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Privity of Contract

The doctrine of privity of contract states that only parties to a contract can enforce it, meaning a third party cannot sue even if the contract benefits them. In India, while the definition of consideration is broader than in English law, the principle of privity remains applicable, allowing only parties to enforce contracts. Exceptions exist, such as beneficiaries under trusts, conduct acknowledgment, and family arrangements, which allow certain non-parties to enforce specific rights.

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13 views2 pages

Privity of Contract

The doctrine of privity of contract states that only parties to a contract can enforce it, meaning a third party cannot sue even if the contract benefits them. In India, while the definition of consideration is broader than in English law, the principle of privity remains applicable, allowing only parties to enforce contracts. Exceptions exist, such as beneficiaries under trusts, conduct acknowledgment, and family arrangements, which allow certain non-parties to enforce specific rights.

Uploaded by

Siyaa Karkera
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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Privity of contract

Thursday, September 28, 2023 6:41 PM

The doctrine of privity of contract means that only those persons who are parties to the contract can
enforce the same; a stranger to the contract cannot enforce a contract even though the contract may
have been entered into for his benefit. Example: If in a contract between A and B some benefit has been
conferred upon X, X cannot file a suit to enforce the contract because A and B are the only parties to the
contract whereas X is only a stranger to the contract.

In India a person may not have himself given any consideration but he can enforce the contract if he is a
party to the contract, because according to the Indian Law consideration may be given either by the
promisee or even a third party. That does not affect the rule of privity of contract.

Genesis of this principle:


▪ This principle had its genesis in the English Common law.

Dutton v Poole:
A wanted to sell wood to cover his daughter's wedding expenses. His son, the defendant, asked him not
to sell the wood and promised to give £1,000 to A's daughter in return. A refrained from selling the
wood, but the defendant didn't fulfill his promise to the daughter.

In this case, the defendant indeed made a promise to his father, and the father provided consideration
for that promise. Even though the daughter was not directly involved in the contract or its
consideration, the primary purpose of the agreement was to provide for her. To allow the son to keep
the wood while denying his sister her share would be unfair. Therefore, the son was held liable.

Tweddle Vs. Atkinson,


After the marriage of the plaintiff, there was a contract in writing between the plaintiff’s father and the
girl’s father that each would pay a certain sum of money to the plaintiff and the plaintiff would have a
right to sue for such sums. Plaintiff brought an action against girl’s father to recover the promised
amount.
Held: Plaintiff could not sue for the same. As the plaintiff was both a stranger to the contract as well as
stranger to consideration and he could not enforce the claim. It laid foundation for doctrine of “privity of
contract” which means that a contract is a contract between the parties only and no third person can
sue upon it even if it is made for his benefit.

Two fundamental principles


• Consideration must move from promisee and promisee only. If consideration moved from any person
other than promisee then promisee becomes stranger to the contract as such he cannot enforce the
contract
• A contract cannot be enforced by a person who is not a party to contract even though it is made for
his benefit. He is a stranger to contract and hence can claim no rights under it.

Indian law – Privity of Contract

The rule that “privity of contract” is needed and a stranger to contract cannot bring an action is equally
applicable in India as in England. Even though under the Indian Contract Act the definition of
consideration is wider than in English Law, yet the common law principle is generally applicable in India,
with the effect, that only a party to the contract is entitled to enforce the same.

Exceptions to the Privity Rule

contracts -1 Page 1
1. Beneficiaries under trust or charge or the other arrangements
- A person in whose favor a charge or other interest in some specific property has been
created may enforce it, though he is not a party to the contract.
- Khwaja Muhammad Khan v. Husaini Begum (1910)
(Agreement between the groom’s father and bride’s father to pay certain allowance to the bride after
marriage. Held: She was entitled to claim allowances, as a specific charge was created on the property in
her favor)

2. Conduct, Acknowledgment, or admission


- Sometimes there may be no privity of contract between the parties, but if one of them by
his conduct, acknowledgment, or admission recognises the right of the other to sue him, he may be
liable on the basis of the law of estoppel.
Narayani Devi v. Tagore Commercial Corporation Ltd (1973)
(Agreement between A & B, where A agreed to sell his shares worth 40,500 and in return B agreed to
pay 500 PM to A for his life and Rs. 250PM to his wife after A’s Death. When the payments were
stopped, A‘s widow brought the suit- Held: She was entitled to sue even though she was not a party to
the contract)

3. Provision for Marriage expenses or maintenance under a family arrangement


- Where the family arrangement is made between the family members, where an agreement is entered
to benefit the male members, and a provision is made for female members, she can enforce the
contract, although she is not a party to the contract or arrangement.
- Veeramam v. Appayya (1957)
[under the family arrangement, the father’s house was allotted to her daughter and she undertook to
maintain the father for his lifetime. The daughter being beneficiary under the compromise agreement, it
was held that she was entitled to sue for specific performance in her favor]

1. Covenants running with the land


Rule of privity is modified by the principles relating to transfer of immovable property A person
purchasing a land with the notice that the owner of the land is bound by certain duties created by an
agreement affecting the land shall be bound by them, although he was not a party to it.

contracts -1 Page 2

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