r jo!

l-clause
. retol • S. 2 83
{11/t!IP
m favo ur of A ~o .
romissory note ffi ·
1 a Part of h·
IS reinun erat'
d P ns ider at io n W
te aexecuted 1or su c1ent co n. dlt Was held that
J:'.
e:,:. ec tJ ar ity an d in di s· , he re th e mo1tgagee1o un er a tn
9 sum to ch s
c large of suel1 obligation tl1 . ist We re
·'1 enote wasay a certain h ·t h Was h 11
u . d top interest to c an y, t e transfer cy tta nsferred
ob Me aa e re t d~ c to be for va iuabI e co nsidcra fJOn,
rtg from the fa ct that the ch arity in 11111 Id not n '
its rig ht to r
uie mo t,
c· oral a ' en ·orcc
. 1 arose the fan11·1 y 1.e., mortgagees). 6JJ An t
,vhtC t froll1 ns id er at ion c; ~~l ~ th_ough not cnforccab~cover tha
was good co negotiable . c, wame s not
~111out nd when acted upo?mdepend ent eviden ce to ·l o1 iss uin gt the t d" account b tw ' ms tru nt
mega_. a
,l wh en th er e w as s 10 w an ou s an lllg
y . d 1 m ent ag reement pr .d. ecn
esP
ec ta .
5 6J.i
A ci au e tn n eve op prov ement Trust t mg for th e transfe r of de / l
rhe prtt~1~ lan do wners to Nagpur Im Jee ~fd cost. on and without pay1:enopt edf
to e
b. valid and not with~ut co o
ns, er·hat1 . , as the transfe ree had
Jand pe y
nsation w as
y combenefit of fo1mm
held
. g layout pIan and was allowed to 11 ot t c sites to all ottees.f,JS
:ui a
go t tI1e
g,8/ Doctri11e o fPrivity. . .
1 9
fs "' . ng ht s or im po se ob ligations arising un der it on any person
ract cannot· coNnfer b t th ·es to a contract can bee nt"tI l ed under it. or bound
Aco nt · to it. k o on e u e pa rti
. .ty of contract. 636
t i-he parties
'
. . I . I of pn v1
e~c , P wn as t mt
by ir. This prmc1p e ts no tr
e first as pe ct is th at no one but the parti·es to th e con act are
pects. Th in the fonn
n1e doctrine· haCs twtrao ctasm · ·
m ay co nf er ng
.
hts _ or benefits upon a third party
entitled ~nder It. on
g parti es
pro n1 1s e no t to sue ( at all or in circu mstances
1:11 ~ service, or a
on whom such right or bene
fit
of prmmse to pay or_ to pe~o us e) . ~u t the th ird pa rty
hm!tat10n cla on defences based on the co
ntract.
c-tir,red by an exclus10n or e un de r 1t no r ca n re ly
n neither su
is conferred by contract ca es to a co ntract cannot impose liabil
ities
e doctrine is th at pa rti he is not a
The second aspect of th su bj ec t to th e bu rd en of a contract to which
on a third party. A person
cannot be
th at a th ird pa rty cann ot acquire rights und r
pai1y. It is the counterp
art of the proposition on fro m be ing bound by an exemption
ba rs a pe rs
r example, also that a contract between A
and B
acontract. t-3i This rule, fo ch it is no t a pa rty , so
ract to whi
clause contained in a cont
se a liabi lity up on C. 638
can not im po estions:
iv ity m ay in vo lv e an y (or more) of the four qu
The doctrine of pr . .
a co nt ra ct to w hi ch he is not a party ?
e a' contract. to wh.ich he hI
(i) Can a person enforc b d I t 1 of
a defence ase. on t 1e em s erson who I'- a pa1ty tot
.. . Ca n a pe rs on se t up b 11t b a P ·
Y ·
(11 )
to an sw er a cla 1111 roug
not a pa rty in order
ms of histoow n contmctt
relevant contract? b i 0 n th.e ter rhc relcran
se t up a de fe nc e as cc 10 11ot .1 party
·1· 1·)
Can a co nt ractin g pacl rty 1
ght by a person w ts
(1 ' '
to an sw er a aim br ou
in ord1:r
cont rac t'.1
.
R 16 8: [ 1966} I SCR 16S
. . , 91 · 1·1%6] I SC
. · · -143
633. ; ·., . ra lre r v P.S Rc:rw a Ji:cr. A ll< 19,661SC I 4 S~c c· A , ' • 1•11 cJu ding
_ n,, a,n hc ·" · · · . i
·,i,c,h llra slttn 1. (20 16) on tlti: <.: 1 01
634 up , . · ( id1ril,1I. AJR I% 1 R.iJJ --' 11 !Jtatc of
ia ·t er wr r
·1 • ·
l:f!; ··s ·on of lndia,
,, 3, · . . pt'n1 1a 1· 1.u ~ I n 11· -~r) u 1· d,·1,·011 und oth L w Comm.1.s pa , rr,·e" ntl cr
I c 1 11 >1 c,
... \ <1r · w, w .u-:_:uhafl (1 u11 ·,1.11c.
616 ·1·111• c· _,m . lows the prJ ct1 · ·c o ,· ,Ir 1: '"L,lf 1.:r • n 2( J)·· S.:c n1so· I n on r111H1
t' "•
.·iron h,l · Je r ·ec tro co nfi.:rring ng ,ts up
· •
l ·.•lf rl'n t cd r ·v1ry 1111 . · .
'' f!l' r->111111~ lla · m rhe dol: rrine . llf pn , th • pro.., 1s1on
s
CC /
I 'H 1J\., '•iurt. l 15;J. rr, )fr n ,;i1H! I(> mc
· or pn ralt.: p.: 1. •
rio rnw n · !J6 0) r 378 ; Fa t~d ,rmc
.1 l • - J 2 p&H 463.
, ''. ·(111 ., .1 ur 1h,· -'\c1 rH th 1: ch.:1p1i:r rd a:!ng :~ . 1963 o111m ct. 5th Ed;~ ~~wncr ofn building nor
r,37 " ~l 11 ia11·0/C
I, ·\ II~ 1%_.' P~ •!. :,:, 8.:, Alfl I985 Bom 71 at
63~: ;,';i! D.1y:1 i Kapr111r i · CU
H S., ~ . q1Ji 111 11p Ch~.J 11r e &'._ I· ,tto or d}
i ~ ' I96J .P& i ·t . n·,.,,,,..- Bo all , · 1'ty Boar ·
,rt.1 \·/•11·,·'· ·\1111e . : ,·d d- IJ1e Elcc rrrc:
• •
:~,u. r/i 1 'I• ia , t• A-vf, 1/1,
•

