Essentials of Valid Consideration
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Stranger to a Contract can not sue
In the case of Dutton vs Poole, a person intended to sell wood in order to provide his daughter a marriage portion. His son(defendant) promised that if he abstains from selling he would pay the daughter £1,000. The father accordingly forebore but the defendant did not pay. The daughter and her husband (plaintiffs) sued the defendants for the same. Held that….as the consideration moved indirectly from the plaintiff to the defendant and the action of the defendant operated to shut out the plaintiff from a certain benefit, the plaintiff can sue. It is a legal common place that if a promise causes some loss to a promisee, that is sufficient consideration for the promise.
A stranger to a contract cannot sue. A person may be a stranger to the consideration but he should not be a stranger to the contract because ‘privities of contract’ is essential for enforcing any of the rights arising out of the contract. It being a fundamental principle of the law of contracts that a stranger to a contract cannot sue only a person who is a party to a contract can sue on it.
Thus, where A mortgages his property to B in consideration of B’s promise to A to pay A’s debt to C, C cannot file a suit against B to enforce his promise, C being no party to the contract between A and B (Iswaram Pillai vs Sonnivaveru).
Exceptions to the Privity rule
In the course of time, the courts have introduced a number of exceptions in which the rule of privity of contract does not prevent a person from enforcing a contract, which has been made for his benefit but without he being a party to it. The different exceptions are as follows:
· Trust or Charge
· Marriage settlement, partition or other Family arrangements
· Acknowledgement or Estoppel
· Covenants running with land