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
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
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
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:
- Dutton v Poole 1678
- Tweddle v Atkinson 1861
- Venkata Chinnaya Rau Garu v Veankata Ramayya Garu 1881
- Durga Prasad v Baldeo 1881