Pn ~i•· . · ·· •
. , r-., ,1u ·..-,, r1 •11
• ! ~,r mt :m
'
. . !. ' ~ . -. ,, ..., .. . . t. I,,.

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 84 S.2
Pre/i,n·
. • 111(/,)1
(iv) Can a contracting party enforce his own contract against a person w .
party to the relevant contract? ho 1s not a

Is 2.9.9.8.J I Applicability of tbc Doctrine of Privity in English Law

It " as an established rule of English law that n third party could not sue
0
though made for his benefit,<>.l'l described as well as established as any "in ~ a contract
•'fundam ental principle'',h40 and an "elementary'' principle. The principle is~~ law'', a
from special considcrntions of agency, tmst, assignment or statute, a person n / 1 apart
to a contract cannot enforce or rely for protection on its provisions. 64 1 English 1~ Party
nothing of ajus quacsti11111 terrio arising by way of contract, such a right may be c:n~ows
t
by way of property, as for example, under a trust, but it cannot be conferred on a st rrect
to a contract as a right to enforce the contract in personam. 642 ranger

[s 2.9.9.9/ Pril ity a11d Co11sideration

1

Th_e rul~ that a party wishi?g to enforce the ~o?tra~t must furnish or have furnished
cons1deratt0n (under the English law) must be d1stmgmshed from the doctrine of privity
The rules of privity and consideration may not always coincide. The two rules reflec~
separate issues of policy. The rule of privity relates to who can enforce the contract and
that of consideration is about the types of promises which can be enforced. '
Two different factual situations may arise. The plaintiff may be a party to an agreement
\-vithout furnishing any consideration. A, B and C may all be signatories to an agreement
whereby C promises A and B to pay A GBP I 00 if B will carry out work desired by C. There
may be another case where the person wishing to enforce a contract may not be a party to
the agreement at all.Band C may make an agreement whereby B promises to write a book
for C and C promises to pay GBP l 00 to A. Under the English law, A cannot sue C in both
the cases. But does he fail in the first case because the consideration has not moved from
him and in the second because he is not privy to the contract?
The fundamental assumption of the English law is that a contract is a bargain. If a person
furnishes no consideration, he takes no part in a bargain; if he takes no part in a bargain.
he takes no part in a contract. In the second of the above two cases, A is a stranger ~o the
contract. But he is equally a stranger in the first; he is a party to an agreement but he 1s not
party to a contract. It is true if the doctrine of consideration were abolished, the problem

