Life Insurance: By section 11 of the Married Women’s Property Act 1882, a life insurance policy taken out by someone on his or her own life, and expressed to be for the benefit of his or her spouse or children, creates a trust in favour of the objects named in the policy. [xxii][1962] AC 446 (Lord Denning dissenting). Covenants Concerning Land: The law allows certain covenants (whether positive or restrictive) to run with land so as to benefit (or burden) people other than the original contracting parties. Consideration is a rule that there must be a "benefit or detriment" involved in any contract, and that this must initially come from the promisee. The relevant covenant may relate to freehold land or leasehold land. This exception covers cases where the promisor by his conduct, acknowledgment, or otherwise, constitutes himself an agent of the third party. [lxxxiii]DebnarayanDutt vs ChunilalGhose, reported in (1914) ILR 41 Cal 137; approved and followed in N DevarajeUrs v M Ramakrishniah AIR 1952 Mys 109. Richardson, J. stated that the action should have been “more properly” brought by the son, for he was the person “in whom the interest is”. In Carnegie v. Waugh[xii], the tutors and curators of an infant, C, executed an agreement for a lease with A, for an annual rent to be paid to C. It was held that C could sue on the instrument, even though he was not a party to it. In this case, the father of a child’s assumpsit on the father of another child in order to stop the latter child from assaulting the former. [47] So the next question arises as to who may be treated as a “beneficiary” under a contract? Section 55 of the Queensland Property Law Act 1974 provides that: A promisor who, for a valuable consideration moving from the promisee, promises to do or to refrain from doing an act or acts for the benefit of a beneficiary shall, upon acceptance by the beneficiary, be subject to a duty enforceable by the beneficiary to perform that promise. The father died before the sister was married and the son subsequently refused to pay his sister the money as was previously agreed, at the time of her marriage. Here it should be noted the difference between the stranger (third-party) to consideration and a stranger to a contract. Privity of contract came about when third parties went to court to enforce the terms of contracts, even though they weren’t actually parties to the contract. She was held entitled to enforce the promise made by the defendant to her father. Chacko v State of Travancore[lxxxix], held that a person not a party to a contract cannot subject to certain well recognized exceptions, enforce the terms of the contract. Call us at- 8006553304, © 2014-2020 Law Times Journal | All Rights Reserved, Doctrine of Privity of Consideration & its position in England & India. Perhaps the most significant point is that some of their Lordships seemed to accept a principle of vicarious immunity, according to which a servant or agent who performs a contract is entitled to any immunity from liability which his employer or principal would have had. The doctrine of privity of consideration states that the consideration must only move from the promisee and the stranger to the contract, although a beneficiary can enforce the terms of the agreement. It was held that the sister could sue, on the ground that the consideration and promise to the father may well have extended to her on account of the tie of blood between them. These cases typically involved the following facts. But this rule is subject to certain restrictions. [xli] ILR (1924) 48 Bom 673: AIR 1925 Bom 97. C failed in his action, on the ground, inter alia, that the promise had been made to B); Taylor v Foster(1600) Cro Eliz 776; 78 ER 1034 (A, in return for B marrying his daughter, agreed to pay to Can amount which B owed to C. In an action by B against A, it was held that B was the personto sue, being the promisee). Thus, the relationship between the father and the son had made the sister a party to the agreement, even if she was not included at the time the contract was agreed. If the third party is to be regarded as having an independent right under the contract, the fact that the promisor has performed in favour of the promisee should not necessarily eliminate the third party’s right to performance. Privity and consideration. In the legal system, the term consideration in contract law refers to It lasted for only 3 months. However, in the Report, the Commission’s reasoning ran along the following lines: The report, thus, signalled a decisive break from the orthodoxy of the privity doctrine which, in the earlier part of the century, was identified by Viscount Haldane LC as one of the fundamental principles of English contract law[ciii]. [lxi]Queensland Property Law Act 1974, ss 55(2). [lxii]Queensland Property Law Act 1974, s 55(3)(a) and (d). Some believe it to be very likely that the introduction of the rule into English Law was accompanied by that in the French law as well, which took place in the early 19th century. Elsewhere, though particularly in the United States, a less strict approach had survived, with an explicit third party beneficiary rule being applied[li]. The consideration for the iqraranama, the agreement between the plaintiff and the defendant,was furnished by the old, the plaintiff’s sister. Subsequently she was again ill-treated by the defendant and also driven out. “The doctrine of privity means that a contract cannot, as a general rule, confer rights or impose obligations arising under it on any person except the parties to it.”