THIRD PARTY

SUBMITTED TO:
Abhinav AJIT KAUSHAL
Aratrik Das
RIGHT
LAW OF CONTRACT

Kanika chhabra BA- LLB

Sap id:- 500028450

Sap id:- 500028584
Sap id:- 500028453
Roll no:- R450213006
Roll no:- R450213024
Roll no:- R450213054
 ACKNOWLEDMENT
I have taken efforts in this project. However, it would not have been possible without the kind
support and help of many individuals. I would like to extend my sincere thanks to all of them.

I am highly indebted to my Torts teacher for his guidance and constant supervision as well as for
providing necessary information regarding the project & also for her support in completing the
project.

I would like to express my gratitude towards my parents & my friends for their kind co-operation
and encouragement which help me in completion of this project.

I would like to express my special gratitude and thanks to seniors for giving me such attention
and time.

My thanks and appreciations also go to my colleagues in developing the project and people who
have willingly helped me out with their abilities.

1
 RESEARCH METODOLOGY

For the purpose of research the researcher has relied on primary sources to look for information
relating to the laws and statutes relating to PRIVITY OF CONTRACT, THIRD PARTY RIGHT.
The researcher has done this keeping in mind the frequently asked questions arising out of this
topic. The researcher has aimed at doctrinal method of research and will try to critically analyze
and provide an un-biased account of the PRIVITY OF CONTRACT, THIRD PARTY RIGHT
from past to present world.

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 OBJECTIVE

The researcher prime objective is to introduce PRIVITY OF CONTRACT, THIRD PARTY

RIGHT from its inception in the past to present world. It aims to critically provide a vivid
account of the case law, statutes and legislations which provide a platform in PRIVITY OF
CONTRACT, THIRD PARTY RIGHT. The researcher will provide its all aspects in present
scenario.

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 CONTENT

CHAPTER 1

Introduction

History
A brief statement of third party right in contract

CHAPTER 2

Third party right under Indian law

Meaning of doctrine of privity of contract

CHAPTER 3

Doctrine of privity of contract

Emergence from England to India

Position in India

CHAPTER 4

Land mark cases

Tweddle Vs Atkinson
Jordon Vs Jorden
Jumna Pandey Vs. Pandit Ramavtar Pandey
Arise Advertising bureau Vs. C.T. Devraj

CHAPTER 5

Exception to the doctrine of contract under Indian law

Exception 1: the benefit except of the contract.

Exception 2: the burden of expects
Exception 3: Doctrine of Privity of contract under law of Agency.
Exception 4: Allocation of contract contractual duty
Exception 5; Contractual allocation passive

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CHAPTER 6

Criticism

CHAPTER 7

Findings

Suggestions

Conclusion

Introduction

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This project is the doctrine of the contractual relationship under Indian law. Credit for emergence
of the doctrine of the contractual relationship is attributed to the common law courts, but is now
applied in many countries including India, England, Canada, Australia and New Zealand, with
certain legal and judicial exceptions. This doctrine ensures that a stranger to a contract cannot
sue or be sued by the parties to the contract. However, in over time, he realized that the doctrine
is too rigid to cope with social demands, for a contract affects not only the parties but also
society in general. Thus certain limitations (or exceptions) have evolved and are recognized in
the literature, both legislative and judicial.

Contractual relationship is an ingrained part of the law of contract. The essence of the
privity rule is that only people who negotiated a contract (that they are aware of it) have the right
to impose its terms. Even if a person is mentioned in the contract - and the contract was
intentional for your benefit - this "third party" cannot rely on or enforce the terms of that
contract.

The doctrine of privity of contract law provides that a contract cannot confer rights or
impose obligations arising under it on any person or agent except the parties to it.

This seems to make sense right, in which only the parties to the contract should be able to
sue to enforce their rights and claim damages as such. However, the doctrine has proven
problematic because of its implications on contracts made for the benefit of others who are not
able to enforce the obligations of the contracting parties.

It has been a fundamental principle of English law- known as the doctrine of privity of
contract- that only the parties to a contract may sue or be sued upon the contract.

The passing of the Contracts (Rights of Third parties) Act 1999 fundamentally changed
the law of this area. The 1999 act make it possible for third parties to contract to obtain right
under the contract provided this was the intention of the contracting parties do intend to confer
right on third parties, and so the rights of such parties will continue to be governed by the
traditional law and by the common law rules and techniques that have been developed as
exceptions to the rule that third parties have no right or as means of avoiding the rules effects.

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 The act 1999 only modifies that part of the traditional doctrine which states a contract
cannot confer rights on third party; it leaves enact the rule that a contract cannot impose duties
on third party.

History

Before 1861 there were decisions in English law allow the provisions of a contract to be applied
by people who are not part of it, usually relatives of a promise and decisions undermines the
rights of others. The doctrine of privity doctrine emerged along with the account, the rules of
which states that consideration must move from the promise. So if it is not given the promise of
something to give in return, that promise is not legally binding, unless promised as fact. 1833
saw the case of Price v Easton, where he became a contract for work to be done on payment of a
third party. When the third tried to sue for payment, it is considered that it is not aware of
contract, so that your claim has failed. This was completely linked to the doctrine of the bill, and
was established as such, with the most famous case of Tweddle v Atkinson. In this case, the
plaintiff could not sue the executor of his father-in -law, who had promised the father of the
applicant to make payment to the applicant because he had not provided any consideration to the
contract.

The doctrine was further developed in Dunlop Pneumatic Tyre v Selfridge and Co. Ltd. through
the judgment of Lord Haldane.

Contractual relationship played a key role in the development of negligence as well. In the first
case of Winterbottom v Wright (1842), in which Winterbottom, driver postal service trolley, is
injured due to a defective wheel, tried to sue the manufacturer for your injuries Wright. The court
nevertheless decided that there was no contractual relationship between manufacturer and
consumer.

This problem appeared repeatedly to MacPherson v Buick Motor Co. (1916), a similar case
involving Winterbottom v Wright faulty wheel of a car. Judge Cardozo , writing for the Court of
Appeals of New York , decided not to require any collusion when the manufacturer knows that
the product is probably dangerous if harmed by such defect third defective (eg , consumers) , and
there was more tests after the initial sale. Injuries occurred foreseeable uses. Cardozo's

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innovation was to decide that the basis of the claim was that it was an unlawful act is not a
breach of contract. In this way he refined the problems caused by the doctrine of privity in a
modern industrial society. Although his opinion was only the law of the State of New York, the
solution lead was widely accepted elsewhere.

A Brief Statement of the Third Party Rule in Contract

A contract or its performance can affect a third party.1 However, the doctrine of privity means
that, as a general rule, a contract cannot confer rights or impose obligations arising under it on
any person except the parties to it.2 This Report is concerned with the conferral of rights on third
parties (including whether a third party should be able to claim the benefit of an exclusion clause
contained in a contract to which he is not a party); and, as we have indicated above, references in
it to the third party rule are to this aspect of the privity doctrine. It was provisionally
recommended in the Consultation Paper that the present rule should be retained whereby, subject
to a few exceptions,3 parties to a contract cannot impose an obligation on a third party. There was
no dissent from this by consulates.4 It would be an unwarranted infringement of a third partys
liberty if contracting parties were able, as a matter of course, to impose burdens on a third party

1 As when C guarantees a debt owed by A to B and A pays, thus releasing C who

thereby indirectly gains a benefit. See Treitel, The Law of Contract (9th ed, 1995) p
551.

2 Before Donoghue v Stevenson [1932] AC 562, the privity doctrine was seen as precluding actions in tort by third
parties arising from negligence by a party to a contract in carrying it out: Winterbottom v Wright (1842) 10 M &
W 109; 152 ER 402.

