCC, CISG, or something else?
▪ Was there an agreement between the parties?
▪ If so, is the agreement supported by consideration or some substitute?
▪ If so, is there some defense to the formation of the contract?
▪ If not, have we interpreted the agreement and determined that what
each party was supposed to have done?
▪ If so, did one of the parties breach?
▪ If so, was the breach excused?
▪ If not, what remedies are available to party victimized by the breach?
But there is, in fact, one more type of issues that may arise and that we should
address. So far in all of our discussions we have assumed that the party raising the
claim of breach was a party to the contract. And that is by far the most common
situation.
Strangers to the Contract. Indeed, the general rule in contract law is that a
“stranger to the contract” (that is, one who is not a party) has no right to enforce the
contract. After all, contracts often are not isolated transactions, and many people may
have some generalized “interest” in the contracts. In some cases, like a contract
between a star athlete and a professional team, there may be literally millions of fans
with an interest in how one or both of the parties are performing the contract.
Imagine the chaos if anyone interested in whether a contract is performed could bring
a lawsuit. Even if we limit litigation rights to non-parties who actually have a direct
economic interest riding on the transaction, strong reasons still exist to restrict the
right to bring claims to the parties themselves. Suppose, for example that Tracy is
married to Dana, and Dana has a lucrative employment contract with her employer.
The employer breaches the contract and fires Dana. Tracy obviously has suffered
harm—where spouses share incomes the loss of one hurts both. If Dana does not want
to sue the employer, can Tracy sue for the harm that he suffered?
Generally, the answer to that question is “no.” The long-standing doctrine of
“privity of contract” holds that when parties create a contract, it benefits and binds
only themselves. They cannot impose contractual obligations on those who are not
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568 CHAPTER IX: CONTRACT NONPARTIES