Monday, November 24, 2014

Dear PM Advisor. Nov 24, 2014

Dear PM Advisor,

I am studying the Procurement Section of the PMBOK and don't understand the term: Privity of ContractsCan you explain this term in layman's language? 

Private in Peshwar

Dear Private,

Privity of Contracts sounds like something you do in the bathroom. 

I'm no expert on procurement so I first looked through the PMBOK and couldn't find the term. I Googled it and it says, in effect, that a contract exists between a buyer and a seller and a person further down the line is not privy to this contract so he cannot sue one of the contracted parties. For example, a manufacturer sells to a distributor, they sell to a retailer, they sell to a consumer. The consumer is not privy to the contract between the manufacturer and distributor so he cannot sue. Of course, tort suits can still be filed if the product is defective. 

But looking over my words, I'm not sure how that helps you in your case. So I asked my friend Bala who deals with these contracts often. Here is his response: 

Privity of Contracts protects the buyer by preventing the seller from subcontracting out the work to a third party. 

Aha! In this way, the buyer ensures that the work contracted out is done by the firm they have contracted with, not some fly-by-night subcontractor. That make sense to me. How about you? 

Good luck,

PM Advisor.

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