3 The exceptions include agency, restrictive covenants running with land, restrictive covenantsrunning with goods
(see, eg, Lord Strathcona SS Co v Dominion Coal Co [1926] AC 108),
bailment (eg, Morris v CW Martin & Sons Ltd [1966] 1 QB 716; Singer (UK) Ltd v Tees and
Hartlepool Port Authority [1988] 2 Lloyds Rep 164, 167-168; The Captain Gregos (No 2) [1990]
2 Lloyds Rep 395, 405; KH Enterprise (cargo owners) v Pioneer Containers (owners), The Pioneer
Container [1994] 2 AC 324), and the Carriage of Goods by Sea Act 1992, s 3.

4 Although a few consultees did suggest further exceptions that, at least at this stage, we considerare better left to
common law development (eg that the situations in which exclusion clauses bind
third parties should be extended).

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without his or her consent. Our proposed reforms do not, therefore, seek to change the burden
aspect of the privity doctrine or the exceptions to it.

Third Party Right in UK

INTRODUCTION

The Contracts (Rights of Third Parties) Act 1999 amends the rule of "contractual relationship "
under which a person can only enforce a contract if it is a part of it. The rule means that even if a
contract is made in order to confer a benefit on someone who is not a party , that person (a "third
party" ) has no right to sue for breach of contract.

The Act sets out the circumstances in which a third party is to have the right to enforce a term of
the contract (Article 1) , the assumptions on which such term may be varied or terminated
( section 2) and the defenses available to the promisor if the third seeks to enforce the term
( Article 3). Makes clear that Article 1 does not affect the rights of the promisee , or any right of
the third party to have, which are independent of the Law ( Articles 4 and 7 ( 1 ) ) . The Act does
not apply to certain contracts (either fully or partially) ( Article 6)

Effective Dates

The Act came into force on November 11, 1999. Provisions of the Act do not apply to all
contracts entered into prior to that date.

The law applies only to contracts that were entered into during the six months after its entry into
force if the contract expressly provides to do so. Without an express provision to that effect shall
not apply to contracts concluded during this period of six months.

The Act applies to all contracts, except those listed in Section 6, held after the expiration of six
months (ie, from May 11, 2000).

Right of Third Party to Enforce a Contractual Term

The central purpose of the law is to give a third party the right to enforce a term of a contract that
the third party is not a party.

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A Third Party may apply a term of a contract if -

( A) the contract expressly provides that the Third Party may do so; or

( B ) the term of the contract purports to confer a benefit on the third party .

Provision ( b ) above does not apply if on a proper construction execution of the contract that the
parties did not intend the term to be enforceable by the third party .

The third party must be expressly identified in the contract -

( A) by name; or

( B ) as a member of a class ; or

( C ) as answering a particular description but need not be in existence when the contract was
concluded .

By law, only a third is given the right to enforce a term of a contract subject to and in accordance
with any other relevant terms of the contract. It is open to the parties to the contract to limit or
condition the right of third parties . For example , a third user wishes to enforce a law that he is
doing so by way of arbitration and not litigation.

When enforcing a third party right can be granted to any resources that have been available to
him in an action for breach of contract if it had been party to the contract . As such , the rules
relating to damages , injunctions , specific performance and any other relief shall apply
accordingly all . Such rules act to place the burden regarding causation and remoteness in the
Neutral and sets a duty on him to mitigate his loss.

In addition to allowing a third party to enforce a "positive " to the right of the Act also applies in
order to allow a third party to take advantage of an exclusion or limitation clause in the contract.
The law, for example, allows a duration of a contract which excludes or limits the liability of the
promisee to the promisor for damage caused by negligence, and expressly stated that the
exclusion or limitation is for the benefit of the "agents or employees of the promise or
subcontractors "and should be required by these groups

Variation and Rescission of Contract

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Where a third party has the right to enforce a term of a contract, the contracting parties may , by
agreement , rescind or modify the contract in a manner that affects the rights of others without
their consent if -

( A) the third party has notified its consent to the deadline for the promisor

( B ) the promisor is aware that the Third Party has relied on the term ; or

( C ) the promisor can reasonably be expected to have foreseen that the third party would rely on
the term and the third has trusted her .

The use of the term " variation " of the law is strict in its legal sense to mean a change in the
terms of an agreement by the higher agreement between the parties to the original agreement.

Note that this restriction does not affect the terms of a construction contract that allows one party
to the contract unilaterally alter or " vary " the details of the work to be performed. A " variation
" of this type was made "under" the contract, not "a" of the contract.

The consent referred to in (a ) above may be by words or conduct , and if sent to the promisor by
post or by other means will not be considered as communicated to the promisor until received by
him.

The law allows the contracting parties to rescind or vary an agreement where the agreement
contains an express clause allowing them to do so without the consent of the Third Party.
Moreover, the agreement may contain terms that specify the circumstances in which the consent
of the third party is required before the agreement can be terminated or modified.

The law provides certain powers to the court or arbitral tribunal to dispense with any consent that
may be required in certain circumstances. In such case, the payment of compensation to the
Third Party may be ordered if the court believes that fits

Defences Available to the Promisor

The Act allows the promisor in an action by the Third Party to rely on any defense or
compensation arising out of the contract and relevant to the term is forced , which would have
been available to him had been the claim by the promisee . The promisor may also depend on

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any defense or compensation , or make any counterclaim, where this would have been possible if
the Third party to the contract.

These defenses available can be classified into three groups for which examples are given
below .

Defense 1

The promisor shall have available as a defense or settlement of any matter arising out of or in
connection with the contract and is relevant to the term , and would have been available by way
of exception or compensation if the action was brought by the promisee .

Example 1: P1 ( promisor ) and P2 ( the promise ) contract to sell merchandise P2 to P1 , who

will pay the contract price to P3 ( Part Three ) . In breach of contract, P2 delivers goods that are
not of the standard contract . In an action for the price of P3 ( as in an action for the price of P2) ,
P1 has the right to terminate or reduce the price because of damages for breach of contract .

Defense 2

The promisor shall have available as a defense or settlement of any matter if an express condition
of the contract expected to be available to him in the proceeding initiated by the Third Party, and
that would have been available by way of defense or compensation if the proceedings had been
brought by the promisee .

Example 2: P1 and P2 P1 contract that will pay you if your car transfers P3 P2 to P1 . P1 P2
owes money under a contract wholly unrelated . P1 and P2 agree on an express term in the
contract that states that P1 can raise against a claim for any matter P3 to P1 would have a defense
or set-off a claim by P2.

Defense 3

The promisor shall have available as a defense or settlement of any matter, and by way of
counterclaim any matter not arising from the contract, which would have been available by way
of exception or compensation or , where appropriate , by way of counterclaim against the third
party if the third party had been a party to the contract.

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Example 3A: contracts with P1 P2 P3 to pay 1,000 pounds. P1 and P3 should be 600 pounds . P1
has a claim for compensation to the P3 to P1 is only required to pay P3 400 pounds.

Example 3B : P3 P1 induced to conclude the contract for misrepresentation with P2 , but P2 has
no actual or constructive notice of the forgery. P1 may have a defense ( or counterclaim for
damages ) against P3 that had not been available the action had been brought by P2.

It should be noted that the availability of Defense and Defense March 1 may be reduced by an
express term in the contract.

Enforcement of the Contract by the Promisee

The rights of the Third Party do not affect any right of the Promisee to enforce any term of the
Contract.

Protection of the Promisor from Double Liability

The Act provides that where the Promisee has recovered damages (or an agreed sum) from the
Promisor in respect of either the Third Partys loss or the Promisees expense in making good
that loss, the court or arbitral tribunal shall reduce any award to the Third Party enforcing a term
in accordance with the Act to take account of the sum already recovered.

It must be noted that whilst this provision prevents the Promisor from paying the same damages
twice, it also makes it clear that even though the Promisor and Promisee may have settled,
between themselves, the matter over which the Third Party subsequently takes action, that action
is not prevented. The settlement of a dispute between the contracting parties in respect of an
obligation owed to a Third Party does not provide the Promisor with a defence against a
subsequent action by the Third Party.

