Privity of Contract for CLAT: Who Can Sue?

📑 On this page

⚡ The short answer

Privity of contract means only the parties to a contract can enforce it, and only they are bound by it. A person who merely benefits is a stranger to the contract and usually cannot sue. In India, a party who gave no consideration can still sue. Exceptions cover trusts, family arrangements, acknowledgement, assignment and covenants on land.

🎬 The 30-second story

The cake that never came

“₹3,000 for a cake. Deliver it to Zoya's party at 7.”

🎂

Aarav

Aarav pays Kabir's bakery.

“Done. Consider it delivered.”

📦

Kabir

Zoya's address goes on the slip.

“Seven… eight… nine. No cake.”

🕘

Zoya

No cake arrives.

“The cake was for me. I'm suing Kabir!”

⚖️

Zoya

Can she sue?

Tara's ruling: Not on the contract. The deal was between Aarav and Kabir; Zoya only benefits, so she is a stranger to the contract. Aarav can sue for breach. Zoya needs another door, such as a direct promise from Kabir or consumer law.

What does privity of contract mean?

The parties who made a contract are privy to each other; everyone else is a third party. The rule runs both ways: a stranger cannot enforce the contract, and the parties cannot load duties onto a stranger. Only people inside the bubble hold rights or owe duties.

🔗 Who owes whom

Who is inside the bubble?

Aarav → Kabir: pays ₹3,000 — this line is the contract
Kabir → Zoya: should deliver
Zoya → Kabir: can't sue on the deal — benefits, but isn't a party

Why so strict? Parties should be free to vary their own deal without asking every outsider who might gain, and nobody should be bound by promises they never made. The cost: a genuine beneficiary can be left empty-handed.

A contract creates rights and obligations only between its parties. A non-party cannot enforce it, even if it was made for his benefit, nor can it bind him.

— How a CLAT passage would put the rule

Stranger to the contract or stranger to the consideration?

English law blocked an outsider with two walls: you must be a party, and the price (consideration) must come from you. Indian law knocked down the second: consideration may come from the promisee or any other person, if given at the promisor's desire. The first wall stands.

⚔️ Side by side

Two kinds of outsider

🚪Stranger to the contract

Never made or received the promise

•Not a party at all
•Cannot sue in India or England

🎁Stranger to the consideration

A party who paid nothing

•The promise was made to them
•Can sue in India; fails in England

Test	Stranger to the contract	Stranger to the consideration
Question to ask	Was any promise made to this person?	Who supplied the price?
Indian result	No suit, unless an exception applies	Suit allowed

India relaxed the consideration wall, not the party wall.

⭕ How the sets nest

Who can sue on a contract?

Everyone the deal touches — beneficiaries, recipients, later buyers. Benefiting alone gives no right to sue.
Parties to the contract — those who made or received the promise. In India, all can sue.
Parties who also paid — the only ones the strict English rule lets sue.

⚠️ Don't mix the two walls

‘Consideration may move from any person’ does not mean any person may sue. First check whether the claimant is a party; only then does the source of the price matter.

When can a stranger sue on a contract?

In M.C. Chacko v State Bank of Travancore (1969), a creditor bank relied on a family deed it never joined, and lost. The Supreme Court said that apart from a beneficiary under a trust created by the contract, or a family arrangement, a non-party enforces nothing. A few other doors exist, and some make the claimant a party after all.

🧩 At a glance

Six doors around the privity wall

🏦Trust or charge

The benefit is held in trust for you or charged on property.

👪Family arrangement

Partitions, settlements and marriage arrangements providing for a relative.

✍️Acknowledgement

The promisor deals with you directly and admits owing you.

🧑‍💼Agency

An agent contracted for you, so you are the real party.

📄Assignment

A party transfers the contract's benefit to you; burdens can't move.

🏡Covenants on land

A restriction on using land binds a later buyer who knew of it.

Trusts and charges: the benefit is earmarked

Rohan sells his godown to Aarav, who promises to pay Rohan's widowed sister ₹15,000 a month out of the rent, with the rent charged to that payment. She can sue Aarav: the benefit is fixed to property and held for her. A bare promise to ‘pay my sister’, with nothing earmarked, is not enough.

Family arrangements and marriage settlements

A partition providing for an unmarried sister, or parents fixing an allowance for a bride: courts let the provided-for relative sue. Being a near relative isn't enough; the deal must actually set the benefit aside for that person.

Acknowledgement: privity created later

Aarav buys Kabir's car and promises Kabir he will clear Kabir's ₹2 lakh debt to Zoya. On that alone, Zoya can't sue Aarav. But if Aarav then tells Zoya, ‘I'm holding the money for you, stop chasing Kabir’, he has created a direct relationship with her, and she can sue.

🧭 Decision flow

Can this outsider sue on the contract?

❓ Was the promise made to this person, directly or through their agent?

Yes →

A party: can sue, even if someone else paid the price

No ↓

❓ Is the benefit held in trust for them or charged on property?

Yes →

Can sue as beneficiary

No ↓

❓ Is it a family arrangement, partition or marriage settlement providing for them?

