Forming a business and taking it to the zenith of success is difficult. It requires a lot of hard work, proper business planning, effective execution of such planning and following all the statutory compliance and legal procedures to develop a robust footing in the business market. As we know, that trade activities involve various agreements and commercial transactions; similarly, there are also chances of breach of such agreements. That is why the Indian Contract Act of 1872; came into force to administrate day-to-day business transactions and contracts.
This law aims to protect the legal rights of the parties engaged in a contract and uplifts the obligations arising therefrom. If somebody has abused your legal rights, worry not! The Contract Act will provide you with sufficient legal remedies to mitigate the losses. However, you would require assistance from top legal professionals who will help you with valuable guidance and take care of your legal matters; while you can concentrate on developing your business furthermore.
The Doctrine of Privity of Contract: A Basic Understanding!
The Doctrine of Privity of Contract is a legal concept. It states that when two or more parties engage in a legal agreement, it safeguards the party's rights and imposes some duties upon them. If any party fails to perform their legal duties, resulting in a violation of the legal rights of the other party; the injured party can bring legal action against the other. However, the person who is a stranger to the contract has no right to sue the parties to the contract.
For example, A let B stay at his house on rent. A gave the property on rent to B because he requires money for his ill mother C's treatment. B paid rent for three consecutive months and stopped payment after that. Now, A can only bring a suit against B to evict him from the property and claim the rent due. But C, the mother of A, cannot sue B because she is an outsider or stranger to the contract.
Privity of Contract: Exceptions
The Doctrine of Privity of Contract has some exceptions allowing the stranger to the contract; to initiate legal proceedings against the parties to the contract. Here they are:
- If the parties entered into a contract that creates a property right in your favour, by law, you have the right to sue the parties, though you are a stranger to the contract.
- When there is no contract between the parties, but through conduct, one of them has recognised your right as a stranger, you can bring legal action to establish your right.
- If you are a beneficiary in a family contract that creates a provision securing your rights, you can undoubtedly enforce the same, being a third party to the contract.
Every business organisation has to maintain statutory compliance to avoid falling into a legal pothole. Of course, legal rules and procedures are complex for commoners to understand. Hence, the best idea is to consult the leading corporate lawyers and act according to their direction.