Exceptions

The Act excludes the rights of Third Partys in respect of several matters including:

1. Contract on a bill of exchange, promissory note or other negotiable instrument;

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2. Contract binding on a company and its members under section 14 of the Companies Act 1985;

3. Any term of a contract of employment against an employee;

4. Any term of a workers contract against a worker (including a home worker);

5. Any term of a relevant contract against an agency worker;

6. Contract for the carriage of goods by sea;

7. Contract for the carriage of goods by rail or road, or for the carriage of cargo by air, which is
subject to the rules of the appropriate international transport convention.

Supplementary Provisions Relating to the Third Party

The Act does not affect any existing right or remedy of the Third Party and allows for the judicial
development of third party rights.

The Act prevents a Third Party from invoking Section 2(2) of the Unfair Contracts Terms Act
1977 to contest the validity of a term excluding or limiting the Promisor's liability under the Act
to the Third Party for negligently caused loss or damage (other than personal injury or death).

The Act applies the standard limitation periods for actions for breach of contract by third parties
(see Sections 5 and 8 of the Limitation Act 1980).

The Act makes it clear that the Third Party shall not be considered as a party to the Contract for
the purposes of any other Act.

Arbitration Provisions

In the event that the Contract under which the Third Party is enforcing a right contains an
arbitration agreement then the Third Party shall be treated as a party to that arbitration
agreement. This provision applies where the arbitration agreement is in writing for the purposes
of Part I of the Arbitration Act 1996.

Contracting Out of the Act

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At Section 1(2) of the Act it states that if on a proper construction of the contract it appears that
the parties did not intend the term to be enforceable by the third party then the provisions of the
Act will not apply. In other words, unlike the Construction Act, the parties can either by express
words or by implication choose to contract out of the provisions of the Act.

It is suggested that the use of express words is the preferred method of opting out of the
provisions as relying on an implied term runs the risk of the court finding that such a term does
not exist or is not required.

The Position under Standard Forms of Contract

The JCT have introduced amendments to all editions of all 1998 models of contract for which the
contract of the parties of the provisions of the law. For example, outsourcing provision has been
introduced as Clause 1.9 of the JCT 1998 With Contractor Form Design by Amendment No. 1
thereto.

The new contract Engineering and Construction Contract Second Edition (NECECC) has been
provided with the option Y (UK) 3, which provides a clause to contract provisions. As with all
secondary options under this option requires NECECC referred in the first part data contracts in
order to be effective.

As for the ICE family of contracts similar provisions have been incorporated in the latest editions
of both the seventh edition and design and construction contract.

Right of third parties to enforce contract terms.

(1) Subject to the provisions of this Act, a person who is not party to a contract (a "third party )
may enforce in its own right a term of the contract if -

(A) The contract expressly provides that may or

(B) Subject to subsection (2), the term purports to confer a benefit on him.

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(2) Subsection (1) (b) does not apply in case of a successful construction execution of the
contract that the parties did not intend the term to be enforceable by the third party.

( 3) The third party must be expressly identified in the contract by name, as a member of a class
or as answering a particular description but need not be in existence when the contract was
concluded .

(4) This section does not confer a right on a third party to enforce a term of a contract otherwise
than subject to and in accordance with any other relevant terms of the contract.

(5) In order to exercise its right to enforce a term of the contract , there shall be available to the
third party any remedy that would have been available to him in an action for breach of contract
if he had been party to the contract ( and rules relating to damages , injunctions , specific
performance and other relief shall apply accordingly ) .

(6) When he construed the term of a contract excludes or limits liability in relation to any matter
referred to in this Act to enforce third term as references to his availing himself of the exclusion
or limitation.

(7) In this Act, in relation to the term of a contract that is enforceable by a third party -

Committed means that portion of the contract against whom the term is enforceable by the
third party and

From Promise Part of the contract is meant by the term which is enforceable against the
promisor.

Variation and termination.

( 1) Subject to the provisions of this section , where a third party has the right under section 1 to
enforce a term of the contract , the parties to the contract may not, by agreement , rescind the
contract , or vary such so as to extinguish or alter his entitlement under that right, without his
consent if -

(A) The third party has notified its consent to the deadline for the promisor,

(B) The promisor is aware that the third party has relied on the term, or

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(C) The promisor can reasonably be expected to have foreseen that the third party would rely on
the term and the third has trusted her.

(2) The opinion referred to in subsection (1) (a) -

(A) May be by words or conduct, and

(B) If sent to the promisor by post or other means, shall not be considered as communicated to
the promisor until received by him.

(3) Subsection (1) is subject to any express term of the contract under which -

(A) The parties to the contract may by agreement rescind or modify the contract without the
consent of the third party, or

(B) The consent of such third parties in the circumstances specified in the contract rather than
those set out in subsection (1) (a) to (c) is required.

(4) Where the consent of a third party under subsection (1 ) or ( 3) the court or arbitral tribunal
may, at the request of the parties to the contract , without their consent is required if you are
satisfied -

(A) That consent cannot be obtained because his whereabouts cannot reasonably be determined
or

(B) Who is mentally incapable of giving consent?

(5) The arbitral tribunal may, at the request of the parties to a contract, dispense with any consent
that may be required under subsection (c) (1) if satisfied that it cannot reasonably be determined
if the third party actually has relied on the term.

(6) If the judge or referee dispenses with the consent of a third party may impose such conditions
as it considers appropriate, including a condition requiring the payment of compensation to the
third party.

(7) The jurisdiction conferred on the court by subsections (4) to (6) may be exercised by the
Supreme Court and a county court.

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 Defenses available to promisor.

(1) Subsections (2) to (5) apply where, under section 1, the procedures for the application of a
term of a contract are carried by a third party.

(2) The promisor shall have available to them by way of defense or for any matter -

(A) Arises from or in connection with the contract and that is relevant to the term, and

(B) Had been available for him as a defense or compensation if the proceedings had been
brought by the promise.

(3) The promisor shall also be available as a defense or settlement of any matter if -

(a) An express condition of the contract expected to be available for him in the proceeding
initiated by the third, and

(B) That would have been available by way of exception or compensation if the proceedings had
been brought by the promise.

(4) The promisor will also have at your disposal -

(a) Through the defense or settlement of any matter, and

( B ) by way of counterclaim any matter not arising from the contract, which would have been
available by way of exception or compensation or , where appropriate , by way of counterclaim
against the third party if the third party had been a party to the contract .

(5) Subsections (2) and (4) are subject to any express term of the contract with regard to matters
that are not available to the promisor as a defense, counterclaim or offset.

(6 ) Where an action against a third party looking in reliance on section 1 to enforce a term of a
contract ( including, in particular , a term purporting to exclude or limit liability ) , may not do so
if could have not (either because of the particular circumstances relating to him or otherwise) if it
had been party to the contract .

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 Protection of promisor from double taxation

If by virtue of section 1 of a term of a contract can be enforced by a third party, and the promise
of the promisor has recovered a sum of -

(A) The loss of the third party with respect to the expression or

( B ) the expense that the promise of doing good to the third part of the promisor default , then,
an action in reliance on that section by the third party , the judge or referee must reduce any
award to the third party to the extent it deems appropriate to account for the amount charged by
the promise .

Exceptions

(1) Section 1 confers no rights on a third in the case of a contract on a bill of exchange,
promissory note or other negotiable instrument.

(2) Article 1 does not confer rights to a third party in the event of any contract binding on a
company and its members under section 14 of the Companies Act 1985.

(2A ) Section 1 confers no rights on a third party for any document for establishing a limited
liability company agreement or limited liability company as defined in Regulation of Limited
Liability 2001 (SI No. 2001 / ) .

(3) Section 1 confers no rights of third parties to enforce -

(A) Any term of a contract of employment against an employee,

(B) Any condition of the contract of an employee to an employee (including an employee of the
house), or

(C) Any term of the relevant contract against an agency worker.