· rc; of Third
639. Sec now, ContrJcts (R1°h · Parnes)
· r ·
Act, 1999, con,cmng · I11:- on tIur
rig · d partics to ·sue on
contrnct. . . , .. , , . _ 5] All ER
640. /)1111/op /'11 i!1111w ric 71re ( o l.td. i · .',cljndge & Co. Ltd, (1915) AC 847,853 • [1 914 1·
lkp 33> per Lord Haldane J at 33-1. . . , . -:, -, WLR 186
641. Sc111t1m1s Ltd. i · ,Hir/11111./ Sili, ·n11..:.1 Lr.I., I 1962] AC 44 ~: [19~2 ] ,1 0, 11 ER 1, · [l 96~ \ ~ ] All
7 1924
(HL): Jisti,'. 0ui ~hin;1 ndn D emt'.f,h'r •~Co. ,. Po!erso11 Zo~·lu~111,, & Co., [ 1_924] AC ·_-
1.: R Rep I>) . D1111/<,1, h 1,w11at1c hre lo. Ltd ., ,St-/(rulgc & Cu. ltd, ( 19 bl AC 847 · [ . for third 19f 4_15JAII

ER Rcr ) ~.~. S,h'flin l!, Julm <, s,;dlim.; l.td.. I ttJ72l I All ER 79 (even though ugrce~iNcnt 15 , si·,,gh.
·· ' c - • / (' " / fl !11b11· (11/\II1
pan~ · IH:.- ndit 1, I E'V1w11 1,w I t1,11a_1y 11, i\ l R I 9) 7 ,\J> 96) ; H 11111,rnr ..Jlllg 1 v ag 1
J\ 11{ ! 9:,i'\ _\l l .111. .,~3 . ~ . . 4RR 6IO·Scrutrons ltd.''
(>42. 7i1ddk , ,W,im/)/1. ( JSt•l l l B & S 393 : I l ~~ l-73] :\ II ER Rt:p ~6_9. 12_ D I, P11e11111aricTyrt'
.Htd!,oui S ,',, r.11 e i.tJ , j Itl fi ? l l t\11 ER I . ! I%'.: l 2 \\'LR 186 (HL_). foll owin~ '.'.': _op o <;mit!t r Ri11er
( (} I ,.f i · d/1 !.i"C' & C<• /.I.I I i en~ )i\C '47 l 19 14- 15] All ER Rep 33d3, /,;z1~dinJ,ooi111 /lari.·ick &
· ··• · , "' ,, ' H,J! ·[ 1949]'"'AIIER l 79(CA)· .:in •·· II rcv , l
!),111g la • ( iil1J:m, ·11 , H,,i1 .!. 1 1•1"1 - K - 1 .1 . · - . ;., , . . . · '. · , t,wmmce compan;_r~
. I . ' JtJl" 'I ') \ 11:1i 1(/°'l 'i··e· \lon e l·ttllilqmrce 1 l1,f i. n edA cudt1ll
( 1/ , ,.. I . , - • 1
- .. •• ~ . "'' II r·R JJ ~ 5?7 . I 53 7· Bern·1Ch 1 . dk.
. ,. , s enrt
/\'c·11 }o>k, .-\ J!{ ·1,, , 5 l'C 11 : 1l '-J.•y] .\ C 7U ut · 9 · l19·1- l_r\ ; ,,1:p .~ :.l , -;.& 0

Ti11sl<'t' Cv. Lt ·•
f I 9ti7 j .:'. ,\II 1.R l 197 : !196:' j .{ WLR 1~.r'_d_t_9~,;_, (HU ( ~u/1;; '. '
( 1%7 ; I !l} c 'LH 460; (,and} , im1C~1: ( I 8:- , _,(I ( hD 57 ,11 66. ( 18 J
l, ar~JRf]r~;r:R Rep 376.

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 S 85
• 11 _cfause ·2
~M . .
/flte1P' as m ot he r contmental legal sy t as cons ideratio
.11 re m ai n
ou ld se em t~ ~m ~. But as lo ng
English law , it w
i~ aterial whe ther a person i·ns
f privit}' ~• I feature of nd that he has gi ven no co _ed unati ,
?an·ddesensenu a ue on the grou b ns1. cr I on o r on the ground that he
is bl to s e contract. Th ese are ut two ways of sa y111g ti c same thin g. 64J
for t th . af
. tfllnger o
troversial .w.heth er the rule that cons id er 10n mus d'
t move firam thc prom isee
.
1ss f en ta ll
,as coctnrine of pnv1ty o contract were fimdam En Y,. J ist mct or wheth er they are
Jt ,, d ea rli er
t11e o·at io ns of a co mmon t11 eme.d In th e g is l pcases' the tw o ru es have
I
and It B L dane J in D dv
rel)' vadnto the same resu . ut or Haln the two: w,I op neumatic Tyre Co. Lt
J11C I stinguished betwee
:ifw·a~s ee& Co. Lt d., di
644

