Q.No.

1
Explain the different exceptions to the doctrine of 'Privity of contract’ with illustrations.

● Collateral Contracts and the Sale of Defective Goods: A third party may sue the seller
over defective goods if the third party is affected by the flaws in the goods.
● When an Agent Is Involved: An agent may enter a contract with another party on behalf
of a principal. In this case, the principal may not be able to be released on the grounds of
the privity principle because he was represented in the contract.
● Trusts: In some circumstances, an agreement between a trustee and another party may
affect the owner.
● Restrictive Agreements: In some cases, a restrictive agreement may be enforceable
against a third party. This may be the case when owners of a house sell to another person
with the understanding that the buyer would not change the design of the house. If the
buyer sells the house to a third party and some requirements are met, the third party may
be obligated to follow the original owners' conditions.
● Negligence: In the case of personal injury resulting from negligence, the negligent party
may generally be sued by third parties who are not parties to any contract with the
negligent party.
● Assignment of the Contract: In some cases, benefits from a contract may be assigned to
another party.
● Insurance Companies: A third party involved in an automobile accident with an insured
vehicle may, in some cases, sue the insurance company when he gets a favourable court
ruling against the vehicle owner.

For example, Arjun’s father had an illegitimate son, Ravi. Before he died, he put Arjun in
possession of his estate with a condition that Arjun would pay Ravi an amount of Rs 500,000 and
transfer half of the estate in Ravi’s name, once he becomes 21 years old.

After attaining that age when Ravi didn’t receive the money and asked Arjun about it, he denied
giving him his share. Ravi filed a suit for recovery. The Court held that a trust was formed with
Ravi as the beneficiary for a certain amount and share of the estate. Hence, Ravi had the right to
sue upon the contract between Arjun and his father, even though he was not a party to it.
Q.No.2) A owes B Rs. 1000, but the debt is barred by limitation. A signs an instrument in
writing to pay B Rs. 500 on account of debt. Is this agreement valid? Give reasons

Ans) Yes, The agreement is valid. Agreement without consideration, void, unless it is in writing
and registered, promises to compensate for something done, or promises to pay a debt barred by
limitation law.—An agreement made without consideration is void unless,
1) It is expressed in writing and registered under the law for the time being in force for the
registration of 1[documents], and is made on account of natural love and affection between
parties standing in a near relation to each other; or unless
2) It is a promise to compensate, wholly or in part, a person who has already voluntarily done
something for the promisor, or something which the promisor was legally compellable to do; or
unless.
3) It is a promise, made in writing and signed by the person to be charged therewith, or by his
agent generally or specially authorised in that behalf, to pay wholly or in part a debt of which the
creditor might have enforced payment but for the law for the limitation of suits. In any of these
cases, such an agreement is a contract. Explanation 1.—Nothing in this section shall affect the
validity of any gift made between the donor and donee. Explanation 2.—An Agreement to which
the consent of the promisor is freely given is not void merely because the consideration is
inadequate, but the inadequacy of the consideration may be taken into account by the Court in
determining the question of whether the consent of the promisor was freely given