(4) In paragraph (3) -

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(A) " Contract of employment , "employee ", employment contract and "worker has the
meaning given by section 54 of the National Minimum Wage Act 1998,

(B) " Home worker has the meaning given by section 35 (2) of the Act,

(C) " Agency worker has the same meaning as in section 34 (1) of that Act, and

(D) "Relevant contract means a contract in a case where section 34 of the Act applies, the
agency worker as aspects work falling within subsection (1) (a) of that paragraph.

(5) Section 1 confers no rights on a third in the case of -

(A) A contract for the carriage of goods by sea

( B ) a contract for the carriage of goods by rail or road , or for the transportation of cargo by air ,
which is subject to the rules of the appropriate international transport convention , except that a
third party may in reliance on that benefit section of an exclusion or limitation of liability in a
contract of this type .

(6) In paragraph (5) contract of carriage of goods by sea " means a contract of carriage -

(A) Contained in or shown a bill of lading, sea waybill or a corresponding electronic transaction,
or

(B) Under or for the purpose of which is not given to a company that has delivered by a ship or a
corresponding electronic transaction.

(7) For the purposes of subsection (6) -

(A) " Bill of lading ", sea waybill " and " ship's delivery order " have the same meaning as in the
transport of goods by Sea Act 1992 and

(B) A corresponding electronic transaction is a transaction within section 1 (5) of the Act, which
relates to the issuance, endorsement, delivery or transfer of a bill of lading, sea waybill or the
delivery of vessel.

(8) In paragraph (5) the appropriate international transport convention means -

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(A) in relation to a contract for the carriage of goods by rail, the Convention which has the force
of law in the United Kingdom under Article 1 of the International Transport Conventions Act
1983

( B ) in relation to a contract for the carriage of goods by road , the Convention which has the
force of law in the United Kingdom under Article 1 of the Carriage of Goods by Road Act 1965
and

(C) In relation to a contract for the carriage of cargo by air -

(I) of the Convention which has the force of law in the United Kingdom under Article 1 of the
Air Transport Act 1961, or

(Ii) The Convention which has the force of law under Article 1 of the Law on Air Transport
(Supplementary Provisions) Act 1962, or

(Iii) Any of the amended Conventions set out in Part B of Schedule 2 or 3 for transport by Air
Acts (Application of Provisions) Order 1967.

Additional provisions relating to the third party

(1) Section 1 does not affect any right or remedy of a third party which exists or is available apart
from that Act.

( 2) Section 2 ( 2) the terms of the Unfair Contract Act 1977 ( exclusion restriction , etc. of
liability for negligence ) shall not apply where the negligence consists of the violation of an
obligation under a term of a contract and the person seeking to enforce a third party acts in
reliance on section 1.

( 3) Sections 5 and 8 of the Limitation Act 1980 the references to an action founded on simple
contract and an action on a specialty respectively include references to an action brought under
section 1 relating to a contract singled and brought an action in reliance on the article on a
specialty.

(4) A third party may not, under Article 1 (5) or 3 (4) or (6), be treated as a party to the contract
for the purposes of any other law (or any instrument made under any other Act).

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 Provisions of Arbitration.

(1) Where -

(A) A right under section 1 to enforce a term (the term noun) is subject to a term providing for
the submission of disputes to arbitration (Arbitration Agreement " ), and

( B ) the arbitration agreement is a written agreement for the purposes of Part I of the Arbitration
Act 1996 , the third part will be deemed , for the purposes of that Act as a party to the arbitration
agreement as to the disputes between himself and the promisor relating to the enforcement of the
substantive term by the third.

( 2) Where-(a ) a third party is entitled under section 1 to enforce a term that provides one or
more descriptions of dispute between the third party and the promisor to be submitted to
arbitration ( "Arbitration Agreement " ) ,

(B) The arbitration agreement is a written agreement for the purposes of Part I of the Arbitration
Act 1996 and

(C) the third party will not fall to be treated under subsection (1) as part of the arbitration
agreement, that party must, should exercise the right shall be treated for the purposes of the Act
as part of the arbitration agreement relation to the matter in respect of which the right is
exercised, and be treated as if it had been immediately before the exercise of the right.

Northern Ireland.

(1) In its application to Northern Ireland, this Act has effect with the modifications specified in
subsections (2) and (3).

(2) In section 6 (2), for "Act section 14 of the 1985 M1Companies not section 25 of the
Companies (Northern Ireland) 1986 replaced.

(3) In section 7, subsection (3) has been replaced -

22
"( 3) In Articles 4 ( a) and 15 of the Limitation (Northern Ireland ) 1989 , references to an action
founded on simple contract and an action on an instrument under seal shall include, respectively ,
references to an application under section 1 on a simple contract and an action under this section
relating to a contract with the label resource. " .

(4) Law Reform (Husband and Wife) (Northern Ireland) 1964, the following provisions are
repealed -

(A) Of Article 5, and

( B ) in section 6 , in subsection ( 1 ) ( a) , the words " in the case of section 4" and " and in the
case of section 5 of the contracting party " and , in paragraph ( 3) , the words " or section 5. "

Short title, commencement and extent.

(1) This Act may be cited as the 1999 Act Contracts (Rights of Third Parties).

(2) This Act comes into force on the day it was approved, but subject to subsection (3 ) does not
apply in relation to a contract before the end of the period of six months beginning with that day.

(3) The restriction in subsection ( 2) does not apply in relation to a contract which -

( a) is entered into as of the day when this law was passed , and

(B ) expressly provides for the application of this law .

(4) This Act extends as follows -

(A) Article 9 extends only to Northern Ireland ;

(B ) the remaining provisions extend to England and Wales and Northern Ireland only.

The Privity of Contract under Indian Law

The term "contract " does provide that it is a form of legal agreement between two people and
two of them are under the obligation created by the contract they parts . But then, a reasonable
question that comes to mind that if a contract does confer some benefit to the third party? Is it
justified not to allow third parties to sue if denial of the benefit conferred expressly in a contract?

23
Therefore, it is necessary to consider the doctrine Effect of light on this question. This doctrine
ensures that a stranger to a contract cannot sue or be sued by the parties to the contract. However,
over time, he realized that the doctrine is too rigid to address current social, because the contract
does not only affect the parties theret, but also society in general. Consequently, certain
limitations (or exceptions) were developed and were applied to the doctrine therefore legislative
and judicial.

Meaning of the Doctrine of Privity of Contract:

"No one may be entitled to, or bound by the terms of a contract for which there is original
game."5 In other words, rights and obligations are strictly private affairs contracting parties and
therefore no stranger has legal access to them. Therefore, the doctrine of contractual relationship
means that a non-party cannot bring an action in the contract6
Contractual relationship has three major effects7:
A third party cannot receive a benefit is not part of that contract.
A third party cannot be liable under a contract, if not a party to that contract.
A third party cannot enforce a contract if it is not party to that contract.

Questions involved in the doctrine8 :

The doctrine of collusion can affect any (or more) of the following questions:

Can a person enforce a contract which is not a party?

5 Price v. Easton (1833)4B.& Ad. 433. Cited from ,Chesire Fifoot and Furmastons Law of
Contract, Butterworths, London(13th edn.1996),p.462.

6 Chesire,Fifoot and Furmastons Law of Contract, id p.463.

7 Ryan Murray, Contract Law The Fundamentals , Sweet & Maxwell, London (1st edn.
2008),p. 75.

8 Pollock & Mulla, Indian Contract and Specific Relief Act, Lexis Nexis, Butterworths, New
Delhi, (13th edn.2006), pp.107-108.

24
 Can a person created a defense based on the terms of a contract in which he is not a
relevant parts of the contract?
Can a contracting party to establish a defense based on the terms of your contract, In
response to a lawsuit filed by a person who is not party to the corresponding contract?
Can a contracting party to impose its own contract against a person not a party to the
contract for?

Two aspects of the doctrine:

Burden aspect: Parties cannot impose its contract obligations or cargo on a third . There is a
sound logic behind this rule how can we justify imposing any contractual obligation on a person
who is a stranger9 to a contract.

