What is the Privity of Contract?
As per the Indian Contract Act 1872, the Doctrine of Privity of Contract states that a third party to a contract cannot sue for a contract, for which he was not a party and a promise for which he didn’t furnish any consideration, even if the contract was made for his benefit. Any contract which is entered by two or more persons thereby creates rights and obligations on them, it is only a party to the contract who can enforce his rights against the other party. This creates a basic principle underlying the law of contract, that a stranger to a contract cannot maintain a suit for a remedy.
The law entitles only those who are parties to the contract can file suits for exercising their rights. This is known as the Privity of Contract. This law of contract creates jus in personam as distinguished from jus in rem. Therefore, a stranger to a contract cannot sue for a contract to which he was not in privity. Hence, the Indian Contract Act, 1872 does not allow a stranger to file a suit on the contract. Only a person who is a party to the contract holds the right to sue.
Geeky Takeaways:
- Under the Indian Contract Act, 1872, it is prescribed that only a party to the contract can be the appropriate person who can enforce the contractual rights and fulfill the contractual obligations. Thus, there exists a Privity of Contract between the parties to the contract.
- Whereas, in case of breach of contract that person will be entitled to sue for breach who was a party to the contract and who has suffered a loss due to such breach while being a party to the contract.
- Accordingly, a person who is not a party to the contract is a stranger to the contract and he cannot bring an action for breach of the contract to which he was not a party to the contract.
Table of Content
- The Doctrine of Privity of Contract
- Important Case Laws
- Exceptions to the Doctrine
- Frequently Asked Questions (FAQs)
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