Privity of contract its binding effect on third party?

Answer 1

Privity(stranger cannot sue) to contract:Legally recognized relationship between two parties.

Only the parties to a contract owe duties to one another & realize any benefits under the contract. The contracting parties also have the ability to sue one another for breach of contract. Privity of contract can also be given to 3rdparties through delegation of duties.

General concept: As general rule of contract a stranger can give consideration but cannot file sue.

Exception:When a stranger can file suit?

1. In case of trust the beneficiary can-file-sue:

   A father(settlor author) gives his property to Trustee with trust deed. After then, Son (beneficiary) come in trust for take property, but trustee don't give property to him. In this situation, Son( beneficiary) can file sue against(upon) trustee, even though he is "stranger"

2. In case of family settlement agreement:

   E.g. A & B get married A's father agreed with B's father to pay Rs. 5000 per month to B [daughter-in-law]. Later, father-in-law refused to pay money to B. Here, 'B' can file sue upon A's father.

3. In case of acknowledgment (to admit something) given by third-party:

   E.g. Debtor pays Rs. 10,000 to agent and promises to pay the money to creditor. Here, creditor can file sue upon agent if does not pay.

   Estoppel: "stop from denying"

   "Once you have confirmed something you cannot cancel it"

4. In case of convent (condition) running(attached) with land:

   If any dues of government is outstanding in respect of land/ recover it from the buyer of land & building.

5. In case of marriage agreement: [see just as point no.2]

   An agreement made without consideration is void.

"No consideration No contract"

General concept: Generally, it is said that "if there is lack of consideration, there will be no contract"

E.g. "An elder brother agrees to pay Rs. 10,000 to his younger brother." Suppose, elder brother fails to perform the promise. Can younger brother take legal action?

No, because it is a social agreement and not support by consideration.

Exception: There are 5 situation in which there is no consideration even though there is contract:

1. Agreement based upon natural love & affection [attachment]: An agreement based upon love & affection will be valid if all of these conditions are satisfied.

• The promise must be written.

• It must be signed by promisor.

• It must be registered.

• It must be based upon nature love & affection.

• There must be near relation between parties.

1. E.g. Husband agreed in writing to pay Rs, 5000 per month to his wife. The agreement is signed & registered. Husband referred that there was several/frequent disputes between the couple, after 2 months the husband stopped payment.

   The court held there is no love & affection between parties. So, this agreement is void.

2. Agreement to compensate for past-voluntary-services (P.V.S)

   E.g. X finds Y's purse and gives it to him. Y promises to give rs.500 to x. this is a valid even though the consideration did not move at the desire of Y, the promisor.

   E.g. X a neighbor helped putting down the fire in Y's house. Afterwards, Y promised X to give Rs. 1000. This is a valid contract even though the consideration did not move at the desire of the promisor.

   This agreement is valid, because if following conditions: Writing, sign by promisor, and P.V.S

3. Promise to pay T.B.D i.e. Time-barred-debt[Period-prohibited-loan]

   A debt which limitation period is over i.e. 3 year from the due date/default date. E.g. A debtor agrees to pay rs. 1000/- to creditor out of Time-barred-debt of Rs. 10,000/-

   If this agreement promise is in writing, signed, then it will be valid.

   According to law of limitation, a debt which remains unpaid or unclaimed for a period of 3 years becomes a time barred debt which is legally not recoverable. But a promissory note issued in personal capacity by the wife of a debtor to pay his time barred debt of her husband is not enforceable.

4. Agency agreement [relation of principal & agent]: No need of consideration

5. Completed gift: The gift actually made by a donor and accepted by the donor are valid even without consideration. Thus, a completed gift needs no consideration.

   E.g. X transferred some property to Y by a duly written and registered deed as a gift. This is a valid contract even though no consideration moved.

Answer 2

(Any errors here are mine therefore please check before you commit anything to memory for exam preparation (we all cannot be boffins)

The privity of contract within the English law is derived from common law. It is where only parties to a contract can sue upon it. Third parties due to this rule have no such 'right' because one rule of a binding contract is that consideration must move from promise and third party does not provide such consideration.

The origin of this rule comes from the case Tweddle v Atkinson (1861). Where the very notion of consideration must move from promise was considered and applied. This rule was later confirmed in Dunlop v Selfridge (1915). It must be noted that the doctrine of Privity has created much controversy amongst judges in particular Lord Denning and is seen to cause much unjust therefore there are now several statutory exceptions and common law exceptions to get around the privity problem.

Before these exceptions can be considered it must first be established the exact reasons as to why privity is thought to be unfair in the first place....

I cannot be bothered to complete this as I have a exam tomorrow but