When we talk about contracts in law, one important rule we often come across is the Doctrine of Privity of Contract. In simple terms, this principle means that only the people who are directly part of a contract have the right to go to court and enforce it. If someone else, who wasn’t a party to the contract, wants to sue or be sued under it, the law generally does not allow that. Even if the contract was made for that person’s benefit, they can't claim any rights under it.
Privity in Indian vs. English Law
In English law, the doctrine of privity applies strictly. A famous case that initially allowed a stranger to sue was Dutton v Poole (1678), but this was later overruled by Tweddle v Atkinson (1861), where the court held that only parties involved in a contract could sue or be sued. Even if a person benefited from the contract, they could not take legal action because they neither made the agreement nor provided the consideration.
On the other hand, Indian law treats this differently. According to Section 2(d) of the Indian Contract Act, 1872, it does not matter who gives the consideration as long as it is given at the desire of the promisor. So, in India, a person who is not a direct party to the contract but has given consideration can still sue. This is why the Doctrine of Privity of Consideration does not apply in India.
Key Elements of the Doctrine
To apply the doctrine, a few conditions must be met:
- A valid contract exists between two competent parties.
- There is lawful consideration involved.
- One party must have breached the contract.
- Only those two parties can take legal action against each other.
Exceptions to the doctrine
Even though the general rule says no, there are several exceptions especially under Indian law where a third party can sue:
- Trusts or Charges: If a contract creates a trust in someone’s favor, that person can enforce it. For example, in Khwaja Mohd. v. Husaini Begum (1910), a woman could claim her allowance from her father-in-law even though she wasn’t part of the agreement.
- Marriage or Family Settlements: If an agreement is made during events like a marriage or property division, a person benefiting from the arrangement can sue.
- Acknowledgement or Estoppel: If a promisor later accepts or acknowledges an obligation towards a third party, that person can sue. This was seen in Davaraja Urs v. Ram Krishnaiah, where the buyer acknowledged his duty to pay a third party.
- Assignment of Contracts: If a contract’s benefits are officially transferred (assigned) to someone else, that new person can sue. As held in Krishnan Lal Sahu v. Promila Bala, the assignee has the right to enforce the contract.
- Agency: If someone (agent) makes a contract on behalf of another (principal), the principal can enforce it, even if they didn’t directly make the agreement.
- Covenant over Land: If someone buys land knowing about certain attached rights or duties (even if they weren't party to the original agreement), they are bound by those. This was settled in Tulk v. Moxhay (1919).
- Fund Held for a Third Party: If money or a benefit is held by one party for a third party, that person might have a right to sue under a quasi-contract. This was mentioned in M.C. Chacko v. State of Travancore.
Conclusion
To wrap up, the Doctrine of Privity of Contract is a core concept in contract law that sets clear limits on who can enforce a contract. While English law sticks strictly to the rule, Indian law is more flexible, especially when it comes to who provides consideration. Moreover, multiple exceptions allow third parties to enforce rights if fairness and justice demand it. Understanding these rules and their exceptions helps us see how contract law balances legal formality with practical fairness.
