Vertical privity
Definition
1) In business law, the relationship between companies in a distribution chain. For example, a manufacturer and a distributor are in vertical privity. Those in vertical privity are jointly liable for product defects in the vertical chain.
2) The relationship between a party to a restrictive covenant and a person who later acquires the property burdened by the covenant from the party. The purchaser is bound by the covenant if he or she had sufficient notice of it at the time of purchase.
Illustrative caselaw
See, e.g. Berrier v. Simplicity Mfg., Inc., 563 F.3d 38 (3d Cir. 2009).
See also
Definition from Nolo’s Plain-English Law Dictionary
A legal relationship in corporate law that exists between companies in the chain of distribution of a product. This relationship creates responsibilities between the companies involved, including being liable for defects in the product. For example, vertical privity exists between the manufacturer of a car and the dealership that sells it. Therefore, both the dealer and the manufacturer are liable for defects in cars sold by the dealership.
Definition provided by Nolo’s Plain-English Law Dictionary.
August 19, 2010, 5:26 pm
