5. PRIVITY OF CONTRACT

The principle. What English law calls the principle of privity of contract requires that a contract should affect only the parties to it, and that third parties should therefore acquire neither rights nor duties under it.

That a third party could acquire no rights under a contract was an aspect of a wider principle which excluded all acquisi­tions through an extranea persona (i.e. a person outside the family). Within the law of property this principle yielded ground, but it remained unmodified in the law of obligations. That a third party could acquire no duties under a contract derived perhaps from the strictly personal and indeed physical character of an obligation in early law, when execution was against the person of the defaulting debtor, and the debt, it seems, died with the debtor.

Novation and delegation. It is no exception to this principle that the rights or duties created by a contract could be transferred to a third party by a fresh contract between the third party and

¹ See above, p. 24 f. Apart from the need expressly to plead the exceptio, how­ever, the practical differences between the civil law extinction of the debt and the Praetorian barring of the action were largely whittled away.

one of the original parties. There was then said to be a nova­tion,¹ the old contract being extinguished and replaced by the new. The new contract conferred no rights or duties on anyone who was not a party to it, but it did extinguish the rights or duties of the original contract. If therefore the novation effected a change of creditors, the consent of the original creditor was necessary, since he was being deprived of a right. On the other hand, if it effected a change of debtors, the original debtor could not be prejudiced by the extinction of his debt, and his consent was therefore not neccessary.

The most important application of this type of novation was in what is called delegatio. For example, if D owes C and G owes X, C can direct D to promise to pay X. D’s promise to pay X will novate and therefore extinguish C’s debt to X. In this way C can satisfy his debt to X by substituting D for himself, but such a substitution requires the consent of all three parties.

Assignment. In modern English law such a substitution can be effected without the consent of the debtor (D) by what is called assignment. G simply assigns, or transfers, his right against D to X and, subject to certain provisos, D is then bound to pay X. Such an assignment of rights would in Roman law have involved too great an inroad on the personal character of obligation, but what was in substance the same result was achieved by a variant of procedural representation. A litigant who was unable or unwilling to conduct his own case could appoint by mandate a representative to do so. The Praetor gave effect to this with­out doing violence to the civil law by a simple change of name within the formula: the action was brought (or defended) in the name of the principal, but the iudex was directed to give judgment for or against the representative.² To convert this

¹              For there to be a novation the new contract must effect some change in the old.

² If, for example, A alleges that B owes him money, but has appointed C to act for him, the skeleton of the formula will be: ‘If B owes A, condemn B to pay C.’ This formula Rutiliana (named after an otherwise unknown Praetor Rutilius) was used in other cases in which it was desired to transfer a burden or a benefit. See, for example, below, p. 203.

representation into an assignment of the action (cessio actionis), all that was necessary was for the principal to waive the repre­sentative’s duty to account to him for the proceeds of the man­date. There was then said to be a mandatum or procuratio ‘in rem suairi (for his own benefit). This simple device suffered how­ever from two defects. On the one hand, the authority to sue, like any other mandate, was revocable, and the assignor could therefore go back on the assignment at any time up to litis contestatio (joinder of issue) between the assignee and the debtor. And the assignment would be similarly destroyed by the death of either party. On the other hand, in the eyes of the law the debt was still owed to the principal (i.e. the assignor) who could therefore at any time before litis contestatio release it or accept satisfaction of it. Both defects were eventually remedied, though perhaps not completely until Justinian’s time. The first was met by allowing the assignee an actio utilis in his own name.

Agency. In modern law, if an agent enters into a contract on behalf of his principal with a third party, he creates rights and duties directly between principal and third party, and himself incurs neither. Roman law had no concept of agency in this sense, though eventually it evolved a system which yielded some of the same results. The slowness of the evolution and the in­adequacy of the outcome may have been due in part to the facts that business agents were often slaves and that within the family the law yielded fairly satisfactory results at quite an early stage of its history.

(i) Within the family. The law was in essentials the same for sons and daughters in potestate as it was for slaves, and we shall therefore for the sake of simplicity speak only of slaves. We have seen that by the civil law the rights but not the duties under a slave’s contracts vested in the master. If the contract were bilateral the master could not of course enforce his rights unless he were prepared to perform the duties, but this still left in his hands the decision whether the contract should be effec­tive or not, and in such circumstances few would be prepared to enter into contracts with slaves. From as early as the second century b.c., however, the Praetor began to grant remedies against the master on his slave’s contract. The device employed to prevent an open breach with the civil law was, as in assign­ment, the change of names within the formula.

(ii) Outside the family. Two other actiones adjecticiae qualitatis extended the same principle outside the family. If one man appointed another, whether a slave or son of his or not, as manager of a business undertaking (institor), he was liable in full by the actio institoria on contracts made in connexion with the business; and the owner or charterer of a ship was similarly liable, by the actio exercitoria, on the contracts of his captain.

In this way the liability of the principal was eventually estab­lished, but his entitlement was not. There was no corresponding action which the principal could bring against the third party. His remedy had to be found in assignment. We have seen that the agent was bound to account for the proceeds of his agency, and that this duty to account imported a duty to assign any action he had against the third party. The principal then sued as the agent of his own agent. In the ordinary case therefore both principal and third party would have an effective remedy against the other, the third party by the actio institoria or ad exemplum institonae, and the principal by assignment of the agent’s action. The remedy by assignment, however, had its defects: the agent might revoke the assignment or die before the principal had brought the action to litis contestatio, or he might simply refuse to make the assignment. We have seen that the effect of revocation or death was in the end nullified by giving the assignee (i.e. the principal in this case) a remedy in his own name. If the same course had been followed in the case of refusal to assign, the whole process of assignment would have become superfluous. Wherever there was a relationship of principal and agent the principal would have been able to sue on the agent’s contract in his own name. And since the third party was correspondingly able to sue by the actio institoria, &c., the substance of agency would have been achieved, except that the agent would have remained both liable and entitled.

But even Justinian seems not to have been prepared to take this last step.¹ For him the principle of privity of contract was apparently still too strong: the principal’s remedy must still be primarily against the agent for failure to assign, and only if this remedy was in the particular case valueless (i.e. if the agent were insolvent, or had disappeared, or had died without heirs) could he sue the third party directly. This was purposeless pedantry—to waive circuity where it would injure the prin­cipal, but to insist on it where it would not.

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