Doctrine of Privity of Contract
Chapter — 1
Introduction
/ Evolution
Doctrine of Privity of Contract: Emergence from England to India
- Position in England:
The doctrine of Privity of contract owes its origin to the common law courts. This doctrine was,
for the first time, applied in the case of Jordan v. Jordanz1 In this case the suit of a non party to a
promise did not lie. But, in Lever v Heys2 the court overruled the decision in Jordan v1 Jordan
and allowed the stranger’s
suit on a contract But in Taylor v Foster“ the court reaffirmed the decision in
Jordan’s case and applied the doctrine of privity of contract and accordingly, a
stranger to the contract was prevented to nlaintajn his action upon breach of
contract
Tweddle v. Atkinson5 is the case in which the doctrine of privity of contract
was finally established by the Court of Queen’s Bench in 1861. In this case
plaintiffs suit was dismissed by the court. It is to be noted that the court in
rejecting plaintifi’s claim laid more emphasis on doctrine of privity of
consideration than on the doctrine of privity of contract Nevertheless. the
doctrine of privity of contract acquired a definite shape in this case.
It is clear from the judicial decision that the doctrine of privity of contract lays
down two general principles of law of contract :
Firstly, it purports to say that a stranger to a contract cannot sue.
1
(1594) Cro. Eliz. 369. Cited from Dr.LR.Singh, supra n. 7 p.4
2
(1598) Cro. Eliz. 619, 652;(1598) Moo. K.B. 550. Cited from Treitel, The Law of Contract,
Sweet & Maxwell, London(12th edn. 2007), pp.624-625
Secondly, it states that a stranger to a contract is not bound by the contract.
‘ (1501) Cro. Eliz. 775,807.Cited from Treitel,i
5 (1861) 1 B. a s. 393. Cited from Robert Fennigan, privity—The End of An Era (Error),
vol.103, law Quarterly
Review, (Reprint, 1001) .pp.567—568
ccc.
é inty of Contract (Repair... Aa :
Doctrine of Privity of Contract
This doctrine finally got approval by the House of Lords in the leading case of
Dunlop Pneumatic TEE Co. Ltd. v. Selfridge & Co. Ltd5., in the year 1915. It is
to be noted that in some subsequent cases efforts were made to abolish the
doctrine. However, the doctrine is not absolute. Certain limitations have also
been imposed upon it. This doctrine has been generally criticised. In 1937, the
Law Revision Committee, under the chairmanship of Lord Wright, also
criticised the doctrine and recontmended its abolition. In its Sixth Interim
Report the committee stated":
“ Where a contract by its express terms purports to confer a benefit
directly on a third party, the third party shall be entitled to enforce the provision
in his own name, provided that the prornisor shall be entitled to raise against the
third party any defence that would have been valid against the promisor...
\/ Underlying Principle:
0 The Privity of Contract under Indian Law
The term “Contract” itself envisages that it is a kind of legal agreement between
two individuals and both of them are under the obligation created by contract to
which they are parties. But then a reasonable question comes into mind that
what if a contract itself confers some benefit to the third party? Is it justified
not to allow to third party to sue in case of denial of benefit conferred expressly
under a contract? So it is necessary to consider doctrine of privity in the light of
this question.
This doctrine ensures that a stranger to a contract can neither sue nor be
sued by the parties to the contract. However, in course of time, it was realised
that the doctrine is too rigid to cope with the present social context because a
contract affects not only the parties to it but also society at large. Consequently,
certain limitations (or exceptions) were evolved and were applied to the doctrine
by both legislature and judiciary.
- Meaning of the Doctrine of Privity of Contract:
“No one may be entitled to or bound by the terms of a contract to which he is
not an original party.” In other words, the rights and obligations are strictly, the
private matters of contracting parties and because of this a stranger has no legal
5 (1915) 1 0,3. 250. Cited from Treitel, supra n.9
7 Avtar Singh, Law of Contract and Specific Relief, Eastern Book Company, Lucknow (9th edn.
Reprint 2006), p.
94.
