INTRODUCTION

The project is on the topic Privity of Contract. The doctrine means that only those persons who
are parties to contract can stand for its enforcement. It implies that a stranger to contract cannot
enforce a contract even in those cases where the contract has been made for his benefit.
However, it is important to note that the rule that is discussed above, that is a stranger to
contract cannot sue has to be distinguished from the rule that applies in India, that a stranger to
consideration can sue. A third person, who’s a party to contract can sue for the enforcement of
a contract as in India consideration can be given by the promise or any other person.

In this project, a detailed study on the Doctrine of Privity of Contract will be presented. As it
is known that the doctrine came after the case of Twiddle v. Atkinson, so the facts of the case
will be presented. Also, along with that the situation prior to its existence will be discussed by
way of cases.

Indian and English laws have their applicability in different ways. So, after this the next thing
which will be discussed is the applicability of the doctrine as per Indian and English law. List
of cases will be used for doing so.

The doctrine has mainly three exceptions which are as follows:

 Trust of Contractual rights or beneficiary under a contract

 Conduct, Acknowledgement or Admission
 Provision for marriage expenses or maintenance under family arrangement.

The three exceptions will be dealt in detail. Since the rule was applied in the case of Twiddle
v. Atkinson, there was a great criticism of this rule and talks about its abolishment was also
prevalent. The Doctrine was however not abolished but was reaffirmed in one of cases and was
not abolished but these exceptions were introduced.

The next chapter shall be dealing with establishment of the doctrine of the Privity of Contract.
AIMS AND OBJECTIVES:

 To present a detailed study on the Doctrine of Privity of Contract.

RESEARCH METHODOLOGY:

 The project has been made with the help of doctrinal sources.

LIMITATIONS:

The limitation has been the prescribed time limit within which the research had completed and
because of that no non-doctrinal source could be used and the entire research is being done
with the help of doctrinal source.
 DOCTRINE OF PRIVITY OF CONTRACT

The doctrine of privity of contract is that a contract cannot confer rights or impose those
obligations arising under it, on any person except the parties to it. The term “parties” may seem
simple enough but there are situations where it may become doubtful as to exactly who the
parties are and resultantly, who, in the eyes of the law should be liable or should be
compensated in event of inevitable breaches that may occur from time to time.1

The rule was laid down in the case of Twiddle v. Atkinson where the son and daughter of the
parties involved in this dispute were getting married. As such, the father of the groom and
father of the bride entered into an agreement that they would both pay sums of money to the
couple. Unfortunately, the father of the bride died before he paid the money to the couple and
the father of the son died before he could sue on the agreement between the parties. As a result
of this, the groom brought a claim against the executor of the will for the payment that was
previously agreed between the fathers. The main issue here was whether or not the son could,
as a third party to the agreement, enforce the contract between the fathers, which was ultimately
for the benefit of him and his wife. In this case the groom’s claim was rejected by the court. It
was held that the groom was not a part of the agreement between the fathers and he did not
provide any consideration for the promise made by the father of the bride. Also, as a stranger
to the contract, the son could not enforce it. On this basis, the court found in favour for the
executor of the will. 2

But this doctrine proved to be problematic due to its implications upon contracts made for the
benefit of third parties who are unable to enforce the obligations of the contracting parties.

In the case of Beiswick v. Beiswick, B a coal merchant entered into a contract with the
defendant by which he transferred to the defendant. B was to be employed in it as a consultant
for his life and after his death the defendant was to pay his widow an annuity of 5 pounds/ week
but the defendant paid the widow the said amount for only once. The widow brought an action
against the defendant.

1
https://www.lawteacher.net/free-law-essays/contract-law/critical-study-of-privity-of-contracts-contract-law-
essay.php
2
Tweddle v. Atkinson, (1861) 1 B
Lord Denning, in his judgement identified the rule of privity of contract as being merely
procedural but decided that where a third party’s benefit is the sole purpose for which the
contract has been entered into, then that third person/ party can sue for the enforcement of such
contract.

However, the House of Lords, did not approve of this approach initiated by Denning in the
court of appeal and held that the plaintiff in her personal capacity has no right to sue, but she
has a right as administratrix of her husband’s estate to require the appellant to perform this
obligation under the agreement.

