Skip to main content

Privity of Contract


By: Robin Pandey Date:


The doctrine of "privity of contract" means that a contract is contract between the parties only and

no third person can sue upon it. It means that a stranger to contract cannot sue. The Supreme Court

of India recognised this rule in M.C. Chacko v. State Bank of Travancore. It said in that case that: "It

is settled law that a person not a party to a contract cannot, subject to certain well recognised

exceptions, enforce the terms of the contract. Under the English Common Law only a person who is

a party to a contract can sue on it. In India, the common law doctrine of privity of contract is

generally applicable. In the course of time, the courts have introduced a number of exceptions to the

rule of privity of contract.

In Dunlop Pneumatic Tyre Co. Ltd. v. Selfridge & Co. Ltd., the plaintiff sold a number of their tyres

to Dew & Co., on the terms that dew & Co. would not resell them below the listed price and that, in

the event of a sale to trade customers, they would obtain a similar undertaking from them. Dew &

Co. sold the tyres to Selfridge & Co. who undertook to observe the restrictions and to pay to Dunlop

& Co. £ 5 for each tyre sold in breach of the agreement. Selfridge & Co. supplied tyres to two of their

customers below the list price. Consequently, Dunlop & Co. Sued Selfridge & Co. to recover two

sums of £ 5 each as liquidated damages and asked for an injunction to restrain breaches of the

agreement. The House of Lords held the view that, "In the law of England certain principles are

fundamental. One is that only a person who is a party to a contract cal Sue on it." Dunlop & Co. was

held not entitled to sue Selfridge & Co.

Although the Indian Contract Act, 1872 is silent on the point whether a stranger to a contract can or

cannot sue, the Privy Council extended the principle of the English Law to India in its decision in

Jamna Das v. Ram Avtar Pandey. The Supreme Court affirmed the rule in M.C. Chacko v. State Bank

of Travancore,. In Jamunadas v. Ram Avtar Pandey, A mortgaged certain properties to B for Rs.

40,000. He (A) sold the property to C for Rs. 44,000 and left with him Rs. 40,000 to pay B for the

redemption of the mortgage. B Sued C for the recovery of the mortgage money. It was held that C

did not become liable to B because B was not a party to the contract between A and C.

The question was elaborately considered in Iswaram Pillai v Sonivavera. That was the case where A

mortgaged his lands to B and part of the consideration was B's promise to discharge a debt of A to C.

C sued B and it was held that C who was a stranger to the contract cannot sue B for the payment of

his debt without joining A as a party. The Court dealt exhaustively with the cases and laid down the

general rule of law to be that a party who is a stranger to contract cannot sue on the contract. In

Subhu Chetti v. Arunachalam Chettiar, the Court held that where a person transfers property by

way of sale deed to another and directs the vendee to pay a third person a part of the purchase

consideration which the seller owed to that third person, a suit by the third person to recover the

money from the vendee will not lie.


Popular posts from this blog

INCOME TAX SECTION 32AD - Investment in new plant or machinery in notified backward areas in certain States

 Description (1) Where an assessee, sets up an undertaking or enterprise for manufacture or production of any article or thing, on or after the 1st day of April, 2015 in any backward area notified by the Central Government in this behalf, in the State of Andhra Pradesh or in the State of Bihar or in the State of Telangana or in the State of West Bengal, and acquires and installs any new asset for the purposes of the said undertaking or enterprise during the period beginning on the 1st day of April, 2015 and ending before the 1st day of April, 2020 in the said backward area, then, there shall be allowed a deduction of a sum equal to fifteen per cent of the actual cost of such new asset for the assessment year relevant to the previous year in which such new asset is installed. (2) If any new asset acquired and installed by the assessee is sold or otherwise transferred, except in connection with the amalgamation or demerger or re-organisation of business referred to in clause (xiii)or cla

60 Minute Marriage Counselling Session On Phone

Description A 60 minute phone call with an expert Marriage\Relationship Counselor to discuss your marriage\relationship related issues. Counselling aims to resolve issues and improve communication in a relationship. Couples’ counselling works with both people in the relationship, however sessions can start with one individual, working towards the involvement of the other partner. What's Included a) 60 minute phone call with the counselor where you can discuss all your issues and seek guidance. What's Not Included a) Counselling session via meeting

Send Legal Notice for Divorce

 India being a secular country derives a large part of its laws from various religious practices. One such area of law is Divorce law of India. A divorce case in India can be initiated by either party based on the procedure relevant as per the law applicable to the parties. However, the procedure for divorce always starts with sending a legal notice.   Either party can send a legal notice to the other spouse intimating his/her intent to initiate legal proceedings for divorce. Sending a legal notice acts as a formal way of communication by one party to the other acting as a warning and at the same time creating chances for a last attempt for conciliation, if possible. Connect with an expert lawyer for your legal issue   What is a legal notice for divorce? A legal notice refers to a formal communication to a person or the opposite party in a case, informing him/her about one’s intention to undertake legal proceedings against him/her. Therefore, a legal notice for divorce is a formal inti