Whether the principle of privity of contract is applicable to contract of insurance

At common law, it is a firmly established principle that only a person who is a party to a contract can sue on it. This is the doctrine of privity of Contract.

In Dunlop Pneumatic Tyre Co. Ltd. v. Selfridge & Co. Ltd. (1915) A.C. 847 at 853, at the House of Lords (in England) Lord Haldane L.C. said of the position: "In the law of England certain principles are fundamental. One is that only a person who is a party to a contract can sue on it. Our law knows nothing of a jus quesitum tertio arising by way of contract. Such a right may be conferred by way of property, as for example, under a trust, but it cannot be conferred on a stranger to a contract as a right to enforce the contract in personam." See also Scrutfons Ltd. v. Midland Silicones Ltd. (1962) A.C. 446."

"In so far as the common law doctrine relates to a contract of Insurance (in Nigeria) the decision of the Supreme Court in Andrew O. Ajufor v. Christopher Ajabor & Ors. (1978) 6-7 S.C. 39 at 52 is instructive.

There the Supreme Court said; "Even if it were established that an identifiable person i.e. the 3rd defendant took up the policy of Insurance (Exhibits G & H) with the appellant, we are satisfied that a third party such as the respondent could not sue the appellant ab-initio. This must be so as there would be no privity of contract between the parties and even if such a right were conferred by a statute such as section 10 of the Motor Vehicles (Third Party) Insurance Act, Cap. 126 Laws of the Federation of Nigeria, it would still be inappropriate to bring in the insurer as a party, except, perhaps, by way of third party proceedings based on contract of indemnity if any. See Post Office v. Norwhich Union Fire Insurance Society Ltd. (1967) 1 All E.R. p.577 and Odubanjo v. New India Assurance Co. Ltd. - SC./69 (Unreported, delivered on 8/10/71 (References not supplied in the judgment but supplied by me).

"We think it was an error on the part of the learned trial Judge to have joined the appellant in these proceedings and to have proceeded to record a verdict against it when at the end of hearing no issue was joined on the pleadings between the respondent and the appellant."

Per OGUNTADE, J.C.A. in Unity Life & Fire Ins. Co. v. Ladega (1996) 1 NWLR (Pt. 427)