What does it mean for a contract to be in “privity”?

A contract being in "privity" implies that only the parties who have signed the contract possess the legal rights to enforce its terms. This legal principle is fundamental in contract law, indicating that third parties—those not directly involved in the agreement—do not have any rights or obligations under the contract.

In practice, this means that if one party fails to perform their duties as outlined in the contract, only the other party can seek legal remedies or enforce the contract against them. This situation protects the interests of the parties involved and ensures that only those who have agreed to the contract's terms can challenge or demand performance based on those terms.

Understanding privity is crucial, especially when considering situations involving third-party interests, where different legal rules might apply, such as the doctrine of third-party beneficiaries in some jurisdictions. Therefore, recognizing that the concept of privity primarily restricts enforcement to the signatory parties is key to understanding contract enforceability.