Abstract

The Doctrine of Privity of contract, which originated from English common law, asserts that only the parties to a contract can enforce a contract's terms or be bound by a contract's terms. In India, even though the Indian Contract Act, 1872 does not expressly provide for the privity of contract doctrine, courts have consistently employed it through judicial construction, resulting in both predictability and uncertainty. While the Act permits a third party to provide consideration for a contract, the doctrine requires that only contracting parties can enforce the contract, creating a doctrinal inconsistency. Courts have provided limited alternative remedies through judicial exceptions (such as trusts, family settlements and agents), but these exceptions are limited in scope and inconsistent. This article will examine the historical and statutory underpinnings of privity in India, as well as its judicial application and the increasing imperative for legislative reform. It will highlight both comparative lessons from other jurisdictions and the Law Commission of India and argue for a codified statutory provision that would permit a third party to enforce its contractual rights where the parties intended to confer a benefit to the third party. This will ultimately remedy this inconsistency and put Indian contract law more in line with commercial realities, while enhancing legal certainty, fairness, and doctrinal clarity.

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