Stranger to Contract

Stranger to Contract cannot sue upon the Contract - Stranger to Contract means a person who is not a party to the Contract. He is neither offerer nor offeree. That means Stranger is an outsider or a third party. As he is not party to the Contract he cannot file a suit in connection with the Contract.

  • Related case is Dunlop Pneumatic Type Company [A] (Vs) Selfridge and Company [B]. In this case A sends goods to their agent Due and Company [C]. C sell those goods and has to remit amount to A. On account of excessive work load, C appoints B as its sub-agent, without having any relationship with A. As per the agency contract formed between C and B, if B sells goods below the specified price, B has to pay five pounds per unit to C. Thereafter, B sells two units below the specified price and also fails to pay ten pounds to C. A files a suit against B to arrange that amount to C. Here Court decides that A is a stranger and therefore its suit is not supportable.

Exceptions to the Statement 'Stranger to Contract cannot sue upon the Contract'

Trust deeds: In case of trust arrangements, the beneficiary, though he is a stranger to the contract, can file suit in case where trustee comes across breach of trust.

  • Example: A has a Son namely B who is a minor. For the sale of B, A has executed a trust deed, appointing C as trustee. Here A is trust maker, C is trustee and B is beneficiary. Here actually the Contract between A and C. But B can proceed legally if C breaches the trust.

Stranger is authorized: When stranger is authorized by party to the contract, then stranger`s suit becomes supportable.

When charge on property is made: In case where charge is created on property, stranger can file a suit.

  • A case on this point is Khaja Mohammed (Vs) Hussend Begum. In this case B is A`s Son and C is B`s wife. A contract gets formed between A and B according to which A has to provide for C`s betel box expenses, out of the proceeds which A gets from his property A fails to pay and C sues. Court decides that C`s suit is supportable though it is stranger`s suit because there is charge on property.

Agency Contract: In case of agency contract, the principle, though he is a stranger can file a suit. Here condition is the contract made by the agent should be in his capacity as agent.

Family Arrangements: In case of family arrangements the dependent person can file a suit, though they are strangers.

  • A case on this point is Shuppa Ammal (Vs) Subramanyan. In this case Shuppa Ammal has two sons. A contract gets formed between those brothers according to which each of them has to contribute certain amount for their mother`s livelihood. The contract gets breached and Shuppa Ammal files a suit. Her suit is given validity under this exception.

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