The doctrine has its separate implementation in Indian and English laws which will be dealt in
the upcoming sections.

The Doctrine was reaffirmed in the case of Dunlop Pneumatic Tyre Co. Ltd v. Selfridge & Co.
Ltd3. In this case the appellant who were the manufacturers of motor car tyres to One Dew &
Co. with an agreement that these tyres will not be sold below the list price. Dew and Co. in
their turn sold some of the tyres to the respondents in this case, with an agreement between
Dew and the respondents that they shall observe conditions as to price and the respondents also
promised that they would pay to the appellant a sum of 5 Pounds for every tyre sold below the
list price. The respondents sold some tyres below the list price and the appellants brought an
action to recover the damages.

The House of Lords held that Dunlop (appellant) could not bring an action against Selfridge
(respondent) because there was no contract between the two parties. Even if Dew was acting
as an agent of Dunlop, the latter still cannot maintain an action as there was no consideration
between Dunlop and Selfridge, since the whole of the purchase was paid by Selfridge to Dew.

3
(1915) A.C. 847, at 853, per Lord Haldane
 APPLICABILITY IN INDIAN AND ENGLISH LAWS

Rule of English Law:

As already mentioned, that the rule or the doctrine of privity of contract was laid down in the
case of Twiddle v. Atkinson4, where the groom’s claim stands rejected in the court. It was held
that the groom was not a part of the agreement between the fathers and he did not provide any
consideration for the promise made by the father of the bride. Also, as a stranger to the contract,
the son could not enforce it. On this basis, the court found in favour for the executor of the will.

In Scruttons Ltd v Midland Silicones Ltd, it was observed that the principle is that apart from
special consideration of agency, trust, assignment or statute, a person not a party to a contract
cannot enforce or rely for protection of its provisions.

After this was reaffirmed in the case of Dunlop v. Selfridge & Co5. it was held that:

“In the law of England certain principles are fundamental. One is that only a person who is a
party to contract can sue on it. Our law knows nothing of a Jus Quaesitum Tertio arising by
way of contract. Such a right may be enforced by way of property, as for example, under a
trust, but cannot be conferred on a stranger to a contract as a right to enforce the contract in
personam.”

By critically examining the cases mentioned above two basic principles under the English law
can be well ascertained,

 Only the promisee can pay the consideration and,

 a contract cannot be enforced by a person who is not a party to the contract even if it
is made for his benefit.

4
Tweddle v. Atkinson, (1861) 1 B
5
(1915) A.C. 847, at 853, per Lord Haldane
Rule of Indian Law:

The rule of privity of contract that, a stranger to contract cannot bring an action is equally
applicable in India as in England. However, the Indian Contract Act of 1872 defines
“consideration” in a wider sense.

According to section 2(d) “When at the desire of the promisor, the promisee or any other
person has done or abstained from doing, or does or abstains from doing, or promises to do
or abstain from doing, something such act or abstinence or promise is called a consideration
for the promise;”

It is clear from this section that the consideration for a contract can proceed from any person
and not necessarily the parties to the contract. A promise is enforceable if there is some
consideration for it and it is quite immaterial whether it moves from the promisee or any other
person. However, there is no specific provision in the Act which either for or against the
Doctrine of Privity of Contact. It is through a series of case laws that the Doctrine has evolved.

In the case of N. Devaraja v M. Ramakrishnan. The facts of the case in brief are that A sold a
house to B under a registered sale deed under the terms that a certain sum will be paid to A and
the remaining to C, A’s creditor. B subsequently made part- payments to C informing that the
amount was in respect of the sale and that he would pay the remaining amount, B failed to
make the payment and C sued B for the same. It was held that the suit was maintainable as B
promised to pay the amount to C and hence C was entitled to bring a suit against B for recovery
of the amount.

However, in Jamna Das v Ram Autar6 the Privy Council extended the doctrine to India and
held that the person not party to the agreement cannot recover the amount due from one
party. The Supreme Court has by its decision in M.C. Chacko v State of
Travancore expressed itself in favour of the rule in Tweddle v Atkinson thus clearing the
ambiguities in the application of the doctrine of Privity of Contract.