[ii]. Something I love a lot apart from reading books and watching movies is traveling. Prior to acceptance, the promisor and promisee may vary or discharge the terms of the promise without the beneficiary’s consent. The aforementioned are more or less the well- accepted and settled exceptions to the Doctrine of Privity. Copyright © 2020 Lawctopus. Punjab & Haryana HC directed Haryana DGP to book Investigating Officers who fail to secure the CCTV footages in Criminal Cases, Maneka Gandhi vs Union Of India – Case Summary. Consideration is the most important essential of any contract formed between the parties unless there is consideration a contract is said to be void. The doctrine of privity of consideration states that the consideration must only move from the promisee and the stranger to the contract, although a beneficiary can enforce the terms of the agreement.eval(ez_write_tag([[580,400],'lawtimesjournal_in-box-3','ezslot_4',134,'0','0'])); Firstly, the doctrine of privity of consideration was not applicable in England. According to Frederick Pollock “Consideration is a price for which the promise of the other is brought and the promise is thus given for value is enforceable”. This paper analyses the evolution of the doctrine of privity, taking into consideration the law in various countries, for largely focusing on England and India.”, ‘The doctrine of privity means that a contract cannot, as a general rule, confer rights or impose obligations arising under it on any person except the parties to it’[i]. 2. It took a few more centuries for the rule to take its form as we know it. The debates and discussions on the Doctrine of Privity are relevant not only in daily life commercial contracts but also in the less frequent and comprehensive transactional contracts. The consideration for the, Here, the consideration for the defendants promise to pay the annuity was the gift deed made by the old lady and the consideration was being furnished by the plaintiff. Whether affiliates, relatives and agents of the parties can be treated as “beneficiary” if their role is restricted to few terms like mentioned hereinabove? The doctrine of privity of consideration states that the consideration must only move from the promisee and the stranger to the contract, although a beneficiary can enforce the terms of the agreement. I wish to assert, as distinctly as I can, that the common law in its original setting knew no such principle. His Lordship based his decision on three grounds: • The doctrine of privity requires that only a party to a contract can sue under that contract. Privity of consideration states that only a person who has provided consideration can enforce the contract and take action against it. H.) Estoppel or Acknowledgement: Where by the terms of a contract a party is required to make a payment to a third person and he acknowledges it to that third person, a binding obligation is thereby incurred towards him. These questions were highly prevalent in England from 17th to 20th century. The leading authority, in this case, is the case of Venkata Chinnaya v. Position of Privity of Consideration in England Firstly, the doctrine of privity of consideration was not applicable in England. Although the English doctrine of privity of consideration is not applicable in India, the doctrine of Privity of Contract generally is. [lviii] The legislation also permits variation or cancellation of the contract by the contracting parties at any time until the third party adopts it either expressly or by conduct.[lix]. Views on the rights of third party beneficiaries have been laid down by other courts of the country. It may move from the promisee or, if the promisor has no objection, then from any other person. From the nature of the covenant entered into by him, a lessee has both privity of contract and of estate; and though by an assignment of his lease he may destroy his privity of estate, still the privity of contract remains, and he is liable on his covenant notwithstanding the ass In the words of Toohey J[lv]: “When a rule of the common law harks back no further than the middle of the last century, when it has been the subject of constant criticism and when in its widest form, it lacks a sound foundation in jurisprudence and logic and further, when that rule has been so affected by exceptions or qualifications, I see nothing inimical to principled development in this Court now declaring the law to be otherwise in the circumstance of the present case.”. He then executed an agreement with her father, promising him to treat her properly, and if he failed to do so, to pay her monthly maintenance and to provide her with a dwelling. Even though under Indian Contract Act, the definition of consideration is wider than in English law and the consideration can very well be given by a non-contracting party, yet the common law principle of Doctrine of Privity is generally accepted in India. [xxx]Toucheross& Co v Colin Bakr [1992] 2 Lloyd’s Rep 207; Sin Yin Kwan v Eastern Insurance [1994] 1 All ER 213. The proposal must involve a relaxation of the consideration requirement. [xxvi]Richards v Delbridge(1874) LR 18 Eq 11; Cleaver v. Mutual Reserve Fund Life Association [1892] 1 QB 147, 152; Re Foster [1938] 3 All ER 357; Green v. Russell [1959] 1 QB 28. Vedachala Naicker[lxxxvii], the Madras High Court held: “There is ample authority for he proposition that in this country, and indeed in a certain class of cases in England where a contract is made between ‘A’ and ‘B’ for the benefit of ‘C’, ‘C’ is entitled to sue the defaulting party. In this case A borrowed ₹40,000 by executing a mortgage of her zamindari in favour of B. As such, the respondents are not complete strangers to the limitation of liability clause. L.L.B. The relationship between father and daughter was found to extend the consideration that the father gave in the promise to the children. Junior Books Ltd v Veitchi Co Ltd [1983] 1 AC 520 - For example sub-contractors cannot sue a party to a contract as they lack the necessary consideration. According to Section 2 (d) of the Indian Contracts Act, 1872, the consideration may move from the promisee or any other person, at the desire of the promisor. 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