Benefit aspect: Strange to a contract cannot take advantage under the contract and he cannot
sue on the contract. This is similar to the doctrine of consideration which says that a person who
is not party to the test, is not entitled to sue on the contract. Indeed, this aspect of the collusion
has undergone many criticisms.

Justification of the doctrine of privity of contract10:

Although this doctrine has no strong basis for its position, but there are some justifications who
continue to support their survival:

In a contract is based on mutual agreement, it would be unfair to impose obligations of

the parties who have not given their consent to be bound.
Enabling third parties to enforce contracts affect, or restrict the rights of contracting
parties to modify or terminate the contract.
A third party may not have provided the consideration, and therefore should not be able
to enforce the contract.
The promisor is likely to face two actions, since the promisor and the third.

9 A stranger is a person who is not a party to the contract.

10 Pollock & Mulla, supra n.4, p.112.

25
Doctrine of Third Party Right: Emergence from
ENGLAND to INDIA11:
Position in England:

The doctrine of contractual relationship owes its origin to the common law courts. This doctrine
was for the first time, is applied in the case of Jordan v jordan12 . In this case the demand for a
non- a promise not to lie. But Lever v Heys13 the court quashed the decision of Jordan v Jordan
and allowed foreign suit on a contract. But the Taylor v Foster14 Court reaffirmed the decision in
the case of Jordan and apply the doctrine of the contractual relationship and, consequently, a
stranger to the contract was prevented from maintaining their action in case of default the
contract.
Tweddle v Atkinson15 is the case in which the doctrine of the contractual relationship was finally
established by the Superior Court of the Queen in 1861. In this suit the plaintiff's case was
dismissed by the court. It is noteworthy that the court dismissed the applicant's claim more
emphasis in the doctrine of privity of consideration that the doctrine of the contractual
relationship.

11 See id at p.108. See also Dr. L.R.singh, The Doctrine of Privity of Contract under the
Indian Law, (D. PhilThesis, University of Allahabad, 1994 ) ,Global Publication, Allahabad, (1 st
edn.1999),pp 4- 12.

12 (1594) Cro. Eliz. 369. Cited from Dr.L.R.Singh, supra n. 7 p.4.

13 1598) Cro. Eliz. 619, 652;(1598) Moo. K.B. 550. Cited from Treitel, The Law of Contract,
Sweet & Maxwell,London(12th edn. 2007), pp.624-625.

14 (1601) Cro. Eliz. 776,807.Cited from Treitel,id.

15 (1861) 1 B. & S. 393. Cited from Robert Fennigan, Privity-The End Of An Era (Error),
vol.103, Law QuarterlyReview, (Reprint, 2001) .pp.567-568.

26
 However, the doctrine of the contractual relationship acquired a definite form in this case.
It appears from the judgment that the doctrine of the contractual relationship establishes two
general principles of contract law.

It is meant that a stranger to a contract cannot sue.

It provides that an alien to a contract is not bound by the contract.

This doctrine eventually won approval from the House of Lords in the leading case of Dunlop
Pneumatic Tyre Co. Ltd. v Selfridge & Co. Ltd.16 in 1915. It is noteworthy that in cases efforts
were made after the abolition of the doctrine. However, the doctrine is not absolute. Certain
limitations have been imposed on it. This doctrine has been generally criticized. In 1937, the
Committee on Revision of Laws, under the chairmanship of Lord Wright also criticized the
doctrine and recommended its abolition. In its Sixth Interim Report committee stated17:

" When the contract by its express terms purports to confer a direct benefit on the third party, the
third party shall be entitled to enforce the provision in its own name, provided that the promisor
is entitled to assert against the third party any defense would been valid against the promisor.

Position in India:

1. Provisions under Indian Contract which implicitly cover this

doctrine14:
As we know that there is no independent sanction the doctrine of privity of contract in India but
fortunately, unlike England, the law of contract in India is encoded. It should be, however, noted
that the Contract Act, 1872 of India not explicitly contain a provision on the doctrine of the
contractual relationship. Therefore, the teaching position can be visualized in the light of various
provisions of the Contract Law. Those provisions are: Ss. 2(a), 2(b), 2(c), 2(e), 2(h), 73, 74, and
75 of the Indian Contract Act, 1872.

16 (1915) 1 Q.B. 250. Cited from Treitel, supra n.9.

17 Avtar Singh, Law of Contract and Specific Relief, Eastern Book Company, Lucknow (9th
edn. Reprint 2006), p.94.

27
 Section 2 (h) of the Contract Law of India, 1872 defines the term "contract" in the form
of an agreement. It states that "an agreement is a legally enforceable contract" In other words, a
contract is simply an agreement valid. The "agreement" is defined in Section 2 (e) of the contract
Act, 1872 of India. According to Section 2 (e) "All the promises and every set of promises
forming the consideration for each other is an agreement." Therefore, one agreement is a
condition precedent to the contract. The agreement may be divided into two parts: "Promise" and
"consideration of the promise. The term "promise" has been defined in Section 2 (b) of the
Contract Act. According to Section 2 (b) "a proposal that accepted becomes a promise" So,
finally, we find two terms - proposal and acceptance "Proposal" is defined in section 2 (a) of
the Contract Law and the "acceptance" under Section 2 (b) of the Act. According to Section 2
(a), " when a person representing another his willingness to do or abstain from doing anything ,
in order to obtain the consent of that other such act or abstinence , is said to make a proposal. "
11/19/2013Section 2 (b) of the Actsays that "when the person to whom the proposal is made
signifies his assent thereto, the proposal is said to be accepted." It is clear that only that person
can accept the proposaltargeted by the proposal. The proposal is generally regarded as a starting
point for the contract and , moreover , an acceptance and nearing completion. The person making
a proposal may be called the proposer, offeror or promisor and the person who is proposal is
made or to accept the proposal applies to the acceptor, recipient or promise. Section 2 (c) of the
Act defines the term "promisor" and "promise." Accordingly, "The person making the proposal is
called the" promisor" and the person who accepts the proposal is called the promise "You can ,
therefore , be deduced from the above provisions of the Contract Act the promisor is accountable
to the promise and the promise is responsible to the promisor . it suggests that only parties to a
contract are the right people who can meet the contractual rights and contractual obligations of
the shoulders. Therefore, there is an effect on the contract between the parties to the contract.
Moreover, it is clear from section 73 of the Contract Act, 1872 of India that the party suffering as
a result of breach of contract is entitled to compensation from the other party in the contract. In
view of section 74 of the Act , we can say that if the sum is named in the contract as the amount
to be paid in case of breach of contract , the complainant in the rape is entitled to reasonable
compensation not exceeding the amount so named or as they may be , the penalty stipulated for .
Article 75 of the Law states that a person lawfully terminates the contract is entitled to
compensation for the damage suffered for breach of contract. It appears from the sections 73, 74

28
and 75 (referring consequences of breach of contract) that only that person has the right to sue
for breach of the contract that is a party to the contract and has suffered losses due to the breach.
Therefore, a person who is not party to the contract, i.e., a stranger cannot, therefore,
bring an action for breach of contract. Therefore, the provision of the Indian Contract Law
discussed above, it is clear that Act implicitly incorporates the doctrine of the contractual
relationship. However, some legal and non-mandatory exceptions to the doctrine accepted in
India also.
Decisions arising English law18 :
In India there has been a wide divergence of opinion in the courts of how much a stranger to a
contract can be enforced. There are many unresolved cases which state that a contract cannot be
enforced by a person who is not part of it and that the standard Tweddle v Atkinson19 is
applicable both in India and England. The PrivateCouncil extended the state to India in its
decision Jamna Das v RAM Autar20 Lord MacNaughtan , in his view very short , said the
commitment to pay new mortgagee was given by the defendant to his supplier. According to CJ
RANKIN this seems to be the effect of the Contracts Act itself in Lal Krishna v Promila Bala21
observed that Not only , however , there is nothing in section 2 to promote the idea that contracts
can be enforced by a person not a party to the contract , but this notion rigidly excluded from the
definition of " promisor " and " promise' In my judgment is wrong. India to assume that people
who are not parties to a contract may be entitled to sue immediately afterwards.Decisions that do

18 Avtar Singh, supra n.13, pp.96-98.

19 Supra n.11.

20 (1911) 30 IA 7: ILR 34 All 63. See also Iswaram Pillai v. Sonivaveru Teragan, ILR(1913)38
Mad 733; GaneshDas v. Mt. Banto,(1935) 16 Lah 118: AIR 1935 Lah 354, and Babu Ram
Budhu Mal v. Dhan Singh Bishan Singh,
AIR 1957 Punj 169. In the last- mentioned case the frst mortgagee was not allowed to
recover the money
retained by the second mortgagee under the agreement between the owner and second
mortagee.

