Exceptions to

the doctrine of
privity of
contract
By,
Megha R Ajit
Reg no: 1712135
Course: 1 Bcom F&A
 An agreement enforceable by law is a contract.
The Indian Contract Act, 1872 was passed by the British India and contains
the law relating to contracts that occur in India. It is based on the principles of
English Common Law and is applicable to all the states in India except Jammu and
Kashmir. It states the circumstances under which the promises made by the
parties to a contract shall be legally binding and the enforcement of these rights
and duties.
The Act originally contained 266 sections and was later converted into two
parts:
Part 1 deals with the General Principles of Law of Contract (Sections 1 to 75)
Part 2 deals with Special kinds of Contracts such as
(a) Contract of Indemnity and Guarantee
(b) Contract of Bailment and Pledge
(c) Contract of Agency

For this assignment, Ill be focusing the rule Doctrine of Privity of Contract
and its exceptions.

What is Privity of Contract?

Privity of Contract is the relationship that exists between the parties to an

agreement. If you want to file a lawsuit involving a contract, you need proof that
you and the other person were in privity of contract or that you were both
involved in the contract and had established a win-win situation or a contractual
relationship.
Lets take an example. Imagine youve visited a supermarket or a bakery
nearby and purchase a frozen meal and later that day you consume it but get sick
because the food was filled with bacteria. You sue the supermarket or the bakery
for selling this product and the manufacturer for not taking proper precautions
but also you wish to sue the middleman who delivered the product from the
manufacturer to the supermarket or the bakery. This would be a potential
problem because you were not in privity of contract with the middleman and had
no direct contact with him as he did not sell or manufacture or market this item
to you.
 Exceptions to Privity of Contact

Now lets take a look at some of the exceptions to privity of contract. This
means that even though someone was not directly involved in the contract,
he/she might still be able to sue the partied involved. For example, in case of a
trust beneficiary, who is the person who receives assets from a trust, can sue the
trustee, who oversees the trust and gives pout the asset in accordance of the
contract undertaken by him, if the trustee is not following the rules of the
contract.

Next, we have property exceptions. For instance, theres a term called

restrictive covenant which require the buyer to either take or abstain from a
specific action. In other words, no matter who buys the property, that buyer has
to abide by the restrictions on the property. Lets take a look at an example for
restrictive covenant. A restrictive covenant would be a situation where your
neighbour has a right of use on your property on a part of the land. Even though
you dont have a contract with that neighbour, the covenant is still enforceable as
if both the neighbour and the owner had a contractual relationship.

Then there is assignments of contract that can be valued as an exception. In

this case, the party who enters into the contract can give the power to sue the
other party to another person. This happens only when the original party in the
contract transfers or shifts all of their rights to another third person. This puts the
third person in place of the original party and therefore allows the third person to
file a lawsuit or sue the other person based on the contract drawn.

Lastly, we have an exception in case of family settlement. When certain

arrangements are made for maintenance or marriage of a particular member of
the family then the person for whose benefit the provision is made may enforce
the contract. For example, two brothers, on partition of joint property, agreed to
invest a certain sum of money, in equal shares, to take of their mother. Later, the
brothers decide to not use that fund. Held, mother was entitled to recover from
her sons such amount that was invested by the sons.
The following are some examples for exceptions to privity of contract.

X promised, the secretary of a Mosque Committee, to subscribe a sum of Rs.500

for rebuilding a mosque, but he failed to pay the promised subscription. Y filed a
suit against A for the recovery of the promised subscription. It was held by the
court that there was no consideration either in the sense of any benefit or
advantage to the promisor X, or detriment or loss to the promise, Y, and so, the
agreement was void and unenforceable.

Kumar promised a trust to donate a sum of Rs.5,000 for the construction of a

temple. The trust of the temple, on the faith of Kumars promise entered into a
construction contract with Super Builders for the construction of the temple.
Later, Kumar refused to pay the amount. Held, Kumar was liable to pay to the
extent of detriment incurred by the promise subject to the maximum amount
promised as the trust had incurred a liability on his faith.
[Kedarnath vs. Gauri Mogamed]

A husband who was separated from his wife executed a separation deed by which
he promised to pay to the trustees, all the expenses for the maintenance of his
wife. Held, the agreement created a trust in favour of his wife and wife could
claim such amount though not a party to the contract.

Mr.A had a son Mr.X and Mr.B had a daughter Mis.Y. A agreed with B that in
consideration of the marriage of Y with X, he would pay to Y, his daughter-in-law,
an allowance of 500 a month in perpetuity. Layer on Y claimed 500 from A which
A refused to pay. Held, Y although not a party to the agreement between A and B,
was clearly entitled to recover the arrears of the allowance.