Who is Stranger to a Contract ; Explain with exceptions
Though a stranger to consideration can sue because the consideration can be furnished or supplied by any person whether he is the promise or not, but a stranger to a contract cannot sue because of the absence of privity of contract (i.e. relation ship subsisting between the parties to a contract.)
Example : P owes Y rs. 100000 and sells his property to Z. Z promises to pay off P’s debt to Y. Z Fails to pay. Y cannot sue Z because he is a stranger to a contract.
The Rule that a stranger to a contract cannot sue , Is subject to the following exceptions
- In Case of Trusts : The beneficiary (i.e. The person for whose benefit the trust has been created) may enforce the contract.
Example : P transferred certain properties to be held by Y for the benefit of Z. Z can enforce the agreement even though he is not a party to the agreement.
- In Case of Family Settlement: The person for whose benefit the provision is made under family arrangements may enforce the contract.
Example: A provision of marriage expenses of a female member was made in a joint Hindu Family. On partition, the female member sued for such expenses. It was held that she was entitled to sue.
- Acknowledgement: The person who becomes an agent of third party by acknowledgement or otherwise, can be sued by such third party.
Example: P receives Rs. 1000 from Y for paying the same to Z, P acknowledges this receipt to Z, Z can recover the amount from P because P will be regarded as Z’s agent.
- Assignment of a contract: Where a benefit under a contract has been assigned, the assignee can enforce the contract subject to all equities between the original parties to the contract e.g. the assignee of an insurance policy.