Fundamentals of Business Laws and Business Communication · Consideration and Legality of Object

Privity of Contract and Stranger to Contract: Rule and Exceptions

Updated 10 October 2026 · Fact-checked

Privity of contract means only the parties to a contract can sue or be sued on it. A stranger to the contract cannot enforce it, even if it was made for his benefit. Exceptions include trusts, family arrangements, assignment, acknowledgment or estoppel, and contracts running with land. To solve questions, check who is suing and which exception fits.

Understand Privity of Contract and Stranger to Contract

A contract creates rights and duties. The rule of privity of contract says these rights and duties belong only to the people who made the contract. Privity means a direct legal link between the parties.

A stranger to a contract is a person who is not a party to it. Even if the contract was made for his benefit, he cannot sue on it. Example: Ravi promises Meera to pay ₹50,000 to Meera's son Arun. Arun is not a party. As a general rule, Arun cannot sue Ravi.

The rule is different from consideration. In India, under Section 2(d) of the Indian Contract Act, 1872, consideration is an act done at the desire of the promisor. It can move from the promisee or from any other person. So a stranger to consideration can still sue if he is a party to the contract and the act was done at the promisor's desire. A stranger to consideration is a party who gave nothing himself. A stranger to a contract is not a party at all. This is the key point examiners test.

The rule has exceptions. In these cases a person who is not a party can enforce the benefit. The main ones are: a beneficiary under a trust, a claim under a family arrangement (such as a marriage or partition settlement), assignment of a contract, acknowledgment or estoppel, and a contract connected with land (a covenant running with the land).

The reasoning is simple. Courts allow the exceptions where fairness requires it: the intention was to benefit the person, or the party has led the person to rely on a promise.

Key formulas to remember

General rule: Only a party to the contract can sue on it; A stranger to the contract cannot enforce it, even if he benefits from it.
Stranger to consideration: Stranger to consideration (but a party) CAN sue in India, if the act was done at the promisor's desire; Section 2(d) allows consideration, at the desire of the promisor, to move from the promisee or any other person.
Stranger to contract: Stranger to contract CANNOT sue, unless an exception applies; A non-party has no right to enforce the contract.
Exceptions: Trust or charge; family arrangement; assignment; acknowledgment or estoppel; covenant running with land; Some books also add contracts through an agent. A stranger can sue where these apply.
Landmark case: Tweddle v Atkinson (1861): a son-in-law could not sue on a promise made between the two fathers; Classic English case for the privity rule. Dunlop Pneumatic Tyre Co. v Selfridge & Co. (1915) is also commonly cited.

How to solve Privity of Contract and Stranger to Contract questions

Use this method for any question on privity or on who can sue.

1Identify the parties who made the contract. Note the person who is suing.
2Ask: is the claimant a party to the contract? If yes, privity exists and he can sue.
3If he is a party but gave no consideration, he is only a stranger to consideration. He can still sue.
4If he is not a party, he is a stranger to the contract. The general rule says he cannot sue.
5Check each exception: trust, family arrangement, assignment, acknowledgment or estoppel, land covenant.
6If one exception fits, the stranger can enforce the contract. If none fits, he cannot.
7Pick the option that matches your conclusion and drop options that confuse the two types of stranger.

Quickest way: Party test then exception test

When to use it: Use in MCQs that ask whether a named person can sue.

Ask: did the claimant sign or accept the contract? Yes means he can sue, whatever he paid.
If no, scan the facts for keywords: trust, marriage or family settlement, assignment, acknowledged payment, land.
A keyword match means he can sue. No keyword means he cannot.
Eliminate options that say a stranger to consideration cannot sue in India.

Common mistakes in Privity of Contract and Stranger to Contract

Treating stranger to contract and stranger to consideration as the same.
Both phrases sound alike and both mention a person who gave nothing.
Fix: Remember: stranger to consideration is a party and can sue. Stranger to contract is not a party and generally cannot.
Saying a person who benefits from the contract can always sue.
Students focus on fairness instead of the legal rule.
Fix: Benefit alone gives no right. Look for an exception.
Claiming a stranger to consideration cannot sue because English law says so.
English law needs consideration from the promisee.
Fix: Indian law, Section 2(d), allows consideration from any person. Apply the Indian rule.
Forgetting family arrangements as an exception.
Students memorise only trust and assignment.
Fix: Learn the list of five exceptions together, with one example each.
Thinking the rule stops a party from suing because a third person is involved.
Confusion between a party's agent and a stranger.
Fix: A party acting through an agent is still the party. The principal can sue.

Worked examples

Example 1

Ravi promises Meera to pay ₹50,000 to Meera's neighbour Sunil. Sunil is not a party, and there is no trust, family arrangement, assignment, acknowledgment or land involved. Ravi fails to pay. Can Sunil sue Ravi?

Show the solution

Parties to the contract: Ravi and Meera. Sunil is not a party.
So Sunil is a stranger to the contract.
General rule: a stranger to the contract cannot sue, even if the contract was made for his benefit.
Check exceptions: no trust or charge was created in Sunil's favour, and no family arrangement is involved, as Sunil is only a neighbour.
There is no assignment to Sunil, no acknowledgment or promise by Ravi to Sunil on which he relied, and no land covenant. No exception applies.

Answer: Sunil cannot sue Ravi. Only Meera, as the promisee, can enforce the contract.

Example 2

A promises to pay B ₹10,000 if B's friend C paints A's house. C paints the house at A's request. A then refuses to pay B, saying B gave no consideration himself. Can B sue A?

Show the solution

B is the promisee and a party to the contract with A.
The consideration (painting the house) was given by C, not by B. C acted at the desire of the promisor A.
In India, Section 2(d) allows consideration, at the desire of the promisor, to move from the promisee or any other person.
So B is a party who is a stranger to consideration only. C is not a party and has no claim on this contract.
A party who is only a stranger to consideration can sue.

Answer: Yes, B can sue A for ₹10,000. Lack of consideration from B himself is no bar in India because B is a party and the act was done at A's request.

Exam tips

Questions often test the difference between stranger to contract and stranger to consideration. Settle it first.
Memorise the five exceptions as a list and match one keyword to each in the facts.
For case-law options, link Tweddle v Atkinson to the privity rule. Do not mix it with other cases.
When no exception clearly fits, choose the general rule that a stranger cannot sue.

Practice questions from Consideration and Legality of Object

Privity of Contract and Stranger to Contract: frequently asked questions

Can a stranger to a contract sue?

Generally no. Only parties to the contract can enforce it. A stranger can sue only where an exception applies, such as a trust, family arrangement, assignment, acknowledgment or estoppel, or a covenant running with land.

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

A stranger to consideration is a party to the contract who gave no consideration himself. He can sue in India. A stranger to the contract is not a party at all and generally cannot sue.

What are the exceptions to privity of contract?

The usual exceptions are a beneficiary under a trust, a claim under a family arrangement, assignment of a contract, acknowledgment or estoppel, and a covenant running with land. Learn each with a simple example.

Which case is linked to the privity rule?

Tweddle v Atkinson (1861) is the classic case. A son-in-law could not sue on a promise made between the two fathers, because he was not a party.