Ensure that all people who may want to sue or enforce rights under a contract are listed as parties to the contract.
This is an important precaution to take as courts have enforced the rule of privity: only parties to a contract can sue on the contract or any of its terms, and only a party to a contract may be subject to liability.
This rule goes back to Tweddle v. Atkinson [1861 - Court of Queen’s Bench]. In this case, the fathers of the bride and the groom entered into a contract. The contract stated that the groom would be paid a sum of money by the father of the bride after marrying his daughter. The money was not paid to the groom. The groom tried to sue the father-in-law. The court did not allow the groom’s case because he was not a party to the contract; the contract could only be enforced by the parties to the contract i.e. the two fathers.
The rule of privity was also enforced, in Beswick v Beswick [1968 – HL] where the court concluded that a third party cannot directly enforce a contractual right.
In this case, there was an agreement between an uncle and nephew. The agreement stated that the nephew was going to pay a weekly sum to the uncle and then to his aunt after the death of the uncle. However, the nephew did not pay the sum to his aunt after the death of his uncle. The aunt requested specific performance and damages from the nephew. The case was held in favour of the nephew as the aunt was not a direct party to the contract.