PRIVITY OF CONTRACT. The relation which subsists between two contracting parties. Hamm. on Part. 182. [3]
Here being "in privity" to a contract is simply defined as being a party to the contract. We can get more insight by looking into the requirements for becoming such a party, by forming such a contract. The chief requirement is a "meeting of the minds". Lysander Spooner described the relationship of legal privity as being one of "mutual recognition, consent, and agreement"[1].
We have to go back more than a century to find significant usage of the word beyond its parched modern usage in English law. In English literature prior to the 20th century, the word "privity" appears in contexts which indicate two connotations. The first, most linguistically obvious connotation, is that one has "privity" to an event if one has knowledge of it that is shared by few others. In this interpretation it means being privy to an event. The second connotation is that one assents to that event, or to its consequences. The event might have been called to the attention of others; it or its consequences might have been prevented or avoided. "Privity" thus often carries the connotation of moral or legal responsibility. This event is usually, furthermore, some human action; what contract law refers to as "performance" when such action has been promised.
In an English translation of Josephus a delegation of authority (in legal terms, agency) is rendered thusly: "Conquer him by the forces that are under thy command, without my privity"[4]. Similarly Shakespeare[5] writes about action taken "without the privity of the King". "Without" here carries the connotation of "beyond", as in lying outside of a boundary. "Privity" is thus seens as a boundary defined by the scope of knowledge (usually accompanied by consent) of the agents in question.
One of the earlier occurence of "privity" describes a purely subjective phenonenon: the "privity" between a person and a god he believes in and worships. The 14th-century mystical tome of Walter Hilton, _The Scale of Ladder of Perfection_[5], emphasizes the "privity of spiritual love". Between two people we might call this "empathy". This gives us a species of what Michael Polanyi describes as "tacit knowledge"[6], knowledge which cannot be articulated but must remain subjective. Furthermore, even explicit knowledge of special circumstances is widely dispersed[8]. The basis of privity is the distribution of knowledge, both articulable and implicit.
The modern legal principle of "privity"[2] has been modified in many jurisdictions by the doctrine foreseeability. The fixed, clear boundary of foreseeability around a contract provided by privity is erased, in an attempt to define the scope of responsibility as "foreseeability" in particular cases. This reflects the computational hubris of the legal positivists. This third-party subjective imposition on the legal process may be one of the major causes of the spiralling tort costs in the U.S. in the latter half of the 20th century.
A nineteenth-century legal definition of "privity" further describes a relationship between person and property; an interesting use of the word which I will expand upon below.
This brings us to an interesting parallel which shows the utility of this revitalized concept of privity in the information age. Our definition of privity now corresponds to the passive and active attacks against a data security system. Passive attacks against privacy are epitomized by Eve, the eavesdropper. Active attacks against performance are epitomized by Mallet, a malicious interferer.[9]
Having added control to privacy, privity becomes a meta-relationship: a relationship between a relationship in which certain parties are in privity, and third parties who lie outside the bounds of that relationship. This recovered and reconstructed privity, or generalized privity, is the protection of the contents and activtities of a relationship (or specifically, the terms and performance of a contract) from third parties.
Privity thus encompasses property rights as stable objects linked to particular contracts (and thereby the parties in privity to such contracts, the "owners"). It lets us analyze the basis of property rights as not merely Lockean "mixing of labor", but as a matter of knowledge, stability, and incentive. Property as the privity of objects to a contract encompasses the myriad exceptions to strict single-owner property rights found in legal traditions: liens, collateral, etc. With its forebears, this new privity carries the connotation of responsibility by those parties for the activities within the contract. It creates a clear boundary within which operate a coherent set of rights, responsibilities, and the knowledge with which to carry out those responsibilities and protect those rights. Perhaps most importantly, recovered privity gives us a basis for analyzing new claims regarding new kinds of property (especially "intellectual property").
Our recovered privity also drives a stake through the heart of "social contract" theory. This argument was well made both by Edward, Earl of Clarendon[7] and Lysander Spooner[1].
We now have recovered and reconstructed a much more general, useful privity than the sterile definition left in 20th century legal textbooks. This new and renewed idea of privity, as clarified boundaries of knowledge, control, and responsibility within and between relationships, is ideal for specifying a variety of cyberspace relationships, whether informal or formalized via legal code or software.
References: [0] My web essays can be found under http://www.best.com/~szabo/ [1] Lysander Spooner, "No Treason: The Constitution of No Authority" [2] Palmer, _The Paths to Privity: The History of Third-Party Beneficiary Contracts at English Law_ [3] John Bouvier, A Law Dictionary, http://www.constitution.org/bouv/bouvierp.txt [4] English translation of Josephus by William Whiston. http://wesley.nnc.edu/josephus/ant-18.htm [5] William Shakespeare, "Henry VIII". http://the-tech.mit.edu/Shakespeare/History/kinghenryviii/kinghenryviii.1.1.html [5] The 14th-century mystical tome of Walter Hilton, The Scale or Ladder of Perfection http://ccel.wheaton.edu/hilton/ladder/ladder-PART-3.html [6] Michael Polanyi, Personal Knowledge [7] Edward, Earl of Clarendon, "A Survey of Hobbes and His Leviathan" http://socserv2.socsci.mcmaster.ca/~econ/ugcm/3ll3/hobbes/clarend [8] Friedrich Hayek, "On the Use of Knowledge in Society" [9] Bruce Schneier, _Applied Cryptography_
