Data Structure
Networking
RDBMS
Operating System
Java
MS Excel
iOS
HTML
CSS
Android
Python
C Programming
C++
C#
MongoDB
MySQL
Javascript
PHP
Physics
Chemistry
Biology
Mathematics
English
Economics
Psychology
Social Studies
Fashion Studies
Legal Studies
- Selected Reading
- UPSC IAS Exams Notes
- Developer's Best Practices
- Questions and Answers
- Effective Resume Writing
- HR Interview Questions
- Computer Glossary
- Who is Who
Privity of Contract
Privity of Contract is a rule of contract law that initially developed under the common law system of Britain and is prevalent in contemporary times all across the world. It is one of the essential principles in protecting the sanctity of contracts and the rights of parties thereto, as it bars or excludes any third party from claiming the enforceability of the contract in order to safeguard the interests of parties to the contract.
Though there are certain exceptions to this rule that are developed by courts to implement the purpose of contracts for the protection of the third parties’ rights.
What is the Meaning of the Privilege of Contract?
Privilege of contract means that only those parties to the contract can enforce it. Thus, the doctrine safeguards the interests of the parties to the contract, and a third person, irrespective of the fact that the contract has been entered into for his benefit, cannot claim its enforceability in order to demand a right or to impose any liability on a person.
Privity of Contract in India
The doctrine of privilege of contract is applicable in India in the same terms as it is applicable in Britain; however, there are certain exceptions to the doctrine that are duly recognised by courts. These exceptions are accepted in larger terms because, due to several reasons, sometimes not everyone can enter into a contract; therefore, some contracts are entered into by others for their own benefit, such as legal guardians forming contracts for minors or lunatics, etc. Although these exceptions do not make a third party to the contract, rather they are limited to the claim of the third party with respect to the contract.
Exceptions
The following are the exceptions of the rule −
Trust or Beneficiary − A person who is made a beneficiary in the contract can enforce the contract by claiming his interest or benefit as specified therein.
Conduct, Acknowledgment, and Admission − If a party to an agreement recognises the right or claim of a third person, then such third person can enforce the contract in order to implement his claim as provided in the contract.
Provisions for Maintenance − If a contract is intended to provide for the benefit of a member of a family with respect to their maintenance or marriage expenses, then the person in whose favour such provision is made can secure the benefit by enforcing the contract.
Conclusion
The doctrine of privity of contract is essential for safeguarding the sanctity of contract; however, its exceptions are equally important in order to implement its purpose. Thus, the doctrine must be given full effect as contracts are usually enforceable by and against the parties to the contract, and no other third party can act against the same unless they are beneficiaries of the contract.
Frequently Asked Questions
Whether the privilege of contract is similar to the privilege of consideration?
The privilege of contract is similar to the privilege of consideration in the sense that both provide that parties to a contract who are bound by the legal relationship are obliged to perform their respective functions. Although in the former, the exceptions are recognised by the courts and a beneficiary can claim enforceability, in the latter, the contract law itself provides three exceptions and empowers a third person to make the consideration.
Whether a third person becomes party to a contract if that person is a beneficiary under the contract?
A third person has limited rights with respect to the enforceability of the contract to the extent of his interest, and this does not make the person a party to the contract.
40 Views
