Doctrine of privity and its application in relation to sub-contractitor's pay

Abstract

This study examines the doctrine of privity and its application in the construction industry. Doctrine of privity is related to issues of the creation of contractual obligations, concerning with the question of who has rights and liabilities under a contract. Sanctity of doctrine of privity means giving recognition to the contractual framework with appropriate legislation. It is a general idea that once parties duly enter into a contract, they must honour their obligations under that contract. However, along the way during the construction period, the situation the employer tends to intervention the construction process by passing the main contractor and goes direct to the sub-contractor is almost common, particularly in the payment issues. The main obstacle in this intervention is there is no privity of contract between the employer and the sub-contractor. It is submitted that doctrine of privity contract theory cannot accommodate third party rights. The comparative study shows that the doctrine of privity is embedded comfortably in Malaysia and UK law based on the decision made by the Malaysia and United Kingdom court. Numerous decisions of the courts in Malaysia and UK had recognised and supported the application of the doctrine. However, this study identified that there are few exceptions exist within the doctrine of privity such as assignment, trust, collateral contract, bill of lading and insurance contract. In the construction environment, most of the exception was created by meeting the needs of the employer to overwhelm the crucial situation due to dispute created by parties in the construction contract.