d . · · e fund amen1a1• 0 ne 1.s that on ly a pc:son who

seffr tdg [I]n the law of EngIan certam·prmc,ples ar know s no thi n f . · .
· can sue on 1t. Our law p a Ju s qu aes,t urn tcrt10 arisidng
. party to a contract ch a right may be co nf er re d by wa y ;/
ro pe rty as fi ex'ampl e• un er
for
,s avay of contract. Su d
be con,erre on a stranger to a
c. co nt ra ct as a rig ht 't
· 0t ent orce the contrac t
bY ' ca nn ot · om a co
rrust. but it · c1·pJe 1s · h
t at 1f a pe.rson ' with wh nenrac der a seal
notbunh.
a. pcrso · nam. A second prm ha ve be g·
1 · be abl e to enc.,orce 1t, •
cons ider ation must 1vcn y 1m to the
" s been made, 1s to . ,
ha . ot her person at the prom1sor s request.
or to so m e
pronus or
5
e Pr iv y Co un ci l co ns idered the provisi ons of
d v Schimidt, ~ th this Act) and held th at
the
In Kepong Propecting Lt an ce (t_h~ sa m e as in
ya Contra~ts Ordm of "consideration" th an
that which
section 2(d) of the ~a la th e de :fi m tio n
ro,~sion gave a wider m
terpretaho n to
ab le d co ns id er at io n to move from another
icularly i~ that it en emen t of contra cts
~pplied in England, part t that did not affect the law relating to enforc ted the English
, ye ion 2 suppor
person than the prom1see ra s (a) , (b), (c) and (e) of sect
ry, pa es to it could sue. 6-1
6
e co nt ra
by third parties. On th w hi ch on ly th e pa rti
as an agreement on th e
conception of a contract ee or an y ot he r person. In th e first of
e from the prom is has b en
Consideration may mov ca us e th e co ns id eration for C s promise
situations given above,
A can sue C be
rd in g to th is de fin iti on , and C is a party to
ny other person " acco from a third party,
pro vided by B, who is "a nsideration for an agreement may proceed
gh co 647 There is, however, nothin
g in section - to
the agreement. Althou e up on it.
t cannot su
astranger to an agreemen
ract to enforce it.
allow a stranger to a cont
ivity
for the Doctrine of Pr a
rs t, it i~unju~t to en~ble
.9.9.1 J Justification
Is 2.9 be r of grounds. Fi
en ju stified on a nu m g third partl_es to
.The rule of privity has be ct and not be liable for it. Secondly, enab lin
es to ry or tem imte
1
e co nt ra va
rhird pany to sue on th s of co ntra ctin g pa rti
affect or limit the right
enforce contrncts would

. d .. ( 19 6 7) 11 CJ CL R 0 84 ~Y'~! ?'
46 11d ~[ ~ ~H 7~ t~I- IS] All ER
11 8· · f . 19..,-> 7•
~!· Cu u// s
· Dw;/op />11,w
v Ra ;;m '.f fa ec utu r & Trus te e Co
Selfritl
Lt
i:c &
na ric 7\ re Co .. Lt d 1· · fll' t'(1by II1e E.ng1t:,
. c 11o n ,w,s ac L'C
Co . Lt d , ( 19 15) AC .
·-I1 La, ,,· R1.:•v1s1
• ·
on C'o n11rnltel! 111
~3 ~ , · ·d1•s tin
64li R" ,'p ., -' at .)3 4; til l', J AC 810. ad 436 : I 39
d. ,. S, hi midt , ( 1968 (ad 457 : I932) 55 M 7; National
· ~~pong /'1upccri11g I.r . ,
646 0 '.1g_l'rop ccri111-: Ltd. ,. Sd1i111itll. ( I lJ~ l<J A ~ .~_IO
I ()J ~ N g . IS8( IC 38 7 at 35
64?: .-l ''l'01 w11ra pw h ll,H11'11 ••dtlt. ~15IR) 16 L ih l lliO· l., . 954 · 165 IC 33S; UK
/ !•: Su~; t11111ra_ w 1u Ru
1,•sh Da , 1· Ra 1110.
u 1· /J
AJR 1935 L ilt19.15 4 : ( l9.
36' uum 344 ·· ( 11J J 6) , I ·a.J 0111 • ·
Muklw ,j ee ,. Man o Ra
,u·an
,.,· 1., :--. C,a1c· r · Cl
rc ·•r uI c@ i o. Lrcl. 1 I'op ut !a l Mul ji.
~
Al l
1938 Ra ng 35 "~. 38 : 1 ';".~ t~":, 1
, Ja n M alw me d,
AIR 43
'i) Ng•p 1; Mamti
58
19
1!:am (. '/11'1z1w: AJR 1) 2 Cal 576; R1Jlumw 1 am 2°('.1 1 .• ( I94-
11
1
; ;" ' · 1R.-1. frw111 p J Im AIR 1947 All 110 al 114;
's_llra, ,.\ 1H 1942 Ca l
25 J : JLR ( 194 ·· p a ll• ·1 1\ ER 19f.45. NgI U
ind
. . .
19.
<I; • 111 ar nmib ui 1· Jl£1ih atra o Ram p
J94 5 Ng p 60; H1: 11i M
_ ad lw vt{f: f
,i, ~ad
IJS 6 3 l 6 al 317; Chlia11ga1 n
Babu Ram Budh u M al 1• Da
1nl

