BJS and Academic Preparation Series: The Doctrines of Contract Law-Part-I-by Judge Nazmul Hasan

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The Doctrines of Contract Law

Doctrine of Privity of Contract: This doctrine is rooted in English law from a famous case of Tweddle vs. Atkinson, 123 ER 762. This doctrine means that stranger to the contract cannot sue. It means that in a contract, obligations arise between the parties to the contract only. A person who is not party to the contract i.e. stranger to contract cannot institute an action on the basis of contract. For example, if a contract has been between X and Y and some benefit has been conferred on Z, who is not a party to contract, then the Z cannot sue on the basis of contract. There are some exceptions to this doctrine. Such as: (i) Beneficiaries under trust or charge,(ii) Family arrangements, marriage settlements or partition, (iii) Acknowledgement or estoppel, (iv) Covenants running with land. 

Doctrine of Privity of Consideration: Doctrine of privity of consideration provides that the consideration must move from the parties to the contract only. Under English law, the consideration must move from promisee only. If the consideration is furnished from any other person, then the promisee becomes stranger to consideration and therefore, cannot enforce the promise.

The position in Bangladesh is different. Under Bangladeshi law, consideration is governed by Section 2(d) of the Contract Act, 1872. This section uses the phrase ‘promisee or any other person’. This clearly provides that under Bangladeshi law the consideration can either move from promisee or any stranger to the contract. This means that a person may be a party to a contract but he may be stranger to consideration. For example, if ‘X’ and ‘Y’ enter into a contract wherein ‘X’ agrees to pay a certain sum of money for a work to be done by ‘Z’. In this case ‘Y’ is stranger to consideration. ‘Z’ is not stranger to consideration but he is stranger to contract. In English law, stranger to consideration cannot sue and in Bangladeshi law stranger to consideration can sue.

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