21 AIR 1928 Cal 518.

29
not follow English Law22There is another line of thought that is based on the observation of the
Privy Council in Khwaja Muhammad Khan v Begum23 Husaini . its Lordships observe :
In India and circumstantial communities like Muslims , among
who contract marriages of minors by parents and guardians that would result in serious injustice
if the common law doctrine applies to agreements or agreements relating to such contracts.
This statement has been adopted by some higher courts as establishing the rule that
Indian courts are not bound by the rule in Tweddle v Atkinson24.

Landmark and cases related to privity of contract

Tweddle v Atkinson
Facts:- John Tweddle, Tweddle William's father, according to William Guy William Tweddle pay
200 pounds after marrying his daughter. The written agreement contained a clause William
Tweddle specifically grants the power to sue for enforcement of the agreement. William Guy
died, and the state will not pay and William Tweddle sued.
Issue:- Does William Tweddle have standing to seek enforcement of the contract?
Judgment:- The courts ruled that a promise cannot bring an action unless the consideration from
the promise moved from him. Consideration must move from party entitled to sue upon the
contract. No legal entitlement is conferred on third parties to an agreement. Third parties to a
contract do not derive any rights from that agreement nor are they subject to any burdens
imposed by it.
Explanation:- Wightman said there was no precedent that a stranger to the consideration of a
promise can still have an action if the relationship is close enough ( Bourne v Mason , 1669 ) .

22 Avtar Singh,supra n.13, pp.96-98.

23 (1910) 37 IA 152: 12 Bom LR 638.

24 Supra n.11.

30
Despite this precedent , argues that the current situation is no stranger to the consideration can
take action , even if it was for their benefit.
Crompton examines whether there was consideration of the child and claims that the natural love
and affection ( of marriage ) was not sufficient consideration. This is in contrast to forage in the
ethics of government was the honor, here is the paradigm that governs the exchange and
reciprocity. Crompton also says it would be "monstrous proposal " if a person would be able to
sue for a contract, but you cannot be sued under it .

Blackburn is an argument of the agency that runs off natural love and affection from father to son
and this son is entitled to sue in place of his father ( as if it had been scheduled for
consideration ) . Blackburn argues that the cases say the natural love and affection are not
sufficient consideration for an action.

Jordan v. Jordan
Facts:- Dunlop, a manufacture of tires, made a contract with dew, a buyer of trade, tires at a
reduced price on condition that they would not sell tires unless the share price and that any
retailer who Rocio wanted to buy had to agree not to sell at the lowest price either. Roco
Selfridge tires sold in the trading price and done Selfridge agree not to sell at a lower price and
they either pay five pounds for damages if they violate this agreement. Selfridge proceeded to
sell the tires below the price you agreed to sell for. Dunlop brought action and succeeded at trial
but was overturned by the Court of Appeal
Issue:- Is it possible to sue the Dunlop Selfridge, although there is no contractual relationship
between them?
Judgment:- Viscount Haldane based his argument on three fundamental principles of law. First,
the doctrine of privity requires that only a party to a contract can sue. Second, the doctrine of the
bill requires a person who made a contract with the label not only able to apply if the
consideration of the promise that the promisor. Third, the doctrine of agency requires that the
director is not named in the contract can only be sued if a party has been hired as an agent.

31
In application to the facts, Haldane could not find any consideration between Dunlop and
Selfridge, nor could I find any indication of an agency relationship between Dew and Selfridge.
Accordingly, the action must fail Dunlop.
Explanation:- The lords are fundamentally agree with the decision of the Court of Appeal , there
was no contract between Dunlop and Dunlop Selfridge and therefore cannot sue . There are some
fundamental principles of law that support this decision:
a) The doctrine of privity, which states that only one party to a contract, can sue on breach of
contract,
b) The doctrine require consideration of the promise (Dunlop) to consider Selfridge for the
contract to be performed, and this did not happen as Dunlop gave nothing to Selfridge here
(Selfridge Dunlop made a promise to only sell at a certain price , but it was free because Dunlop
gave no consideration to change),
c) The only way that a director not named in a contract can be sued is if he acted as agent on
behalf of one of the private parts of the contract . Selfridge was no dew agent therefore this does
not apply in this case.

Jamna Das vs Pandit Ram Autar Pande

In this case it was held that the action is brought by a mortgagee against a purchaser of the
mortgaged a company that signed your vendor. The creditor is not entitled to benefit from that. It
was not part of the sale. The buyer signed a contract with him, and the buyer is not personally
obligated to pay this mortgage debt. Therefore, it is not a person who, in the words of Section
90a of the Property Transfer Act, or the balance is legally recoverable.

Their Lordships will therefore humbly advise Her Majesty that this appeal should be dismissed
with costs.

Aries Advertising Bureau vs C.T. Devaraj

This special license appeal from the judgment of the Division Bench of the Madras High Court
in AS No. 226/71 dated February 14, 1995 . The facts are in short compass. The appellant -
plaintiff had announced for the circus performance in the second Balakrishnan defendant. He put

32
on a suit for recovery of a sum of Rs Odd 27000 and advertising charges accusing the defendant ,
as the first defendant and second defendant along with Balakrishnan . Balakrishnan was ex -
panel and a glass former decree against him was strong. We are concerned only with the
responsibility of first defendant - informant, CT Devaraj. The court ruled the claim against him
on the grounds that contractual relationship existed between the plaintiff and the defendant . The
Supreme Court, on appeal, found that there is no contractual relationship. Although the basis of
Article 70 of the Contract Law of India , 1872, ( for short 'the Act' ) attempted to establish the
liability of the defendant , the defendant was found not obtain any benefits under the contract
between he and Balakrishnan. On the other hand, was a financier to run the circus that had
incurred a huge loss Consequently, it was considered that the benefit of Section 70 of the Act did
not apply. The appeal was accordingly allowed and the claim against the defendant was
dismissed. Thus, this appeal.
Shri Sampath , learned counsel for the appellant has argued forcefully that , in view of the
agreement (Ex. A-3) , executed by the defendant and Balakrishnan that clause ( 4) provides for
the defendant agreeing to pay the costs of advertising , is obliged to pay the same to the appellant
. Proposal sent to the announcement by the appellant was certainly adopted by the respondent.
This gave rise to a verbal contract entered into between plaintiff and defendant . It is also argued
that since the defendant agreed to receive the benefit of 30 % of.

Exceptions to the Doctrine of Privity of Contract

under Indian Law:25
There are a number of exceptions introduced by our courts, in which the doctrine of
contractual relationship does not prevent a person from enforcing a contract that has been
for his benefit, but he is part of it. Many of the exceptions relate to
special branches of the law of contract, such as debt securities, agency bill
shipping, railway receipts, transfer of ownership, etc. Some of the more commonly known
exceptions can be seen here.

