PRIVITY OF CONTRACT
The doctrine of privity of contract means that only those persons who are parties to the contract can enforce the same. A stranger to the contract cannot enforce a contract even though the contract may have been entered into for his benefit. For Example, If in a contract between A and B some benefit has been conferred upon X. X cannot file a suit to enforce the contract because A and B are the only parties to the contract whereas X is stranger to the contract.
This doctrine of privity of contract is equally applicable in India as in England. In Tweddle v. Atksinson, it was held that only parties to the contract can sue each other. In that case the plaintiff, A married a girl, B. After this marriage there was contract in writing between A's father and B's father that each would pay a certain sum of money to A and that A will have the power to sue for such sums. After the death of the two fathers, A brought an action against the executors of B's father to recover the promised amount. It was held that A could not sue for the same. Inthe above stated case the plaintiff was both a stranger to contract as well as stranger to th consideration andhe could not enforce the claim. The rule of privity of contract was reaffirmed by the House of Lords in Dunlop Pneumatic Tyre Co. Ltd. v. Selfridge It Co. Ltd.9
1. The appellants (Dunlop Co.), who were manufacturers of motor-car tyres, sold some tyres to one Dew & Co. with an agreement that these tyres will not be sold below the list price.
2. Dew & Co. in their turn sold some of these tyres to the respondents (Selfridge & Co.), with an agreement between Dew & Co. and the respondents that the respondents shall observe conditions as to price and the respondents also promised that they would pay to the appellants a sum of £ 5 for every tyre sold below the list price.
3. The respondents (Selfridge & Co.)sold some tyres below the list price, and the appellants brought an action against the respondents to recover damages for the same.
The House of Lords held that, Dunlop Co. could not bring an action against Selfridge and Co. because there wasno contract between the two parties. The authority for the application of the rule in India is the decision of thePrivy Council in Jamna Das v. Ram Avtar , In that case A had mortgaged some property to X. A then sold this property to B, B having agreed with A to payoff the mortgage debt to X. X brought an action against B to recover the mortgage money. It was held by the Privy Council that, since there was no contract between X and B, X could not enforce the contract to recover the amount from B. Similarly was held in In Advertising Bureau v. C.T. Devaraj,.
Exceptions to the rule that a stranger to contract cannot sue
(1) Trust of contractual rights or beneficiary under a contract …This exception to the doctrine of privity of contract was recognised by Lord Haldane in Dunlop Pneumatic Tyre Co. v. Selfridge & Co.itself and it was mentioned that while only a party to a contract can sue on it a stranger can not sue for the samehowever "such a right may be conferred by way of property, under a trust." . The basis of an action by the third party in such a case is actually not the enforcing of contract but the right conferred by a particular contract in favour of a third party in the form of trust, etc. For example, in a contract between A and B, beneficial right in respect of some property may be created in favour of C. In such a case C can enforce his clai right conferred upon him.
Indian law has also recognised this exception, through the decision of the privy Council khwaja Muhammad Khan v. Husaini Begum In this case
1. there was an agreement between the father of a boy and a girl that if the girl (plaintiff in this case) married a particular boy, the boy's father (defendant in this case) would pay certain personal allowance known as Kharchi-i-pandan (bettle-box expenses) or pin money to the plaintiff.
2. It was also mentioned that a certain property had been set aside by the defendant and this allowance would be paid out of the income of that property.
3. The plaintiff married the defendant's son but the defendant failed to pay the allowance agreed to by him.
4. In an action by the plaintiff to claim this allowance the defendant contended that his contract to pay the allowance had been made only with the plaintiffs father and not with the plaintiff, she being a stranger to the contract cannot sue.
5. The defendant's contention was that Tweddle v. Atkinson,I7 which debars an action by a stranger to the contract should be applicable in this case.
It was held that,in the present case, the basis of the plaintiffs claim being a specific charge on immovable property in her favour, she is entitled to claim the same as a beneficiary and as such, the common law rule is not applicable to the facts and circumstances of the present case.
Similarly was held in by the Calcutta High Court in Narayani Devi v. Tagore Commercial Corporation Ltd.20
Facts of the case---
1. A held various shares of the value of Rs. 40,500. It was agreed that A will sell his shares in favour of B and in return B shall pay to A Rs.500 p.m. and after his death shall pay Rs. 250 p.m. to A's widow during her life, if she survived her husband.
2. C stood a surety for B.
3. Some payments were made by C to A and after his death to A's widow. Thereafter the payments were stopped. A's widow brought an action against B and C to recover the amount.
4. One of the defences pleaded was that since the plaintiff was not a party to the said agreement which was entered into by her husband and the defendants, she was not legally entitled to sue in respect of the agreement.
It was held that from the facts and the circumstances of the case, an obligation in the nature of trust can be inferred in favour of the plaintiff, and an equity having been created in her favour she is entitled to sue even though she is not a party to the contract. A decree was passed in her favour for the arrears of the amount due.
This exception was also recognized by Delhi High Court in Klause Mittelbachert v. East India Hotels Ltd.,21
(ii) 
Conduct, Acknowledgment, or Admission Sometimes there may be no privity of contract between the two parties, but if one of them by his conduct, acknowledgment or admission recognises the right of the other to sue him, he may be liable on the basis of the law of estoppel. In the case of Narayani Devi v. Tagore Commercial Corporation Ltd. A.I.R. 1973 Cal. 401; though there was no contract between the plaintiff and the defendants, defendants made certain payments to the plaintiff , asked for the extension of time to pay and had earlier called upon the plaintiff to agreement with the, plaintiff’s husband. execute certain documents in this connection in pursuance of their It was, therefore, held that the defendants had created such privity with the plaintiff by their conduct and by acknowledgment and by admission, that the plaintiff is entitled to her action even though she was stranger to contract .
(iii) Provision for marriage expenses or maintenance under family arrangement
Where, under a family arrangement, the contract is intended to secure a benefit to a third party, he may sue in his own right as a beneficiary. This exception is based on rule laid down in, Khwaja Muhammad Khan v. Husaini Begum In Veeramma v. Appayya, under a family arrangement, the father's house was to be conveyed to his daughter and the daughter undertook to maintain him in his lifetime. The daughter being a beneficiary under the compromise arrangement, it was held that she was entitled to sue for the specific performance in her favour.
PRIVITY OF CONTRACT
1. The doctrine of privity of contract means that only those persons who are parties to the contract can enforce the same. A stranger to the contract cannot enforce a contract even though the contract may have been entered into for his benefit.
2. This doctrine of privity of contract is equally applicable in India as in England.
a. In Tweddle v. Atksinson,
b. The rule of privity of contract was reaffirmed by the House of Lords in Dunlop Pneumatic Tyre Co. Ltd. v. Selfridge It Co. Ltd.
c.The authority for the application of the rule in India is the decision of the Privy Council in Jamna Das v. Ram Avtar,
d. Similarly was held in In Advertising Bureau v. C.T. Devaraj,.
Exceptions to the rule that a stranger to contract cannot sue
(1) Trust of contractual rights or beneficiary under a contract
(ii) Conduct, Acknowledgment, or Admission
(iii) Provision for marriage expenses or maintenance under family arrangement
