Privity of Contract in Financial Leasing
Abstract
This article examines the classical doctrine of privity of contract in the context of financial leasing transactions. According to the doctrine of privity, rights and duties originating from a certain contract shall only affect the parties to that contract. Despite the fact that the doctrine still is an undisputable main rule in Finnish law, exceptions to it are necessary. This is partly due to the fact that modern forms of exchange, finance and contractual practice require flexibility.The situation may be that a third party, who is formally not a party to a contract, is de facto comparable to a contractual party.
An example of a situation where the traditional and dogmatic division into inter partes and ultra partes relationships should be slightly reconsidered is a financial leasing transaction. Financial leasing is an established tripartite form of finance where, in short, the financier A purchases an object from the supplier B and leases it to the customer C who chose the object. The established practice in financial leasing transactions is that the supplier B and the financier A enter into a sales contract and the financier A and the customer C into a lease contract, which essentially differs from an ordinary lease contract on movable property. No formal contractual relationship between the supplier B and the customer C exists. However, it can be argued that a specific relationship – that is de facto comparable to a contractual relationship – does exist between the supplier B and the customer C.
The main focus of this article is on examining the relationships of the parties to the leasing transaction. It is argued that the examination should not be limited to the formal contractual relationship but deviating from the doctrine of privity should be possible if reasonable grounds weighty enough exist. What is to be considered “reasonable ground weighty enough” is examined mainly on the basis of the practical arguments developed by Olli Norros. In addition, due to the special features of a financial leasing transaction it is argued that financial leasing should be recognized as an independent form of finance. us, the relationships between the parties to the transaction should be examined considering the purpose of the parties, the situation de facto as well as the financial leasing transaction as a whole.