c'~t
11
_Teli I R11dlrc1b11i, A IR irc d L[ fe .4s su rana Co. Lid., A LR 704 .
mg ar v l'n 9 u? ; . lai:ore Commercial Co
,pn. Lt d ,
J,f · < \wam , fn
111 11
7 Bo rn 27 6 : 5
ufln dia . AI R J 95
11
ew
),_ur1;u/c/u.<; 1 Dtm1i11,io1A1 IR J9S7 P& H 169 at I 70 ; Nan~ram
/n ,g I flis lum Sin ~/,
5.
.JR 1973 Cn l 40 1 nt 40

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 86 S.2
Pre[IIJ1
· .
. . . • l1Jci'1, •
the contract. Thirdly, the tlmd party may not have provided the cons,derati ·
should not be able to enforce the contrnct. Lastl y, the promisor is likely to fa~n, and, hen
·
from the prom1sor an d t I1c t Im· d part y. c two actil)ns,
Ce

fs 2.9.9.9.21 Criticism of the Doctrin · of Prh ity

Fi 1 t. th e third part rnlc prcv~nt s cffc ·t bein g gi en to the intentions or th
parties. If r med is de nied to th · thi nl part when the cont racting parti es intc~ d corn:actinu
so, it frus trntes their intenti.ons. ~ecomII y. 1t. cau ses lllJUSt1cc
. . .
to tI1e third party wl11 Cd I t to bet
relied on the contrnct to regulate hi s :iffo irs. and, thus, up. els the reasonable 10 may have
of the t11ird party to the benefi t under the contract. Thirdly, such a third party \i~~: Clation,
Joss cannot sue. and the promisre who has sutfered no loss can. Fourthly, therefo Uffers a
party who suffei:· loss cannot claim compensation, and the promisee not havi~e; t~c third
any loss can claim nominal damages only. Fifthly, even if the promisec were tg suffered
satisfactor y remed.,, he may not be able to, or may not wish to sue. Lastly, the thirdo obtain a
causes difficulties in commerc_ial li_fe, particular_ly_ ~~1ere tra~sa~t!~ns and projects~~~ lult
"network·· of contracts allocatmg nsks, respons1b1ht1es and hab1hties between the p _Ive a
art,es.'A'
The courts have developed exceptions649 to the doctrine to avoid injustice. The ex·
of the number of exceptions demonstrates its basic injustice, and the fact tha; st ~~e
exceptions continue to evolve and are litigated, shows that the existing exceptions 1ha~-~
not solved the problems. ~

(s 2.9.9.9.31 Applicability of the Doctrine of Privity in India

AfC Chacko v State Bank of Travancore, 650 is a striking example of the application of
the rule of privity in India. In this case, the appellant was the Managing Director of th~
Highland BanJc K, the father of the appellant, had guaranteed amounts due by the Hi ghland
Bank to the Kottayam Bank for an overdraft arrangeme nt between the two banks ... K . had
executed a deed making the appellant and other members of the family universal donees of
his properties . This deed contained a clause as follows:
I have no debts whatsoever. If in pursuance of the letter given by me to the Kollayam8J.r1
at the request of my eldest son, Chacko, for the purpose of Highland Bank Ltd., Konayam.
of which he is the Managing Director, any amount is due and payable to the KottayamBan.t
that amoun t is to be paid from the Highland Bank by my son, Chacko. If the same is n.it
so done and any amount becomes payable (by me) as per my letter, for that my dd?st .,in
Chacko and the properties in Schedule A will be answerable for that amount.
K .i,· guarantee wa. barred by limitation . The Kottayam Bank sued the HighlandBnnk a;iJ
the appellant and other fomil y members. The claim against the appellant rested upon\~:
fact that he was one of th e donccs under the deed, which, it was daimcd, created a ch:ir:-'
on the properties mentioned . The upn:me Court held that the
Kottayam Bank 11ot hei nl!. a party to tltl' <.keci was nol bound by the covcnan t.~ 1·n the ded tract
.
. ~ . • . t , to the con '
nor cou ld II en fo rce the <: )\ l"na nt,;;. It 1s ctt k d law that a person nut •1 par) ct· th~
· · II · ·' ·
cmmot uhJ cct tu c 11:1 111 we rct·ogmscu c ·tcpt1ons. cnlurcc r ti 1c tems1~ ot· the contra ·