25 Dr. L. R. Singh, supra n.7, pp.195-212.

33
1. Exception I to the doctrine: The Benefit Aspect of Contract
The benefit aspect of the doctrine is that a contractual benefit application may be forced by the
party to the contract is entitled to it. In this case, an important question arises whether an alien
may, in any case, claim the benefit of a contract.
Judicial Exceptions26:

(a) Contract creating a trust:

When the contract creates a trust in favor of a third person, such third person may sue the
contract. In the main event MC Chacko v State Bank of Travancore,27 the Supreme Court held
that the beneficiary under a contract that creates a trust in their favor can sue the contract.
(b) Contract involving a Family Arrangement :
The family members can confer benefits of a contract to a stranger if the contract must be related
to some kind of family arrangement. In the case of M.C. Chacko v State Bank of Travancore, the
Supreme Court held that a beneficiary of a contract involving a family arrangement may enforce
the contract. The Supreme Court's decision in this case appears to be reasonable, that benefits a
third person and reduces his miseries to reduce his / her financial responsibilities.
Statutory Exception:
The following are the statutory exceptions to the privity rule:

(A) Trust: It's the most common legal exception to the doctrine of privity of contract. According
to Article 56 of the Indian Trust Act, 1882 the beneficiary entitled to have the intention of the
author of the trust, executed to the extent the beneficiary's interest.
(B) Contract of insurance: A person can take an insurance policy for another of benefit. For
example, if the husband has insurance policy for the benefit of their wife and children, may sue
the Life Insurance Corporation, although outside the insurance contract and consideration. The
corporation is the obligation to pay the sum insured for all policies, including any bonus. Such
policies and bonds should also be guaranteed by the Central Government under Article 37 of the
Law of Life Insurance Corporation, 1956. Similarly, Section 146 ( 1) of the Motor Vehicles Act ,
1988 provides that the holder of a motor vehicle is intended to get the vehicle insured not only
26 Treitel, supra n. 9 ,p.685.

27 AIR 1970 SC 504.

34
against their own risk, also against the risk of a third party. Therefore, if a third party is injured in
an accident involving a vehicle, you can sue the insurance company to recover compensation for
the loss suffered by him.
(C) To benefit from a minor under the Partnership Act:
Section 30 of the Indian Partnership Act, 1932 is another exception to the doctrine of collusion .
A minor is unable to make such a contract cannot become a partner of the company. However,
section 30 ( 1) of the Partnership Act provides that , with the consent of all the partners of a
minor may be admitted to the benefits of association . The minor admitted it is entitled to such
part of the property and benefits. Company as may be agreed upon , and may also have access to
inspect company accounts .
It is accepted that the above exceptions are fair and reasonable that help improve the socio-
economic condition of the third party.

2. Exception II to the doctrine: The Burden Aspect of Contract

The "load aspect" of the contract is another exception to the doctrine of privity. According to her,
there are certain circumstances in which the parties to a contract may mutual agreement to
transfer cargo or contractual liability of a third party and while third person can be sued . The
following are legal exceptions:
(A) The Law of Agency:
Under the law of agency the principal is bound by contractual obligations performed by the agent
in his / her name (manager) , although the contract is concluded between the agent and the third
person dealing with the agent.
(B) The Indian Partnership Act, 1932:
Section 19 of the Act provides that a company is responsible for all acts of a partner done under
its authority, express or implied. This corporate responsibility extends even to torts of a partner
as negligence, willful misconduct and misapplication of money or property received from third
parties, provided that such grievances expressed or falls within implied authority of the company.
Article 25 of the Indian Partnership Act speaks of the liability of members of a company is joint
and several. Therefore, an act performed by a partner on behalf of the signature binds all other
partners , although they have not directly contract. Section 45 ( 1) of the Indian Partnership Act
imposes contractual obligations after dissolution of the company in those couples who have not
entered into the contract with a third person . Such liability may be imposed on other partners for

35
the contract made by a couple with the third party, provided , first, the act is such that is
commonly made by the firm prior to dissolution and Second, no public notice of the dissolution
of the company is given.28
Section 30 (3) of the Indian Partnership Act , states that despite a minor is not personally liable
for a company's responsibility , however , participation in society is responsible by signing
ceremony.

(C) The Negotiable Instruments Act, 1881: Section 31 of the Act provides that the holder of a
check is liable to pay the money mentioned in the recipient. The debtor is strangers to the
contract made between the drawer and the beneficiary, but still are required to pay money to the
beneficiary.
Article 36 of this Law stipulates that all parties before is responsible to the holder in Of course. It
should be noted that the contract is between an immediate front and holder in due course and the
previous parts that remain are strange of the contract , but are held responsible until the
instrument is duly satisfied. According to Article 53 of this Law , each party before the holder is
liable to derives its title from a holder in due course . Clearly, in terms of contract between the
owner and holder in all the previous are liable to the holder until the instrument is duly satisfied,
although not parties to such contracts. It follows that the imposition of contractual obligations in
an third parties under certain circumstances , it seems fair and adequate , as it promotes trade
relations between people who are not directly linked to the contract , but are likely to be
affected .

3. Exception III to the doctrine: Doctrine of privity of contract

under the Law of Agency
The Agency Act is another exception to the rule of collusion . To the extent that the relationship
between the principal and the agent is concerned, there is a contractual relationship between
them. The relationship between the agent and the third party enters existence when the agent
acting within the scope of his authority , entered into a contract with the third party. The
relationship between the principal and the third appears an exception to the doctrine of the
contractual relationship. When there is any express contract or by operation of law (Article 230

28 C. Assiamma v. State Bank of Mysore & others, AIR (1990) Ker. 157.

36
( 1) , (2) , (3) of the Contract Law of India , 1872 ), an agent can be sued personally by the third
party and the agent can run the contract against the third. All dependency law can not be treated
as an exception to the doctrine of contractual relationship. It provides only two exceptions .
These are :
(A) When the contract with the third party is composed of a sub - agent , and
(B) If the principal is disclosed.
In these two cases, but the main one is a stranger to the contract , however , may sue and be sued
by the third party .

4. Exception to the doctrine IV: Allocation of Contractual duty

The "assignment of contractual rights to a stranger" is also one of the exceptions to the collusion
rule. When contractual rights may be transferred, this will acquire all rights of the transferor or
deceased party. The transferee is certainly a stranger to the contract, however, is entitled to sue
the other party to the contract. Therefore, a valid assignment of contractual restricts the
application of the doctrine of relative impact contract. These restrictions are genuine, as they
provide an opportunity for an alien to perform the contract and therefore force the promisor to
perform his promise.

5. Exception V to the doctrine: Contractual Allocation passive

The "contractual allocation of responsibilities to a stranger is another exception to the doctrine of
the contractual relationship. The general rule is that contractual obligations cannot be assigned
by the promisor to the third person without the consent of the promise. But certain circumstances
in which it may take that assignment. For example, when a contract is impersonal , the promisor
may use a third party to perform its promise.29
You can , therefore , states that the exceptions built into various legislations such as the Contract
Act , 1872 of India and the Indian Partnership Act 1932 are right reduced the scope of the
doctrine of the contractual relationship, since in the current society of the rights of a stranger is

29 Section 40, The Indian Contract Act, 1872: Person by whom promise is to be
performed: If it appearsfrom the nature of the case that it was the intention of the parties
to any contract that any promise contained
in it should be performed by the promisor himself, such promise must be performed by the
promisor. In other
cases, the promisor or his representative may employ a competent person to perform it.

37
likely to be affected by the contracts in different dimensions . Therefore, the limitations of the
doctrine of contractual relationship are for the benefit of foreigners.

Third-party beneficiaries
In Australia , it has been argued that third-party beneficiaries can keep a promise made for his
benefit in an insurance contract which is not a party ( Trident General Insurance Co Ltd v
McNiece Bros Pty Ltd ( 1988 ) 165 CLR 107 ) . It is important to note that the decision had no
clear relationship Trident , and did not create a general exception to the doctrine of privity in
Australia .

Queensland, the Northern Territory and Western Australia have all enacted laws for third-party
beneficiaries to enforce contracts , and has limited the ability of contracting parties to modify the
contract after the third party has relied on it. Furthermore, Article 48 of the Insurance Contracts
Act 1984 (Cth) allows third-party beneficiaries to enforce insurance contracts.

Although the damages are the usual remedy for breach of a contract for the benefit of a third
party , if the damages are inadequate , specific performance may be granted ( Beswick v Beswick
[ 1968 ] AC 59 ) .

