The Second Opinion: Can A Non-Contracting Party Sue For Breach Of Contract? The Ontario Court Of Appeal Addresses The Doctrine Of Privity

When can a person who is not a formal party to a contract sue for its breach? The Ontario Court of Appeal grappled with this and related privity issues in its recent decision in Brown v. Belleville (City), 2013 ONCA 148.

The facts of the decision in Brown are, briefly, as follows. The Township of Thurlow, which subsequently amalgamated with the City of Belleville (the "City"), entered into an agreement with a farmer, undertaking to perpetually maintain and repair a storm sewer drainage system on the farmer's land (the "Agreement"). The land in question was sold to third parties called the Pleizers. The Pleizers subsequently sold the land to the Browns. The Agreement was never expressly assigned to either the Pleizers nor to the Browns. However, the Agreement did contain a clause stating that it "[s]hall [e]nure to the benefit of and be binding upon the parties hereto and their respective heirs, administrators, successors and assigns." The City disavowed its obligations under the Agreement. The Browns ultimately sued the City, seeking specific performance of the Agreement or damages for its breach. In defence, the City argued, among other things, that the Browns did not have standing to sue it for breach of the Agreement.

The Ontario Court of Appeal ruled that the Browns could sue for breach of the Agreement. While recognizing that it is "an established principle of contract law...that 'no one but the parties to a contract can be bound by it or entitled under it'", the Court went on to state that this "doctrine...is of considerably diminished force in Canada" and that "it persists only in weakened form." Although the traditional exceptions to the doctrine of privity - namely, trust and agency - were not engaged by this case, the Court nevertheless ruled that doctrine did not bar the claim by the Browns.

The Court rested its decision principally on the enurement clause, stating that:

"[T]he broad and unqualified language of the enurement clause constitutes an...