Stranger to Contract [Privity of Contract] and Stranger to

Consideration [Privity of Consideration]

Fathima Nusheeba
Stranger to Contract [Privity of Contract] and Stranger to
Consideration [Privity of Consideration]

A person who is not a party to contract cannot claim rights, even
though the contract is for his benefit, and such a person is known as
stranger to contract. Similarly, when consideration is furnished not
by the promisee but by a third person, the promisee becomes a
stranger to consideration.

The term privity of consideration is a doctorine which means
stranger to the consideration or consideration given by any
other person than the promisee.

Thus under English Law, a stranger to consideration
can not sue, and the consideration must move from the
promisee and not from a stranger,



But under the Indian Contract Act consideration may move from the
promisee or any other person. So in India a consideration made by
the stranger is lawful and enforceable.

However, doctrine of privity of contract is applicable in India also. That
is a stranger to contract can not sue in England as well as in India,
though it may be made for his benefit. This rule is known as the
doctrine of privity of contract.
Exceptions to the rule that a stranger to contract and stranger to
considertion can not sue:
1. Trusts
In a contract creating a trust, the beneficiary who is a stranger to the
contract, can enforce the trust.

Example : Arya agrees to transfer certain properties to Cindy, to be
held by Cindy in trust for the benefit of Basil. Basil can enforce the
agreement even though he was not a party to the agreement.



2. Where provision is made in a marriage settlement
When agreement is made in connection with marriage and a
provision is made for the benefit of a person, he may
sue although he is not a party to the agreement.
Example : The father of the bridegroom and the father
of the bride entered into a contract. Where by it was
agreed that in consideration of marriage the father of
the bridegroom would pay a definite amount as Pin-
money or Kharachi i Pandan to his daughter in law.
The allowance was stopped sometime after the
celebration of the marriage. The daughter sued her
father in law to recover arrears of the allowances.
It was held that, though she was not a party to the
contract, she could recover the money (Khwaja
Muhammad Khan Vs. Husaini Begum)

3. Where provision is made in a partition or family arrangement for
maintenance or marriage expenses of female members
The female member can enforce the promise though she may be a
stranger to the contract.

Example : On partition of a Hindhu undivided family, the two
brothers agreed that, they would jointly pay (in equal shares) a sum
to their aged mother. The brothers subsequently refused to pay
the amount. It was held that, the aged mother, though is not a
party to the contract, can enforce the promise (Shuppuammal
Vs.Subramanyan(1910)).

4. Acknowledgement or estoppel
Where a promisor by his conduct, acknowledges or otherwise
constitutes himself as an agent of a third party. A binding obligation
is thereby incurred towards him and is estopped from denying his
liability to the third party.

Example : Thomaskutty receives some money from Anand to be
paid over to shaban. Thomaskutty admits of this receipt to shaban.
Shaban can recover the amount from Thomaskutty who shall be
regarded as the agent of shaban.

5. Contracts entered into through an agent
The principal can enforce the contracts entered into by his agent
provided the agent acts within the scope of his authority and in the
name of the principal.

6. An assignee can also sue on the basis of assignment
Assignment is a process whereby right to enforce a contract is
vested in someone other than original creditor without the
consent of original debator. An assignee of a contract can also
enforce the benefit which has been as signed under the
contract. Thus the folder in due course of a negotiable
instrument can realize the amount on it even though there is no
contract between him and the person liable to pay.