Privity of Contract
Introduction
In contract law, rights and obligations generally arise only between the parties who enter into the contract.
A person who is not a party to the contract cannot usually enforce it, even if the contract was made for his benefit.
This rule is known as the Doctrine of Privity of Contract. It is recognised in both English law and Indian law.
Meaning / Definition
The Doctrine of Privity of Contract means that only the parties to a contract can enforce the contract.
A stranger to the contract (a person who is not a party to the agreement) cannot file a case to enforce it, even if the agreement gives some benefit to that person.
Example:
If A and B make a contract, and the contract provides some benefit to X,
X cannot enforce the contract because he is not a party to it.
Thus:
- Only A and B, who made the contract, can enforce it.
- X is a stranger to the contract and therefore has no right to sue.
It is important to note that under Indian law, consideration (something given in return) may move from the promisee or even from another person, but this does not change the rule of privity of contract.
Modes or Types
Privity of Contract
This principle means that only the persons who made the contract can enforce it.
If a person is not a party to the contract, he is called a stranger to the contract, and he cannot enforce the agreement.
Privity of Consideration (English Law Principle)
Under English law, there is another rule called privity of consideration.
This rule means that consideration must move from the promisee (the person to whom the promise is made).
If the consideration is given by someone else, the promisee may not be able to enforce the contract.
However, Indian law does not strictly follow this rule, because under the Indian Contract Act, consideration may move from any person.
Important Case Law
Dutton v. Poole
Facts
A father intended to sell some wood to arrange money for his daughter’s marriage expenses.
His son requested him not to sell the wood and promised that he would pay £1000 to his sister instead.
The father did not sell the wood, but the son later refused to pay the money.
Judgment
The court held that the son was liable to pay the amount.
Reason
Even though the daughter was not a party to the contract, the agreement was clearly made for her benefit, and it would have been unfair to deny her the benefit.
Tweddle v. Atkinson
Facts
After a marriage, the father of the bride and the father of the groom agreed in writing that each would pay a certain amount to the groom.
The groom later sued to recover the promised amount.
Judgment
The court held that the groom could not enforce the contract.
Reason
He was not a party to the contract between the two fathers and had not provided consideration.
This case firmly established the Doctrine of Privity of Contract in English law.
Jamnadas v. Ramavtar
Facts
A mortgaged his property to X.
Later, A sold the property to B, and B agreed with A that he would repay the mortgage debt to X.
X sued B to recover the mortgage amount.
Judgment
The Privy Council held that X could not enforce the contract.
Reason
There was no contract between X and B.
Therefore, X was a stranger to the contract and had no right to sue.
Distinction / Comparison
Privity of Contract vs Privity of Consideration
| Basis | Privity of Contract | Privity of Consideration |
|---|---|---|
| Meaning | Only parties to a contract can enforce it | Consideration must move from the promisee |
| Legal system | Recognised in both English and Indian law | Strictly applied in English law |
| Position in India | Fully recognised | Not strictly followed because consideration may move from any person |
Practical Example
A contracts with B that B will deliver goods to C.
Later, B fails to deliver the goods.
Even though C was supposed to receive the goods, C cannot sue B because C was not a party to the contract between A and B.
Only A or B can enforce the contract.
Summary
- The Doctrine of Privity of Contract means that only parties to a contract can enforce it.
- A stranger to the contract (person who is not a party) cannot file a case to enforce it.
- This rule applies even if the contract provides benefit to that person.
- Tweddle v. Atkinson established the doctrine clearly in English law.
- Indian law also generally follows this rule.
- Even though consideration may move from any person in India, the rule of privity of contract still applies.