Meaning of the Doctrine of Privity of Contract :
It is a general rule of law that only those person who are parties to a contract may sue and be sued on that contract. Any person other than the parties to a contract is called as "stranger to the Contract". A contract neither confers any rights nor imposes any obligation/ duties on such person. Hence, a stranger to a Contract cannot sue and be sued. This rule is known as the Doctrine of Privity of Contract.
Example :
Dunlop Pneumatic Tyre Co. Ltd Vs. Selfridge and Company Ltd. (1915) A.C 847
S bought Tyres from the Dunlop Rubber company and sold them to D. sub-dealer who agreed with S not to sell below the Dunlop's list price and to pay the Dunlop company.$ 5 as damages on every tyre D undersold. D sold two Tyres at less than the list price and thereupon the Dunlop company sued him for breach.
In this case, court held that the Dunlop company could not maintain the suit as it was a stranger to the contract.
Consequences of the Privity of Contract :
There are two consequences of this rule:
Application of the Doctrine of Privity
It is a general rule of law that only those person who are parties to a contract may sue and be sued on that contract. Any person other than the parties to a contract is called as "stranger to the Contract". A contract neither confers any rights nor imposes any obligation/ duties on such person. Hence, a stranger to a Contract cannot sue and be sued. This rule is known as the Doctrine of Privity of Contract.
Example :
Dunlop Pneumatic Tyre Co. Ltd Vs. Selfridge and Company Ltd. (1915) A.C 847
S bought Tyres from the Dunlop Rubber company and sold them to D. sub-dealer who agreed with S not to sell below the Dunlop's list price and to pay the Dunlop company.$ 5 as damages on every tyre D undersold. D sold two Tyres at less than the list price and thereupon the Dunlop company sued him for breach.
In this case, court held that the Dunlop company could not maintain the suit as it was a stranger to the contract.
Consequences of the Privity of Contract :
There are two consequences of this rule:
1) A person who is not a party to a contract cannot sue upon it even though the contract is for his benefit and he provided consideration. This rule is known as the Doctrine of Privity of contract.
2) A contract cannot confer rights or impose obligations arising under it on any person other than the parties to it. Thus, if there is a contract between A and C, here C cannot enforce it.
Application of the Doctrine of Privity
- Application of the doctrine of Privity in England :
In England, a Stranger to a contract cannot sue. There is a famous case on this point Tweddle Vs Atkinson (1861) 1 B&S 393.
- Application of Doctrine of Privity in India:
The position is the same in Indian Law also. Relevant case on this point is Jamuna Das Vs. Ram Avtar.
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