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Exceptions to the doctrine of privity of contract

The rule that a stranger to a contract cannot sue, is subject to the following exceptions:

In case of beneficiary of a trust

A trust is always created for the benefit of some person called as the beneficiary. The beneficiary can file a suit to enforce his right even though he is not a party to the contract.



Kalu transferred a certain property to Balu under the trust, to be held by him for the benefit of Ramu. If Balu refuses to give benefit to Ramu, then Ramu can enforce the agreement even though he is not a party to the contract.


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In case of family settlement

When certain arrangements are made for the marriage or maintenance of a particular member of the family then such person for whose benefit the provision is made may enforce the contract.


Note: Family or marriage settlements should be in writing.

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In case of acknowledgment of liability

When the promisor, by his conduct, acknowledges or himself acts as an agent of a third party, a binding obligation is thereby incurred by him towards the third party.



Amar receives some money from Akbar to be paid to Anthony. Amar admits of this receipt to Anthony. Anthony can recover the amount from Amar, who shall be regarded as the agent of Akbar.


In case of assignment of a contract

Assignment refers to the transferring the rights in a contract to a third person. When a contract is assigned in favor of someone, the assignee can enforce the contract, even if he is not a party to the contract.



The assignee of an insurance policy of a deceased person, Endorsee of bill of exchange can enforce the contract though he is not a party to the contract.



Note: A contract requiring use of personal skills (singing, dancing etc) cannot be assigned.

For bringing a legally enforceable contract between the parties, consideration is one of the most essential elements. Sec. 25 of The Indian Contract Act states that “An agreement made without consideration is void”. The Latin maxim, “Ex Nudo Pacto Non Oritur Action” means an agreement without consideration is void. In simple terms, ‘No consideration No contract’
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A mere promise for charity is void because it is without consideration. But if a person promises to contribute for charity and on his faith, the promisee undertakes liability then the contract is valid to the extent of the subscription so promised.
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