Coupon Accepted Successfully!


Stranger To Contract/Privity Of Contract Or Suit By The Third Party To An Agreement

A “Stranger to a contract” means a person who is not a party to a contract. A person who is not a party to a contract cannot sue upon it even though the contract is for his benefit and he provided consideration. This known as doctrine of privity of contract. It means that a contract cannot confer right or impose obligations arising under it on any person who is not a party to contract.


 Exceptions To Privity Of Contract

1. Beneficiary of a trust: A person in whose favour a trust is created may enforce it even through he may not be the party to the contract.

2. Marriage settlement, partition or other family arrangements: Where an arrangement is made in connection with marriage, partition or other family arrangements and a provision is made for the benefit of a person, he may sue although he is not a party to the agreement.

3. Estopple to acknowledgement: Where by the terms of a contract a party is required to make payment to a third person and he acknowledge this liability to the third person, he is bound by the acknowledgement although he was not a party to the original contract. Acknowledgement may be express or implied.

4. Covenants/condition running with the lend: If there is some right or obligation attached with the land to some authority and the owner of land is subject to fulfill those obligations. If that land is sold and buyer is not aware of those obligations even then he will be subject to those rights and obligations.

5. Contracts entered into through agents: The principle can enforce the contracts entered into by his agent provided the agent acts within the scopes of his authority and in the name of the principle.

6. Holder in due course of a negotiable instrument: A ‘holder in due course’ of a negotiable instrument is a holder who has obtained the negotiable instruments in good faith and for valuable consideration. He may sue the prior parties to the negotiable instrument.

7. Assignment of a contract: Where rights of a person are assigned or transferred to another person by him or under the operation of law, the assignee is entitled to enforce the right in his own name even if he is stranger to the contract.

Test Your Skills Now!
Take a Quiz now
Reviewer Name