Topic 12: DOCTRINE OF “STRANGER TO A CONTRACT”

STRANGER TO CONSIDERATION:

Under the Indian Contract Act 1872 consideration for a contract may move from the promisee or any other person i.e., a stranger to the consideration can also enforce the contract.
This law established in the case of CHINAYYA V.S. RAMAYYA
An old lady Laxmi Rani gifted her property to her own daughter Ramayya, with the direction to pay a certain sum of money annually to Chinayya, her maternal uncle. On the same day Ramayya executed an agreement with Chinayya agreeing to pay the amount annually. Later on Ramayya refused to honour the agreement on the ground that there is no consideration. Chinayya sued for the recovery of the annuity. It was held that there was sufficient consideration i.e., the property given to her by the sister of Chinayya.





STRANGER TO CONTRACT:
A stranger to contract cannot sue because he is not a party to a contract. This means that unless there is privity (relationship subsisting between the parties) of contract a party cannot sue on it. A person who gives / receives consideration on behalf of the promisee / third party is called as stranger to contract, although he is not a stranger to consideration. Therefore, this rule is popularly known as “The Doctrine of Privity of Contract or stranger to contract.
For example: The leading case DUNLOP PNEUMATIC TYRE Co. V.S. SELFRIDGE & Co. (1915)
‘A’ sold a large quantity of tyres to B at a certain price on entering into a covenant not to sell the tyres below the price mentioned in price list supplied by ‘A’. ‘B’ sold the tyres to ‘C’ a retail dealer under a contract stipulating the same covenant as between ‘A’ and ‘B’. ‘C’ sold the tyres at less than the list price. ‘A’ sued ‘C’ for the breach. It was held that ‘A’ could not sue ‘C’ as ‘A’ was not a party to the contract between ‘B’ and ‘C’.





Exceptions:
A stranger to contract cannot sue except in the following cases:
1. Trust: In case of trust, the beneficiary may enforce the contract event though he is stranger to the contract creating the trust.
For example: ‘U’ successor of his father was put in possession of his entire property. In consideration ‘U’ agreed with his father to pay a certain sum of money and to give a village to ‘J’ the illegitimate son of his father on his attaining majority. Trust was created in favour of ‘J’ for the money and village trust was entitled to maintain the suit. (RANA UMA NATH BAKSH SINGH V.S JANG BAHADUR [1938])
2. Where provision is made in a marriage settlement: Where an agreement is made in a connection with marriage and a provision is made for the benefit of a person he may take advantage of that agreement although he is not a party to it.
For example: D agreed with P’s father that he would pay P Rs. 500 per month as kharch-i-pandan if she marries D’s son. The allowance was stopped sometime after the celebration of marriage. P sued her father-in-law for Rs. 1,500 as arrears of allowance. It was held that P could recover the money even though she was not a party to the contract. (KHWAJA MOHD. V.S. HUSSAINI BEGUM (1910))





3. Where provision is made in a partition or family settlement: Such members though not parties to the agreement can sue on the footing of the arrangement.
For example: Two brothers in a partition deed agreed to pay Rs 300 in equal shares to their mother for maintenance. The brothers subsequently refused to pay the amount. On a suit it was held that the mother could enforce the promise even though she was stranger to the contract. (SHUPPUAMMAL V.S. SUBRAMANYAN [1910]).
4. Where a charge is created in favour of a stranger on specific immovable property: A stranger to a contract can sue for the money made payable to him by it where the money is charged on immovable properties.
5. Where the promisor has by his conduct created privity of contract with the stranger:
For example: An agreement between tenant and subtenant the latter was paying the rent directly to the landlord, the land lord are allowed to recover unpaid rent from subtenant.





6. Covenants running with the land: At the time of transfer of immovable property a notice that the owner of land is bound due to certain obligation created by an agreement relating to land, the new purchaser will be bound by them though he was not a part to the original covenant.[TULK V.S. MOXHAY (1919]