Doctrine of Privity of Contract

A stranger to a contract cannot be sued neither can sue a person who is not a party to contract. The law doesn’t allows a stranger to file a suit on the contract only a person who is a party to contract can sue or can be sued. This is called Privity of Contract.
Mr. A borrowed money from Mr. B.
Mr. B sold his property to Mr. C.
Mr. C promises Mr. A to pay the money on behalf of Mr. B.
Here in this case, if Mr. C fails to pay the money, Mr. A cannot sue him as Mr. C was a stranger to the contract Instead Mr. A can sue Mr. B for breaching the Contract.

Essentials to the Doctrine of Privity of Contract:-
1)The most important essential of the doctrine of Privity of Contract is that there has to be 2 or more competent persons or parties to contract.
2) There has to be a breach of contract between the parties/ from the parties for the application of the doctrine of contract.
3)Only parties to a contract are entitled to sue each other for the non performance of the contract by either party.

Consideration is the key element of any contract. Without consideration a contract is considered to be void.
As defined under section 2(d) of the Indian Contract Act, 1872 When, at the desire of the promisor, the promisee or any other person has done or abstained from doing, or promises to do or abstain from doing, something, such act or abstinence or promise is called a consideration for the promise.

Exceptions to the Doctrine of Privity of Contract.
A stranger who is not a party to the contract can sue on a contract in the following circumstances:-

1. Beneficiary
When two parties entered into a contract for the benefit of the third person. Then the third person can claim benefits from it and if one of the party fails to perform his part in not fulfilling the contract the third person can sue them.
Example:- Mr. A and Mr. B makes a Contract. Beneficial right was created in the favour of Mr. C. Then in this case, if any of the party fails to perform their part of the contract Mr. C can sue them.

2. Estoppel
When a contract is being made between the parties. Where a party with a clear intention makes a promise to the other party for a benefit of the third party. And the promise was made in the acknowledgement of the third party. If the party fails to fulfil the promise then the third party can sue him.
Example:- A contract is being made between Mr. A and Mr. B. Where, Mr. B promises Mr. A that he will pay him a certain sum of money and after his death to Mr. C and this promise was made in the acknowledgement of Mr. C. After the death of Mr. A, Mr. B refuses to pay the certain amount of money to Mr. C. Here, In this case Mr. C can take shelter under the Doctrine of Estoppel and can sue Mr. B.

Aishwarya Says:

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