It is not a word many of us use in everyday conversation: privity. But this legal term is important in discussions of contracts because there must be “privity” – a legally recognized interest in the same matter – for one party (a property owner) to sue another (a general contractor).
In some situations, a property owner and general contractor do not both have legally recognized interests in the same matter. In those circumstances, the contractor can have an absolute defense against construction defect claims – even when the construction was flawed.
In order for a property owner to assert breach of contract, they must have contract rights. Let’s look at an example of a situation in which the property owner would not have those rights.
It is common for a developer to sell an apartment building after its completion. But in this situation, the general contactor has no contract with the new owner. So in many cases, that new owner will not have contract rights and cannot sue the general contractor for breach of contract (one of the most common legal claims a property owner can assert in construction defect litigation).
Another common scenario in which the issue of privity arises: when condominium owner or homeowner associations want to sue general contractors. In most situations, the contractor does not sign construction contracts with those associations. It is instead the developer who typically has a contractual relationship with the associations, which means the associations have no contract rights to enforce against the general contractor.
At MacDonald Law Group, we handle a broad array of construction claims and litigation. Should you have any questions on these topics, please contact us using the email or telephone contacts found on our website at www.macdonaldlawgroup.com.