Does a stranger to consideration can sue in a contract?
There is a general rule of law is that only the parties to a contract can sue. In other words, if a person is not a party to a contract, he cannot sue. This rule is known as the “Doctrine of privity of contract”. Privity of contract means a relationship subsisting between the parties who have entered into contractual obligations. There are two consequences of the doctrine of privity of contract they are following:
1) A person who is not a party to a contract cannot sue even if the contract is for his benefit and he provided consideration. (Or) A stranger to a contract cannot sue.
2) A contract cannot provide rights (or) impose obligations arising under it on any person other than the parties to it. (Or) A stranger to a contract can sue.
The following are the exceptions to the rule that a stranger to a contract cannot sue:-
1. A trust: In a trust, deed beneficiaries are allowed to sue the trustee for enforcement of the trustee’s duties even though they are not contracting party. However, the name of the beneficiary must be clearly mentioned in the contract.
2. Marriage settlements, partition (or) other family arrangements: When an agreement is made in connection of marriage settlements, partitions (or) other family arrangements and a provision is made for the benefit of a person, he may sue although he is not a party to the agreement.
3. Acknowledgement (or) Estoppel: The person, who becomes an agent of a third party by acknowledgment (or) Estoppel, can be sued by such a third party.
4. Assignment of contract: Assignment means voluntary transfer of the rights by a person to another. In such a case an assignee becomes entitled to sue and enforce the rights which are assigned to him.
5. Contracts entered into through an agent: The principal enforces the contract entered into by his agent provided the agent act within the scope of his authority and in the name of the principal.
6. Covenants running with the land: In case of transfer of immovable property, the purchaser of land (or) the owner of the land is bound by certain conditions (or) covenants created by an agreement affecting the land.