Fundamentals of Business Laws and Business Communication · Void and Voidable Agreements, No Consideration No Contract

Privity of Contract and Stranger to a Contract

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, even if he benefits, cannot enforce it. Exceptions include trusts, family arrangements, acknowledgement, assignment, and covenants running with land. To solve questions, first check who is a party, then look for an exception.

Understand Privity of Contract and Stranger to a Contract

A contract creates rights and duties between the people who made it. This link between the parties is called privity of contract. Only a person who is a party to the contract can sue on it or be sued under it.

A stranger to the contract is a person who is not a party to it. He did not make the promise and is not part of the agreement. Even if the contract was made for his benefit, he generally cannot enforce it. For example, Ravi promises Meena to pay ₹50,000 to Meena's friend Karan. Karan cannot sue Ravi. Only Meena can.

Indian law has a twist on consideration. In English law, consideration must move from the promisee. Under Section 2(d) of the Indian Contract Act, 1872, consideration may move from the promisee or any other person. So a promisee can sue even if someone else provided the consideration. But this does not make a stranger to the contract entitled to sue. A third person to whom the promise was not made cannot sue. The key question is: was the promise made to him as a party, or is he only a beneficiary?

The rule can be unfair, so courts and law have allowed exceptions. In these cases a person who is not a party can still enforce a right. You must remember the main exceptions and be able to match each to a situation in an MCQ.

The well-known English case for this rule is Tweddle v Atkinson, where a son-in-law could not sue on a promise made between the two fathers. In India, in Jamna Das v Ram Autar, the purchaser agreed in the sale deed to pay the mortgage debt to the mortgagee. The mortgagee was a stranger to the sale deed, so he could not sue on that promise. The Privy Council also noted that an acknowledgement or admission made directly in the mortgagee's favour could create liability by estoppel. Treat the cases as support. The exam mostly tests the rule and the exceptions.

Key formulas to remember

General rule of privity: Only a party to the contract can sue or be sued on it; A stranger to the contract cannot enforce it, even if the contract benefits him.
Exception 1: Trust: Beneficiary of a trust can enforce his right against the trustee; The contract is between settlor and trustee, but the beneficiary can sue to enforce the trust.
Exception 2: Family arrangement: Provision for marriage expenses, maintenance or share in family settlement can be enforced by the member concerned; Applies when a family settlement or marriage arrangement gives a benefit to a family member who was not a party.
Exception 3: Acknowledgement or estoppel: Where the promisor, by acknowledgement or by a direct admission of liability to the beneficiary, creates a direct obligation, he is estopped from denying it; The acknowledgement or admission must be made to the stranger himself, not only to the other party. Jamna Das v Ram Autar is the illustration: the mortgagee could not sue on the purchaser's promise in the sale deed alone, but a direct admission in his favour could create liability by estoppel. A promise merely made to someone else gives no right.
Exception 4: Assignment: Assignee of a contract can enforce it; Benefit of a contract can be assigned, for example a life insurance policy or a debt. Burden cannot be assigned without consent.
Exception 5: Covenant running with land: Purchaser of land with notice of a covenant affecting the land is bound by it; Listed as an exception in the standard study material. It comes from the English equitable doctrine (Tulk v Moxhay) and, in India, from Section 40 of the Transfer of Property Act. It applies to land only.
Agency (not a true exception): Principal can generally sue on a contract made by his agent; This is not a true exception, since the principal is the real party to the contract made through the agent.

How to solve Privity of Contract and Stranger to a Contract questions

Use this order for any privity question, whether MCQ or scenario.

1Identify the parties who made the contract and who gave the promise.
2Identify the person who wants to sue or is being sued.
3Ask: was this person a party, or only a beneficiary or outsider?
4If he is a party, he can sue. The rule applies and he has privity.
5If he is a stranger, look for an exception: trust, family arrangement, acknowledgement or estoppel (the promisor, by acknowledgement or a direct admission of liability to the stranger, creates a direct obligation), assignment, or a covenant running with land (land only). Remember that agency is not a true exception, because the principal is the real party.
6If an exception fits, the stranger can sue. If none fits, he cannot.
7Pick the option that matches this result.

