DOCTRINE OF PRIVITY OF CONTRACT

INTRODUCTION

The Indian Contract Act, 1872, allows the consideration for an agreement to proceed from a third party. The third party to consideration is different from the stranger to a contract. This law does not allow any stranger to file a suit on the Contract. This law is allowed only to the parties to the Contract and is called Privity of Contract. The rule of Privity of Contract is based on the interest theory, which means that the person who has any interest in the Contract is entitled to protect his rights under this law.

ILLUSTRATION

Atharva has borrowed money from Sakshi. Atharva owns a property, and he decided to sell it for Sakshi. Kshitiz promises to pay Sakshi on behalf of Atharva. If Kshitiz fails to pay then, Atharva cannot sue Kshitiz as Kshitiz is a stranger to the Contract and as per the doctrine of Privity of contract stranger cannot file a suit on the Contract.