Yes →

Can sue under the family exception

No ↓

❓ Did the promisor later deal with them directly and admit the duty to pay them?

Yes →

Can sue: privity created by conduct

No ↓

❓ Was the benefit of the contract assigned to them?

Yes →

Can sue as assignee

No →

Stranger: no suit on the contract

Try tort or consumer law.

📌 What CLAT actually expects

The passage states the rule and maybe one or two exceptions. Is the claimant a party? If not, does the passage's exception fit exactly? Never import one it omits.

Can a contract bind someone who never agreed to it?

Generally, no. Kabir sells sneakers to Aarav, who promises never to resell below ₹5,000. Aarav sells to Rohan, who dumps them at ₹3,000. Kabir can't sue Rohan, who never promised him anything. Conditions don't travel with goods. Land is the exception.

Situation	Is the later owner bound?	Why
Resale-price promise on goods	No	The later buyer never made the promise
‘Don't build above two floors’, buyer of the land knew of it	Yes, by injunction	Restrictive covenants bind buyers with notice
Same restriction, buyer paid and had no notice	No	An innocent buyer for value takes free of it
Positive duty, e.g. ‘maintain the wall’	No	Only restrictions run; duties to act stay personal

→ scroll to see more

Does privity block claims in tort or consumer law?

No. Privity only controls suits on the contract. An outsider hurt by careless work can sue in negligence, because the duty of care is owed to everyone foreseeably affected. That's how a woman who found a snail in a ginger beer her friend bought sued the manufacturer in Donoghue v Stevenson.

✓Negligence: the injured guest, passenger or user sues for careless harm, whoever signed.
✓Consumer law: a user of goods, or beneficiary of a service, with the buyer's approval counts as a consumer.
✓Beneficiary of a booking: the Delhi High Court let a pilot sue the hotel his airline had booked for him.

💡 Read what the claim is for

Suing for breach of contract? Apply privity. Claiming for careless injury? The rule may be negligence; privity is a red herring.

Which cases built the rule?

💒

Landmark case · 1861 · English court (Queen's Bench)

Tweddle v Atkinson

📋

What happened

Before a wedding, the groom's father and the bride's father agreed in writing that each would pay the groom a sum. The bride's father died without paying; the groom sued his estate.

❓

The question

Can the person a promise was made for enforce it?

🔨

What the court held

No. The groom was not a party and gave no consideration, so he could not enforce a contract made for his benefit.

What CLAT takes from it: Benefiting from a promise is not the same as owning it.

🛞

Landmark case · 1915 · House of Lords

Dunlop Pneumatic Tyre Co v Selfridge & Co

📋

What happened

Dunlop sold tyres to a dealer, Dew, on terms that buyers must not undercut list price. Selfridge bought from Dew, signed that promise with Dew, then undercut. Dunlop sued Selfridge.

❓

The question

Can a manufacturer enforce a promise made to its dealer?

🔨

What the court held

No. Only a party to a contract can sue on it, and Dunlop had given Selfridge no consideration for its promise.

What CLAT takes from it: Conditions can't be pushed down a supply chain to bind strangers.

💍

Landmark case · 1910 · Privy Council

Khwaja Muhammad Khan v Husaini Begam

📋

What happened

Before a childhood marriage, the groom's father agreed with the bride's father to pay the bride a monthly allowance, charged on his property. As an adult, she sued for arrears.

❓

The question

Can the bride sue on an agreement between the two fathers?

🔨

What the court held

Yes. The allowance was charged on property and she was its sole beneficiary, so she could enforce it in equity. The strict English rule would be unjust for such Indian arrangements.

What CLAT takes from it: Trusts, charges and family arrangements open the privity wall.

How would CLAT ask it?

Privity hasn't had its own question in CLAT 2018–2025, but it sits beside consideration, which is tested often. Here are two CLAT-style ones.

🧪 CLAT-style practice (not a past question) The basic rule

A contract binds only the persons who are parties to it. A person who is not a party to a contract cannot sue upon it, even if the contract was entered into for his benefit. Consideration, however, may be furnished by the promisee or by any other person, provided it is given at the desire of the promisor.

Kabir owes Zoya ₹5 lakh. He sells his flat to Rohan, who promises Kabir in the sale deed to pay Zoya ₹5 lakh out of the price. Rohan never pays. Zoya sues Rohan. Decide.

AZoya succeeds, because the promise was made for her benefit.

BZoya succeeds, because consideration may move from any person.

CZoya fails, because she is not a party to the contract between Kabir and Rohan.

DZoya fails, because Kabir gave no consideration.

Reveal answer + reasoning

Answer: C

Rohan promised Kabir, not Zoya. She benefits but is a stranger to the contract, so the first sentence shuts her out. Kabir can sue Rohan, and Zoya can still recover from Kabir.

Why the others fail

A — benefit alone gives no right to sue.
B — that line is about who may pay, not who may sue.
D — Kabir gave the flat, ample consideration.