Quickest way: Party first, exception second

When to use it: For single-line MCQs on whether someone can sue.

Check if the person is a party. If yes, answer in his favour.
If not, scan the options for trust, family arrangement, acknowledgement or assignment. Acknowledgement counts only if the promisor admitted liability directly to the stranger.
If the facts show none of these, choose the option that says he cannot sue. A promise made only to someone else, as in Jamna Das v Ram Autar, gives the stranger no right.
Remember: a promisee can sue even if someone else gave the consideration (Section 2(d)), but a third person to whom the promise was not made cannot sue.

Common mistakes in Privity of Contract and Stranger to a Contract

Thinking a person who benefits from a contract can always sue.
Students link benefit with right.
Fix: A benefit alone gives no right. He must be a party or fit an exception.
Confusing stranger to the contract with stranger to consideration.
Both phrases sound alike.
Fix: In India consideration can come from any person, but only a party to the contract can sue.
Saying a beneficiary of a trust cannot sue because he is not a party.
Students apply the general rule and forget exceptions.
Fix: A trust beneficiary can enforce his right. This is a standard exception.
Assuming the burden of a contract can also be assigned freely.
Students learn assignment of benefit and extend it.
Fix: Benefit can be assigned. Burden cannot be transferred without the consent of the other party, which is novation.
Treating the agent as the party and forgetting that the principal can generally sue.
The agent signs the contract, so he looks like the party.
Fix: The principal is the real party and can generally sue on a contract made by his agent for him. Agency is not a true exception to privity.

Worked examples

Example 1

Anil promises Bina to pay ₹1,00,000 to Bina's daughter Chitra on her marriage. Anil refuses to pay. Chitra sues Anil. Can she succeed, if there is no family arrangement or trust?

Show the solution

Parties to the contract are Anil and Bina.
Chitra is not a party. She is only a beneficiary, so she is a stranger to the contract.
Check exceptions: no trust, no family arrangement, no acknowledgement by Anil to Chitra, no assignment.
No exception applies, so the general rule of privity governs.

Answer: Chitra cannot succeed. Only Bina can sue Anil.

Example 2

Rohan transfers ₹5,00,000 to Suresh as a trustee, to hold for the benefit of Rohan's sister Tara. Suresh fails to pay Tara the income. Can Tara sue Suresh?

Show the solution

The arrangement is between Rohan (settlor) and Suresh (trustee).
Tara is not a party, so she is a stranger to the contract.
But the arrangement is a trust and Tara is the beneficiary.
A beneficiary of a trust can enforce her right against the trustee. This is an exception to privity.

Answer: Yes. Tara can sue Suresh because she is a beneficiary under a trust.

Exam tips

Most MCQs ask for the exception that applies. Learn the list: trust, family arrangement, acknowledgement, assignment, covenant running with land. Know that agency is not a true exception.
Read the facts for words like trustee, marriage, maintenance, or agent. These point to an exception or to the principal being the real party.
If the promise was made to the person, he is a party. But if it was made to someone else for his benefit, he is a stranger.
Do not spend time on case names. Know the rule and its exceptions well.

Practice questions from Void and Voidable Agreements, No Consideration No Contract

Privity of Contract and Stranger to a Contract: frequently asked questions

What is privity of contract?

It is the legal link between the parties to a contract. Only they can enforce it or be bound by it. A person outside the contract cannot sue on it.

Can a stranger to a contract sue under the Indian Contract Act?

Generally no. He can sue only if he falls within an exception, such as being a beneficiary of a trust, a member covered by a family arrangement, or an assignee.

Is a stranger to the contract the same as a stranger to consideration?

No. In India consideration may be given by the promisee or any other person. Even so, only a party to the contract can sue on it.

Which are the main exceptions to privity of contract?

The main ones are trusts, family arrangements, acknowledgement or estoppel, assignment of a contract, and covenants running with land. Agency is often discussed with them, but it is not a true exception because the principal is the real party.