. . . ., . . , ·c . . ,;or rhr
·t· Co111111ll
(i4R. , ~c for <li~cLL, irn1 l. J \\' om rm Sl\1!l (of CK,1 'o. 242 19J6) Prmt.1 oj o11 r,ac ·
61
Ht•1;1'/i of Ti,ird Panic_,. P:in Ill. . ., . ., . K No 24~ (1 99
649. Al·;,u 1 c(, m.· I t 1 · · --( 1m iln -~·n1 1on:-. of the doctrme- -Law Comm1.s1on (of U ) , R
l 'ril-:rv , 1/ r·,11 1!, ".-r Cu1;!r11: tf ,r tht' Bt:1t.flf of Third Parrie:, Part JL parJ 2.8 . ., . [! 970] I sCA
f&iO f C ( /1·1• /(., i: sat ! Ba11A ul fr,m.m t O ' .: (R 19 0 - . 504 : (1969) 2 sec l.) 43 D ,,· .,,fo 11nll'III s,,,,
,. . - . ' •· .
65f' . ( /l(Jm/m ,,fi.l, an 11 !\/air ,. K:.?rolu ··1:.1te Coopcratii·r! ilgric11/r11ra / <.~ R111"I' t.: c r
Li, ·., m·1 S c· On luit K~r 165 1~

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,,,.-
S. 2 g7
,;owcfause
. ,.eta neficiaries under th
1c1P d exceptions are that be of the contract or where ti ic
]11 •
ent ma y cnfor c tt~rrns
ily arrangem ce le covenant.
recognis: a part of the fam
fi d 1 .
contract JS t 1e pr on ouncement f R . La l
Court also re er re to o ankm CJ Ill Kn:\'lllla
,
fa Bala Dasi:6s1 .
rbe suprprome~1 .
n 2 of the Co
.
ntract Act' 187?- , widens LI ic c.111111011 of
d Ii .. • so
' consrc-1cratro n'
caJhli V Clau.se (d ) of sectm I t r. me in Ind .
ia i11 rt:1111 cases m wl · I h
o cn 1o rcc the sa 11c 1 t c English
J' a par1y to a contracL • • y vo lun
cc
(' ·. ·
as
ble
to ena Id regard the party as t11e rec1p1cnt
grotm d of 111 1du
of
m
a
pa
pu rel
cttm, . No
~
?
t O' 11Jrom, se m~15d 1would ref in
1

