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

Which of the following is a recognised exception to the rule that a stranger to a contract cannot sue, as accepted in Indian law?

A person in whose favour a charge on specific immovable property is created under a family arrangement can enforce it, even though not a party. This is a recognised exception to privity. Being merely affected by a contract, like a neighbour or creditor, gives no right.

  1. AA person for whom a charge on specific immovable property is created under a family arrangement can enforce itCorrect
  2. BA neighbour who is affected by a contract can enforce it
  3. CA creditor of one party can enforce the contract against the other party
  4. DA shareholder can sue on any contract made by a partner of the firm

Explanation

Recognised exceptions include a beneficiary under a trust, family settlements or marriage arrangements where a provision is made for a person, and a charge created on specific property. Mere neighbours or creditors have no such right. The shareholder option is unrelated to any exception.

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