The issue of third party beneficiaries has appeared in cases where a longshoreman has stated that
they are covered by the exclusion clauses in a bill of lading . For this to be successful, three
factors must be made :

The bill of lading must have clearly intended to benefit a third party.

It is clear that when support contracts with shippers, but also as an agent contracts Docker. That
is, whether the carrier should have had the authority by the stevedore to act on their behalf, or
later stevedore must ratify (approve) the shares of the company.

The difficulties moving from the stevedores consideration should be extended.

The last issue was discussed in New Zealand Shipping Co Ltd v AM Satterthwaite & Co Ltd
[1975] AC 154, where it was held that the stevedores had provided consideration for the benefit
of the exclusion clause in the unloading of the goods from the ship.

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New Zealand has enacted the Contracts Act 1982 connivance , which allows third parties to sue
if they are sufficiently identified as beneficiaries of the contract , and the contract is expressed or
implied to be able to apply for this benefit.

Criticism

The doctrine of privity has been under severe attack for its refusal to recognize the right of a
Third beneficiary to enforce the contractual provisions made for his / her benefit. Amendments to
the Law, commentators and judges have noted that sometimes differences between contract
theory on the one hand, and the commercial reality and justice in the other. The availability of the
exceptions above does not always correspond to your needs.

No wonder that law reform agencies in various common law jurisdictions have critically
examined the doctrine and recommended its reform.30 In Australia ( Western Australia and
Queensland) , Canada ( New Brunswick ) , England, New Zealand and Singapore on privity
doctrine was finally repealed by legislation.31

The following are the criticisms of the doctrine of privity:

Does injustice to parties who have relied on the contract to regulate their issues, and thus
upset the reasonable expectations of third parties to obtain benefits under contract.

30 Such as the Queensland Law Reform Commission, Report on a Bill to Consolidate, Amend
andReform the Law Relating to Conveyancing, Property, and Contract and to Terminate the
Application of Certain Imperial Statutes (1973); the Law Commission (England), Privity of
Contracts: Contracts for the Benefit of Third Parties (1996); the New Zealand Contracts and
Commercial Law Committee, Report on Privity of Contract (1981); and Law and Revision
Division, Attorney General Chambers (Singapore), Report on the Proposed Contracts (Rights
of Third Parties) Bill 2001: Law Reform Commission of Nova Scotia, Report on Privity of
Contract (Third Party Rights) (2004).

31 See the Western Australian Property Law Act 1969 (Western Australia), the
QueenslandProperty Law Act 1974 (Queensland), the Law of Property Act 2000 (the Northern
Territory),
the Law Reform Act 1993 (New Brunswick), the Contracts (Rights of Third Parties) Act 1999
(England), the Contracts (Privity) Act 1982 (New Zealand), and the Contracts (Right of Third
Parties) Act 2001 (Singapore).

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 It frustrates the intentions of the parties in the contract when the purpose of conferring
some benefit to the third party32.
In case of third suffers no harm, then he has no chance of claiming compensation
collusion because of this rule. Fourth, such third party suffers a loss cannot sue, however,
promise that has suffered any loss as possible.
This doctrine is unduly complex and uncertain. During the passage of time, the judiciary
has made these doctrine loopholes to reduce their stiffness and reduced in a principle
vulnerable and weak.

The courts have developed exceptions to the doctrine of avoiding injustice, as we have seen with
Over time the exceptions are continuously increasing , this shows the basic deficiencies and
demonstrates that existing exceptions have not solved the problem in its entirety and the scope of
the new amendments are still persistent , denying the very existence of this doctrine.33

Finding and suggestions:

Need coding complementary principles: 34

In the preamble of the Contract Act, 1872 of India says, this Act does not profess to be a
complete Code relating to the law relating to contracts. The legislature, while the enactment of
this Act, did not intend to comprehensively codify the entire law of contract to be enforced by the
courts. Consequently, the issues on which it is silent, the courts have had to resort to the rules of
English Common Law as principles of "justice, equity and good conscience" by Law
Commission report this reliance on the principles of English law to supply the deficiencies
Indian enactment is not conducive to safety or simplicity of the law. It is preferable to add to the
Law of the English common law principles that have been applied by our courts for nearly a
century, so it may not be necessary to refer to the law in English many cases.

32 Supra n.11.

33 Pollock & Mulla,supra n. 4 ,p. 112, see also Chesire, Fifoot & Furmston, supra
n.2,p.582.

34 13th Law Commission Report of India (Contract Act,1872) ,1958, para 3,available
athttp://lawcommissionofindia.nic.in/1-50/Report13.pdf (Last visited on August 20, 2011).

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From the above discussion we find that there is no reason why reform should not be welcome.

Steyn LJ in Darlington Borough Council v North Wiltshire Ltd.35 said:

"The law of the contract shall comply with the reasonable expectations of contracting parts, no
doctrinal, logical or policy reason why the law should deny the effectiveness of a contract for the
benefit of others that this is the intention expressed of the parties."

A rigid adherence to the doctrine of collusion is bound to cause difficulties. The current state of
relevant Indian legislation is not true and is still evolving. Exceptions have been recognized by
our judiciary and the legislature does not cover all cases of difficulty and thus enhance the
confusion of layman. According to Law 13 Commission Report 1958, the best course would be
to adopt a general exception to cover all cases of contracts executed benefits to third parties
while neglecting the particular cases in which the rule of collusion apply should not. The student
is in line with the recommendation of Law Review Committee that a separate section to be
incorporated as the section 37 A, which is similar to the Contracts (Rights of Third Parties) Act
1999. It should read:

Section 37 A - The benefits granted to third parties:

When the contract expressly confers a benefit directly to a third party, unless the contract
provides otherwise, shall be enforceable by the third party in its behalf, subject to the
defenses that would have been valid between recruitment parts.
When a contract expressly conferring the benefit directly from a third party has been
approved , expressly or impliedly , by a third party , the parties to the contract cannot
replaced by a new contract for him or terminate or modified so as to affect the rights of
third.

There are four possible types options41 reform:

(A) Development Judiciary collision avoidance doctrine.

(B) The legislative exceptions to the privity doctrine to be made in specific cases.

35 (1995) 1 WLR 68.

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(C) The adoption of a general statutory provision that no third party should be denied the
execution of a contract made for his benefit on the grounds of lack of collusion.

(D) reform through detailed legal system .

Each option has its pros and cons. We are aware that the options (a) and (b) have the advantage
of being flexible and can meet the needs of specific circumstances. Its main shortcoming is that
both not address collusion doctrine within a comprehensive plan, systematically and consistently.
The problem is even more delicate in option (a) that the courts may act only when there is an
appropriate case. To option (b), the creation of specific legal exceptions inevitably a complicated
area the law and is generally regarded as technical, artificial and complex. Option (c) may is
simple to implement, but it is not feasible because it leaves too many fundamental questions
unanswered and would create considerable uncertainty in its operation. Option (d), which speaks
of a comprehensive reform of the privity doctrine would certainty, clarity and coherent body of
law, which is not available in the other options and therefore more suitable with the subject. This
approach is also adopted by Australia, England, New Zealand and Singapore.

Conclusion:

During the project, the we found that the hypothesis is justified and well-illustrated in the
previous project. It is hereby concluded that the idea behind the concept of Doctrine of the
contractual relationship itself is vague and does not fit the modern context. The student is against
retention of the rigors of this doctrine but simply the abolition of the doctrine of collusion or
ignore it would not solve the crisis and instead constitute a serious challenge the legal system.
Therefore, there is a strong need for redefining.

Although it has existed in many common law systems in the world from a long time, so
challenge and change would not be entirely justified. What is required is to modify the building
provisions

A separate section as recommended by the Indian Law Commission 13 Report that may
be useful to decrease the difficulties created by this doctrine , or

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 The enactment of a new law that entitles a stranger to the insurance contract qualifying
circumstances that may be an alternative to it.

What should be the elements of the new legislative framework is an open space for greater
project.

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