🧪 CLAT-style practice (not a past question) Stranger to the consideration

Only a party to a contract may enforce it. Under Indian law a party may enforce a promise though he gave nothing for it, if consideration moved from some person at the desire of the promisor. English law requires the consideration to move from the person who sues.

Rohan, Kabir and Zoya sign one agreement: Rohan will deliver a laptop to Kabir, and Kabir will pay ₹60,000 to Zoya. Rohan delivers; Kabir refuses to pay Zoya, saying she gave him nothing. Which is correct?

AZoya can sue Kabir in India but would fail under the English rule.

BZoya cannot sue anywhere, as she is a stranger to the contract.

COnly Rohan can sue, since he delivered the laptop.

DZoya can sue under both systems, as she signed the agreement.

Reveal answer + reasoning

Answer: A

Zoya signed and received Kabir's promise, so she is a party. The laptop came from Rohan at Kabir's desire, which suffices in India. The English rule needs the price to come from her.

Why the others fail

B — she is a stranger only to the consideration.
C — nothing in the passage makes Rohan's claim the only one.
D — signing doesn't satisfy the English consideration rule.

💥 Myth vs fact

Privity traps

🙅 Myth

In India, anyone who benefits from a contract can sue on it.

Tap to bust it →

✅ Fact

Consideration can come from anyone, but only parties can sue, subject to narrow exceptions.

🙅 Myth

A stranger to the consideration is the same as a stranger to the contract.

Tap to bust it →

✅ Fact

The first is a party who paid nothing (can sue in India). The second was never a party (cannot).

🙅 Myth

Privity means a non-party has no remedy at all.

Tap to bust it →

✅ Fact

It only blocks suits on the contract. Negligence and consumer law can still help.

🎯 Quick quiz

Inside or outside? 5 fact patterns

0 / 5

Brothers Aarav and Kabir partition the family shop. The deed says Kabir will pay their unmarried sister Zoya ₹10,000 a month. Kabir stops.

Q1. Can Zoya sue Kabir?

Kabir sells Aarav a rare watch; Aarav promises never to resell below ₹50,000. Aarav sells it to Rohan, who resells at ₹30,000.

Q2. Can Kabir sue Rohan?

Zoya asks Rohan to buy her a projector. Rohan signs with Kabir as ‘Rohan, for Zoya’. It's faulty.

Q3. Can Zoya sue Kabir on the sale?

Kabir sells half his plot to Aarav, who promises not to build above two floors. Aarav sells to Rohan, who knows of the promise and starts a fourth floor.

Q4. Can Kabir stop Rohan?

Aarav's company books its employee Zoya into Kabir's hotel. A loose ceiling fan falls and injures her. She sues the hotel in negligence.

Q5. Is privity a defence for the hotel?

Test the privity wall under the clock

Timed Contracts passages in the real CLAT exam interface, with step-by-step solutions.

Start a Contracts drill

🎯 In a nutshell

The rule: only parties can enforce a contract, and only parties are bound by it.
India's twist: consideration may come from anyone, so a non-paying party can sue.
Outsiders' doors: trust or charge, family arrangement, acknowledgement, assignment; agency makes you a party.
Burdens: don't bind strangers, except restrictions on land against a buyer with notice.
Outside contract: negligence and consumer law can still help a non-party.

📎 Good to know, not to memorise

Indian Contract Act, 1872: consideration from ‘the promisee or any other person’, s.2(d); agent's contracts bind the principal, s.226.
Transfer of Property Act, 1882, s.40 (rule in Tulk v Moxhay, 1848); Consumer Protection Act, 2019, s.2(7).
M.C. Chacko v State Bank of Travancore, AIR 1970 SC 500; Jamna Das v Ram Autar (PC, 1911); Klaus Mittelbachert v East India Hotels (Delhi HC, 1997). England: Contracts (Rights of Third Parties) Act 1999.

Frequently asked questions

What is privity of contract in simple words?

Only the people who made a contract can enforce it, and only they are bound by it. If Aarav pays a bakery to deliver a cake to Zoya, Zoya benefits but is outside the contract, so she generally can't sue the bakery for breach. Aarav can.

Does privity of contract apply in India?

Yes. The Supreme Court has held that a non-party cannot enforce a contract, except a beneficiary under a trust it creates or under a family arrangement. India relaxed only the consideration rule: the price may come from someone other than the person suing.

What is the difference between a stranger to the contract and a stranger to the consideration?

A stranger to the contract was never a party; no promise was made to them, so they cannot sue. A stranger to the consideration is a party who simply didn't pay the price; someone else did. In India the second can sue, as Chinnaya v Ramayya shows.

Can a beneficiary named in a contract sue?

Not just because they are named. They must be a party, or fit an exception such as a trust, a charge on property or a family arrangement. England now lets named beneficiaries sue under a 1999 statute; India has no such general rule.

Is Tweddle v Atkinson good law in India?

Partly. Its consideration point isn't, because Indian law lets consideration come from anyone. Its party point is: a groom who was never a party still couldn't sue. But Indian courts treat marriage settlements charged on property as an exception, as in Khwaja Muhammad Khan.