There are two aspects of this doctrine. Firstly, no one but the parties to the contract are
entitled under it. Rights or benefits may be conferred upon a third party but such a third party
can neither sue under the contract nor rely on defences based on the contract. The second
aspect is that the parties to a contract cannot impose liabilities on a third party.

6
(1911) 30 I.A. 7
 EXCEPTIONS TO THIS RULE

1. Trust of contractual rights or beneficiary under a contract:

One of the exceptions was recognized in the case of Dunlop Pneumatic Tyre Co. v Selfridge &
Co. where it was mentioned that only a party to contract can sue on it. It was also stated that
such a right can be there with the third party by way of property. The basis of an action by the
third party in such case is the rights conferred by a particular contract in favour of a third party
in form of trust.

Indian law has also recognized this exception. For example, in the case of Khawaja Muhammad
Khan v. Husaini Begum in which there was an agreement between the father of a boy and a
girl that if the girl married a particular boy, the boy’s father would pay certain personal
allowances known as Kharchi- i- padan or pin money. It was also mentioned that certain
property has also been set aside for this. The girl married as per the man’s wish but he could
not pay the allowances. In an action brought by the girl in this case, the defence taken was that
there was no direct contract between the two and the girl being a stranger cannot sue in the
light of the case of Twiddle v. Atkinson. However, it was held that since the basis of claim
being a specific charge on immovable property in her favour, she was entitled to claim the same
as the beneficiary, and as such the Common Law rule was not applicable to the facts and
circumstances of the present case.

2. Conduct, Acknowledgement or Admission:

There may be no privity of contract between the parties but if one of them by his conduct,
acknowledgement or admission recognizes the right of the other to sue him, he may be liable
on the basis of the law of estoppel.

In the case of Narayani Devi v. Tagore Commercial Corporation Ltd where there was no
contract between the plaintiff and the defendants but the defendants in their agreement with the
plaintiff’s husband had agreed to pay a certain amount to the plaintiff’s husband during his
lifetime and thereafter to the plaintiff and the question of the right of plaintiff to sue the
defendant had arisen.
It was established that the defendants had made certain payments to the plaintiff after her
husband’s death in pursuance of the agreement and had also asked for the extension to pay.
Apart from this, it was also found that the defendants by their admission had earlier called upon
the plaintiff to execute certain documents in this connection which implies that they considered
the plaintiff to be entitled to certain rights. Therefore it was held that the defendants had created
such privity with the plaintiff by their conduct and acknowledgement and by admission, that
the plaintiff was entitled to her action even though there was no privity to contract between the
plaintiff and defendant, when the said contract was entered.

3. Provision for marriage expenses or maintenance under family arrangement:

Where under a family arrangement the contract is intended to secure a benefit to a third party,
he may sue in his own right as a beneficiary. Such an action has been allowed in cases where
on partition of joint family property between the male members a provision is made for the
maintenance of the female members of the family.

In the case of Veeramma v. Appayya7, under a family arrangement, the father’s house was to
be conveyed to his daughter and the daughter undertook to maintain him in his lifetime. The
daughter being a beneficiary under the compromise arrangement, it was held that she was
entitled to sue for the specific performance in her favour.

7
A.I.R. 1957 A.P. 965
 CONCLUSION

The Act does not specifically provide for the doctrine of Privity of Contract, however through
a series of case laws the doctrine as laid down in Tweddle v Atkinson is now applicable in
India along with various exceptions.

With reference to consideration of a contract the position in India and England are however
different. Under the English law only a party to the contract can pay the consideration. If he
doesn’t pay the consideration, he becomes a stranger to the contract. Under the Indian Law, it
is not necessary that consideration should be paid by the promisee.

Though there are no express provisions as to assignment of rights and obligations under a
contract in the Act, the Principle of assignment has been recognized and developed by the
courts through its various decisions.
 BIBLIOGRAPHY

Primary Sources:

 Contract-I, Dr. R.K. Bangia

Secondary Sources:

 https://www.lawteacher.net/cases/tweddle-v-atkinson.php
 https://www.lawteacher.net/free-law-essays/contract-law/critical-study-of-
privity-of-contracts-contract-law-essay.php
 https://www.scribd.com/doc/133204372/Consideration-and-Privity
 https://www.lawctopus.com/academike/basis-privity-contract-consideration/
TABLE OF CONTENTS