Introduction: According to Sec.2(d) of the Indian Contract Act,1872 (hereinafter mentioned as I.C.A.), consideration may be given by Promisee or any other person. In India there's a possibility that consideration for the promise may move not from the Promisee but a third person ,who is not a party to the contact. But in Englad, the position is different , there rule is that consideration must move from the Promisee and nobody else.
Privity of Contract: The doctrine of privity of contact means only those person who are parties to the contract,can enforce the contract. A stranger to a suit can't enforce a contract eventhough the contract may have been entered into for his benefit. E.g., there's a contract between A&B. Under that contract some benefit has been conferred upon X. Here in this case if the contract has breached by B , X can't file a suit against B for the enforcement of contract as because A&B are only parties to the contract wheras X is stranger to the contract.
The rule that a stranger to a contract can't sue but in India, a person who is stranger to a consideratin can sue, because according to Indian law, consideration may be given either by Promisee or by a third party ,so, that doesn't affect the rule of privity of conrtact.
The rule that a stranger to a contract can't sue but in India, a person who is stranger to a consideratin can sue, because according to Indian law, consideration may be given either by Promisee or by a third party ,so, that doesn't affect the rule of privity of conrtact.
Privity under English Law:- In Tweddel v. Atkinson, it was held that only parties to a contract can sue each other. In the instant case the plaintiff, A merried a girl B. After this marriage there was a contract between A's father and B's father that each would pay a certain sum of money to A and A will have the power to sue for such sums. After the death of the two father, A brought an action against the legal representative of B's father to recover the promised amount. It was held that A couldn't sue for the same as because plaintiff was stranger to consideration so he couldn't enforce the claim.
Privity under Indian Law:- The rule of privity if contract i.e.," stranger to a contract can't bring an action" is equally applicable in India as as in Englad. However under the I.C.A 1872, the definition of consideration is wider than the English law, yet the common law principal of privity of contract is generally applicable in India,with the effect that only a party to a contract is entitled to enforce the same.
In Jamna Das v. Ram Avatar, A had mortgage some property to X. A than sold the mortgaged property to B, B having agreed with A to pay off the mortgage debt to X. On the default of B , X brought an action against B to recover the mortgage money. It was held by the privy council that since there was no contract between X&B, so X couldn't enforce the contract to recover the amount from B.
Thus it is clear that a third person can't take an action into a contract, however there are some exceptions under this rule where a stranger to a contract can sue. So those exceptions are as follows-
(i) Trust or Charge: A well recognized exception to this rule is that that a trust or Charge created in some property in favour of third person.
In Narayani Devi v. Tagore Commercial Corp. Ltd. A had various share of the value of ₹40500. It was agreed that A would sell his shares in favour of B and in return B would pay to A ₹500 per month and after his death would pay ₹250 per month to A's widow during her life if she survived after her husband. C stood a surety for B. Some payments were made by C to A and after his death to A's widow. Thereafter the payments were stopped. A's widow brought an action against B and C to recover the amount. One of the defence pleaded was that since the plaintiff was not a party to the said agreement which was entered into by her husband and the defendants, she was not legally entitled to sue in respect of the agreement. Rejecting the contention of the defendants, the Calcutta H.C. held that from the facts and the circumstances of the case, an obligation in the nature of trust could be inferred in favour of the plaintiff and an equity having been created in her favour , accordingly she was entitled to sue even when she was not party to the contract. A decree was passed in her favour for the arrears of the amount due.
Thus it is clear that a third person can't take an action into a contract, however there are some exceptions under this rule where a stranger to a contract can sue. So those exceptions are as follows-
(i) Trust or Charge: A well recognized exception to this rule is that that a trust or Charge created in some property in favour of third person.
In Narayani Devi v. Tagore Commercial Corp. Ltd. A had various share of the value of ₹40500. It was agreed that A would sell his shares in favour of B and in return B would pay to A ₹500 per month and after his death would pay ₹250 per month to A's widow during her life if she survived after her husband. C stood a surety for B. Some payments were made by C to A and after his death to A's widow. Thereafter the payments were stopped. A's widow brought an action against B and C to recover the amount. One of the defence pleaded was that since the plaintiff was not a party to the said agreement which was entered into by her husband and the defendants, she was not legally entitled to sue in respect of the agreement. Rejecting the contention of the defendants, the Calcutta H.C. held that from the facts and the circumstances of the case, an obligation in the nature of trust could be inferred in favour of the plaintiff and an equity having been created in her favour , accordingly she was entitled to sue even when she was not party to the contract. A decree was passed in her favour for the arrears of the amount due.
(ii) Conduct, Acknowledgement or Admission: sometimes there may be no privity of contract between the two parties, but if one of them by his conduct, acknowledgement or admission recognizes the right of the other to sue him, he may be liable on the basis of the Law of Estoppel.
In the same aforesaid case i.e., Narayani Devi, when there was no contract between the plaintiff and the defendants but the defendants in their agreement with the plaintiff's husband had agreed to pay a certain amount to the plaintiff's husband during his lifetime and thereafter to the plaintiff, the question of the right of the plaintiff to sue the defendants had made arisen. It was established that the defendants hd made certain payments to the plaintiff and after her husband's death, in pursuance of the agreement and had thereafter asked for the extension of the time to pay. Apart from that it was found that the defendants, by their admission had earlier called upon the plaintiff to execute certain documents in this connection,which imples that they considered the plaintiff by their conduct to certain rights. It was therefore held that the defendants had created such privity with the plaintiff by their conduct and by acknowledgement and by admission that the plaintiff was entitled to her action even though there was no privity to contract but the plaintiff and the two defendants, when the said contract was entered into.
In the same aforesaid case i.e., Narayani Devi, when there was no contract between the plaintiff and the defendants but the defendants in their agreement with the plaintiff's husband had agreed to pay a certain amount to the plaintiff's husband during his lifetime and thereafter to the plaintiff, the question of the right of the plaintiff to sue the defendants had made arisen. It was established that the defendants hd made certain payments to the plaintiff and after her husband's death, in pursuance of the agreement and had thereafter asked for the extension of the time to pay. Apart from that it was found that the defendants, by their admission had earlier called upon the plaintiff to execute certain documents in this connection,which imples that they considered the plaintiff by their conduct to certain rights. It was therefore held that the defendants had created such privity with the plaintiff by their conduct and by acknowledgement and by admission that the plaintiff was entitled to her action even though there was no privity to contract but the plaintiff and the two defendants, when the said contract was entered into.
(iii) Provision for marriage expenses or maintenance under family arrangement:- When under a family arrangement the contract is intended to secure a benefit to a third party he may sue in his own right as beneficiary. Such an action has been allowed in many cases where, on the partition of joint family property between the male member. A provision is made for the maintenance of the female members of the family. The basis of the recognition of such an action is the application of the rule laid down in Veeramma v. Alpayu, under a family arrangement,the father's house was to be conveyed to his daughter and the daughter undertook to maintain him in his lifetime. The daughter being a beneficiary under the compromise arrangement, it was held that she was entitled to sue for the specific performance in her favour.
Conclusion: From the above discussion we get to know that privity of contract means only those persons ,who are parties to the contract can enforce the same (English law) whereas in indian law if the contract is made for the benefit of third party than the third party can bring an action to enforce the same, if the certain exceptions as discussed supra exist.
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