Based on the principles of the English Common Law, The Indian Contract Act, 1872 allows both the parties entering a contract with the provision to sue each other. This principle is known as the privity of the contract. For instance, Susan was supposed to be delivered goods by Ravi. If the latter violates this contract, then Susan can legally sue Ravi. No ‘stranger to the contract’ is allowed to sue any of the parties involved in it. But are there any exceptions to such a case? Let us learn now.
Privity of Contract and Privity of Consideration in India
We have seen what privity of contract means, but before moving further, you need to learn about privity of contract as well. The English Law states that in ‘Privity of Consideration’ promisee in the contract alone can move for “consideration”. If any other person promises other than the promisee, the latter becomes a “stranger to consideration”, unable to enforce the promise. However, in the Indian context, a “stranger to consideration” can sue on the parties involved or the contract given that he was also a party of the same. Keep in mind to understand the exceptions of the doctrine of privity of the contract in India given below.
Exceptions to Privity of Contract
Here are some of the exceptions to which a “stranger to consideration” can sue the other party involved in the contract:
Case of Trust or Beneficiary in a Contract
So, for instance, if a contract is entered by two parties (trustee of the trust and a second party) benefitting a third person (beneficiary) not a part of the contract, then the beneficiary can sue the two other parties. However, it is advisable to opt for an online lawyer consultation for updated knowledge.
Law of Estoppel or Acknowledgement
Even if there is no privity of contract between two parties and one recognizes the right of the other through acknowledgement, he is accountable by the law of estoppel. For instance, if the contract makes it mandatory for one party, to pay an amount to a third party with his acknowledgement of the same, then it has become obligatory to continue to do so.
If a contract is made through an agent, then the exception of “stranger to consideration” is applicable in this case.
Take Help from Professionals
This article attempts to give you most of the information within a few words. However, you must go for the best online lawyer consultation. They are in the best position to help you make the right decisions and guide you throughout the whole process involved in entering a contract. So, contact an expert today for your good.
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