y, ww_cvcr, _hcrc nothing

use to
l~W wo~aht of action on the ac ts ca n be en fo rce d
a that contr
n;
birll_ a to encourage the ide ex clu de d by the de fin itio n ~; pcrso~1. w~ ~an,sd?oprot a ~arty to
misec'.
t bu t this notio n is rightl y prom,so r
sec tion ~c .
t11e con '
s en tit le d to th e be ne fits or bound b th e bl' .on s
rson ay be enfi Y d i tga t1
eral rule is that only the pe up on jt, 6s2 No rig ht m
orce Ya rson pe
r11egen tare entitle d to sue or be sued
ract 6S3
fa controtaca party to tl1e cont . d
o ·sn 'd . .r. ag re em en t m ay pr oc ee d from a third party, but •tI oes
irhOl 1or anth
Jc Act1 the •codns1 eraflon em en t. Th er e wa s some divergence ofopinio
n
d ('
Un er t the tlur party can sue on e ag re is
fi JloW tha nt ra ct ~c t~ 18 ~2 , th e definition_ of co~sideration
1
: w~s poil~t.65-l E~en th
ough under the Co le 1s generally apphcable m In
dia with
t the co m m on law pn nc 1p
.d tlian m English law, ye th ontra ct 1s · ent1t · Ied to enforce the same.6ss
111 er
ly a pa rty to ec
me effect that on e contrary, the rules in rela ad
tion to
he ad co ~t rac t_ to th
nt in th~ ding the he
In the absence of ? covena th e JU ral re lat w ns h1 p between the party awar
privity of contract w ill mea
n th at
e ha nd an d be tw ee n the subcontractor and the
ractor on the on
contract and the head cont t and separate. 656
nc
bead contractor wiU be disti ist ra tio n of justice was not to
be
th at th e ad m in
t has held are free from these tramm .658
els and
The Calcutta High Cour 657
an d th at "in In di a, we
nson, conscience"
hampered by Tweedle v Atki e by th e ru les of justice, equity and good
ed ur
are guided in matters of proc
Privity
tions for ch an gi ng the Doctrine of
ls2.9.9.9.4J Recommenda adhe renc e to the doctrine ofprivity
d that a rigid
di a recognise into the Act.
659
The Law Commission of ln of a sepa rate section
raused hardship, and reco
mmended incorporation
15; 32 Ca l WN 634,
Da si, AI R I 92 8 Ca l 51 8 : (1928) 55 Cal 13
65 1. Krish11a Lal Sadhu v Promila Ba la 1•
114 IC 658. ., Al R 19 51 P& H I 14; Shiv Daya l Kapa'.":
Co. Ltd mcay
652· ~es Raj Pahirn v Co111:ord of /ntlia /11s11ran cc Fatechantl Murlidlwr 11 Maharas htra State Elec
: ( 1963 ) 2 P& H 46 3; . . ,
LOI. AlR 1963 P&H 538 wr ex cc-plw ns be lu\ \ .
~oa rr/. AI R 19 85 Bo m 71 ut 74. Ltd . , AI R 19 73 Ca l 40 I; hul see otl 19 30
bS\
n• Commerc ial Co rp11. unachalam Clit'ttiar, A IR
6· .. .\ ara_ran, De vi i · Ta1::o us jud gm en ts, Tiru11111l11 S11bb11 Chclli 1• Ar
rio
~t ~ec for a discw,sion o f vu 0, 12 4 IC 55 .
. _
.
382 ? JO ) 53 M ad 27 73 C.i l 40 I ,ti .JO .).
655. ;,~:,~ _<F R)_: (I
ur c Co nu ,w rci al Co qm . J.td., AIR 19 I" sc·c· 6°()· f•\·
J 'i
· 11 · Oil Lui, . f/111d1
1.1·1111
6,6 / .l am De n 1· lu~ . ) ., l n • .. .\t
• Eq11ip111c11t.\' (20
- · Shrco· ,,, tn,. c.rnaru· ,nal l.t d ,, lfo11y Heui:1
HJ sec r,.n .
.· . .
1 1
6s1. r 1~- md Ltd c o 15) S( d ) J B& S 39 3 : f! S6 1- 73 J A ll E R lk p 369 4 C~tl IJ 7 pe~
6~8 ~ t('d(c " .·Itk in.t on
. (I ➔ : ( 191
: 12-1 R({ 6 10.
.:J) ! ~;'ft: ~ 9
.

.:../i' ~-(~u iTJ D 111t ,. Ram S(l(//,

a,, Manda!. A ti{
D,
19 1
•,·a
Ca l 11 9
r,~jl' Ur.1· " Al Ramak~ft"
j~~-
:"1~·-~~rn. 10 {,11: Ac;
fol low ed in N ing sec IOI!
;ip pro \ l' d ~mJ me nd ed auc •
659, /.ai~~:_() I<.' 63 0; rf lnd m. 87 th l{e po rt, J 951-i, pa rn I6. recom f11
; 11 om 111i n11111 nl~ rs bt: ne
as , rra cl cx pn:ss ly co :i
hv
, .O\\ ~;
.- {I ) W 11_crc a co ~d • .,' ·11·11·1· be i:nfon:cu bk •
Is 37 \J nl•tits couft-rn·d on third pn rti e s • the
pro v1Id es,have bel"ll v·i' lid bd ween
1
dir c11'.. , aBl' 0 1h c· rw ise
J on th · d pa rty. then, un ks !> the co ntr..ic t ce t wo u •
lhe 11i;1'd _m cr to any defen s tha
. pn.rty m
con1"1..:· •ing his own na me ' su bie J
on a third partyc ha s been ad opted,
_ •
.. . . a ne w ,·ontrac l for
ly upt can _ nu1 s·ub sr,·rut
(2) ',1/h~•re' _r:m1e. J. ct ex p res ly conlem ng ::i bt· ·
ne fit Idm:clntr ac
•
~ Pre, . 1Yor..a 1. co utr1· the r aru es lo l IlC· co d · rty·
,s . mp icd lv. h v iJ thi rJ pa· nv • • • t pa
II \Jf ·.. c1
rt, 11<J 0 1. " he r II.· t.o· ,b ro efJi:c t the n g hts o f the 1ff

