Privity of Consideration

In context of Indian law, as long as there is consideration for promise, it does not matter who furnishes the consideration. Which means in Indian law doctrine of Privity of Consideration does not applies. It can be clarified by the words given under Section 2(d) of Indian Contract Act, 1862. It states that, when, at the desire of the promisor, the promise or any other person.

It means a promise always get initiate at the desire of promisor and can be fulfilled either by Promisee himself or by any other person who is stranger to consideration. It clarifies the absence of Doctrine of Privity of Consideration in Indian law. Unlike in English law, this concept is wholly contrary to Indian concept. There in English Law the consideration must move from the Promisee alone. It clearly depicts that stranger to consideration cannot enforce the promise under English Law. Which manifestly implies the presence of Privity of Consideration in English Law.

Consideration must move at the desire of the Promisor

Consideration must move at the desire of the promisor only. As consideration is the consideration is the cardinal principle of contract. It accomplish the purpose of Quid Pro Quo which directly preserves the notion of a valid contract. As per sec 25 of Indian Contract Act, 1872 consideration plays an important role to held a contract a valid contract. It also states that an agreement without consideration is Void. Impliedly it states there can be an agreement without consideration but to held it as a contract there must be presence of consideration. It directly forbid or abrogate the concept of a contract without consideration, but there is a concept of agreement without consideration.

Literal meaning of Privity

Privity means relation between two parties recognized by law. It means to fulfil the consideration there must be a legal relation created between the parties. It means there must be a relation between the parties which is solely created by the law. In the matter of Privity of Consideration the party to the contract must have relation with the consideration. It clarifies the concept that the consideration should be given by the promise himself and not by the stranger to the contract.

This is welly recognised under English law but remain unrecognised under the Indian Law. Which is unveiled by the wordings of Section 2(d) of the Indian Contract Act, 1872.

The words at the desire of the promisor under section 2(d) of Indian Contract Act, !872 give rise to the concept of Promissory Estoppel. It came through the situation where on the promise made by promisor the promise or any other person, as per section 2(d) of Indian Contract Act, 1872, has changed his legal position on believing upon such promise, in such case the promisor will become bound to his promise. This concept has been confirmed by the then judicial system in the case of Kedarnath Bhattacharji v Gorie Mohammad (1887).

Concept of Stranger to Consideration:

As per the doctrine of Privity of consideration if, as per section 2(d) or any other person, is not being a party to contract has fulfilled or given the consideration on the place of promisee (who is party to the contract) there in this situation when any other person who is not he party to contract has fulfilled or given the consideration the promise will become stranger to consideration.

Here A Question Arises Whether:

A stranger to consideration can sue?

It has been given a different interpretation in English and Indian law.

Under English law initially it was held in the case of Dutton v Poole (1678) that a stranger to consideration can sue however later on in the case of Tweddle v Atkinson (1861) the former precedent was set aside and held that stranger to consideration cannot sue under English law as there is no involvement of any other person either it be in contract or be in consideration. The consideration given or fulfilled by any other person in English law make that agreement void in itself.

However, in Indian law this concept has been taken inversely to the concept of English law. It can manifestly be seen in the wordings of the statute itself that a consideration can be given or fulfilled by any other person. Therefore, in India stranger to consideration can sue.

This apparently shows that Indian law is liberal to deal with the concept of Stranger to consideration whereas the English is strict at this place.

Relevant Case Laws:

1. Dutton v Poole 1678
2. Tweddle v Atkinson 1861
3. Venkata Chinnaya Rau Garu v Veankata Ramayya Garu 1881
4. Durga Prasad v Baldeo 1881