The Expanding Circle of Contract Law

• Jurisdiction: South Africa
• Citation: (2016) 27 Stell LR 227
• Published date: 27 May 2019
• Author: Jan M Smits
• Date: 27 May 2019
• Pages: 227-237

227

THE EXPANDING CIRCLE OF CONTRACT LAW

Jan M Smits

LLB LLM PhD (Leiden)

Professor, Maastricht University

1 Introduction

Few principles of private law are more obvious than privity of contracts.

Only the contracting parties themselves have the rights and obligations that

follow from their agreement; th ird parties are not affec ted by it.1 Legal doctrine

has it that no real exceptions to th is principle of the relative effect of contracts

exist. Agency, a contract for the benet of a third party (stipulatio alteri)2 and

so-called “direct actions” from third pa rties to a contracting party, or from

contracting parties to a third party,3 all have an independent justication that

leaves the doctrine of priv ity intac t.

However, the sanctity of the dogma of privity does not mea n that contracts

do not affect third par ties. On the contrary, if one looks beyond legal doctri ne

at the reality of contract practice, it becomes abundantly clear that individual

contracts can af fect other people in many different ways.4 If I buy the etching

entitled “Echoes and Shadows” and hang it on my wall, I a m depriving many

others from enjoying it. In the same vein, my decision to buy a Volkswagen

Jetta will make pollution increase to the detr iment of others. Similarly, when

two business part ners agree to open a restaurant, they are likely to lure

customers away from existi ng eateries in the area. The law usually does not

consider these side effects of exchange as relevant. Yet the question gaining

importance i n present-day society is whether this approach to privity is still

the right one and whether contract law should not expand the circle of people

it seeks to protect. This explorative contribution offers some thoughts on

whether there is indeed a need to expand the circle of contract law and , if so,

how this could be realised.

It is obvious why this topic ts a special issue in honour of my friend and

colleague Gerhard Lubbe. In the almost 40 years of his academic career

Gerhard not only contributed widely to the eld of contract law (with a special

focus on those who are in need of protection), but also showed a relentless

concern for the policy considerations underlyi ng the law. Ever since my rst

visit to Stellenbosch in 1995, I have greatly beneted from our conversations

1 See H Kötz Europe an Contract Law I (1997) 245 ff and for South Afr ican law eg LF van Huyssteen,

SWJ van der Merwe & CJ M axwell Contract Law in So uth Africa (2010) 312 ff and Mini ster of Public

Works & Land Affair s v Group Five Buildings L td 1999 4 SA 12 (SCA).

2 Widely accepte d in civil law juri sdictions, as ref lected in ar t 6:110 of the Principles of Europea n Contract

Law (“PECL”).

3 For example recogn ised in French law: Kötz European Contract Law 254, but abs ent in South African

law: Van Huyssteen et al Cont ract Law 314.

4 Cf MJ Trebilcock The Limits of Free dom of Contract (1993) 58 ff.

(2016) 27 Stell LR 227

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