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 88 S. 2
Prefi111ina,.y
Tl d t opo cd puivortcd to mak
. 1be. amen men 1~rf the contr·1ct cx1m~ssly e a contrnct enforceable by the third
m 1s own name, 1 ' .· conferred a benefit on him, but subject t Party
- l I to th ~ cont " . , . ,,i • ~ . •, .
defiences avat 1a ) e net IIH! 1rult cs. It also p1 opo sct t11.1t t11c pai tics o an
t: • . - ' •
• d to the cc Y
sIlOU Id bC una blC to v·il) ' .
,
•
or rcsc md or alte r ,
the contract, onc e t11c t 1ur pa1ty had ad q >ntru
the contract. Optcrj
The E ·pert Committee app?ii~ted by the Go crnm
cnt oflndia_ to ~-c~o mm cnd amendments
the Specific ReliefAct, I963. m 11. Re pm:t dak d 26
May 20 ~ 6 h.1d ,tl~o. suggcst~d amentirncnto 1
to the Contract Act I871._ to lesse n the n gou~~ of
t_hc, doctrme o~ pn_v t!Y· Despite t~e doctrin~
of privity under the English conm1~n. law bt:1~1dg
lm_kcd to c_onstftdciation and sect ion (d) of
the Indian Contract Act. J872, 1_Jcnmtt1!1~ cons, eratt 2
the Committee noted that Indian on movmg ·om a non -contra~ting Party
dcc1s1ons have generally re-affirmed the apphcabi
this doctrine except certain_ jud!cially established lit '
preceden!s. A number of e~ccptions ~ ~:
also been carved out by leg1slallon, notable am?
ng them bemg the_ Motor Vehicles Act, 11
(sections 149-150). t11c Employees Compensatio 988
n Act, I 923 (sections 12 & 14), Ncgotiabl
Instruments Act, 1881 (secti_on 8), ~ailways Act,
198~ (section 4), Transfer of Pr_opcrty Ac~
1882 (sections 39-40), Spec1~c Rehef :',Ct, 1963
[sect1~ns 11 & 15(c)] & the ~rb1tration and
Conciliation Act, 1996 (section 8). Given the unce
rtamty by the ever evolvmg exception
de, eloped by Courts, the Committee recommende
d insertion of a new section in the Contrac~
Act, I ~72, to safeguard t~e right of a thir? party
upon wh~m a be1~efit has been conferred by
providmg that where a thtrd party had a nght, the
contractmg parties may not, by agreement
rescind or vary/alter the tenns of the contract in
a way which would affect the third party '~
right without his consent. While some of the ame
ndments proposed to the Specific Relief Act
1963 were accepted with modifications with the
passing of the Specific Relief (Amendment)
Act, 2018 , the change to Contract Act, 1872, has
not been accepted so far.
[s 2.9.9.9.5] Privity in Other Legal Systems
The doctrine of privity is peculiar to the common
law countries. A number of countries
recognise the rights of third parties to enforce the
contract. 660 The rule that a third party cannot
enforce a contract has been abrogated by statute
in a number of "common law" counttics .6(, 1
Even in the United Kingdom, the Contracts (Rig
hts of Third Parties) Act, 1999, provides
for enforcement of contractual terms by third part
ics.h61 The UNIDRO[T Principles provide
that a contract is binding upon the parties/'63 but
this docs not prejudice any effect which that
contract may have in respect of third parties und
er the applicable law, nor docs it purport to
deal with the effects of a oidance and tem1ination
of a contract on the rights of third persons.
/s 2.9.9.10) Remedies Available to tl,e Pro mis eefo r the
Be11cfit oftl w Thin/ Par(l'
Is 2.9.9.10.1] Spl'cific Pcrform:.rncc
Third parties for whose benefit a contrac t has
bee n made may not sue on the contr::ict,
but the party making the contract nny sue for
spt·c itic perfom1ancc for the benefit of ~he
third party even where dam ages obtainublc will
he nominal. Section 15 (c) of the Specific
Rel ief Act , 1963 , recognises the ri ,Jn of a per
·on hcncfkinlly entitled under a s~ttlcmcnt on
marriage or 1.:ompromise between family mem
bi:rs to uc for ·pecific pcrfonnam:c.

660. Scot 13ml, Fr.111Ct', Germany. l!.1ly, f\ttst

ri:1. ' pain, l\lrtngal. Netherlands, Belgium, Luxe
Gree ~- mbo urg. 311d
661. We:;1em Austr..u io, Qu1:l!n ·bnd and ~t·w
Ze:ilun<l.
662. Sl·t: helow: ··Statule ' Confrrrim~ Righ b: 1
K",
00:l, U lDROIT Principl s, rt1ck I J , a1ci C\•mmi:nt bdo w it.

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