BUSINESS ADMINISTRATION
BUSINESS LAW
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Question
[CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]
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Stranger to consideration cannot sue
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Consideration must flow from the party to the contract
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Stranger to contract can sue
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Stranger to contract cannot sue
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Detailed explanation-1: -The Indian Contract Act. 1872, allows the ‘Consideration’ for an agreement to proceed from a third-party. However, a stranger (third-party) to consideration is different from a stranger to a contract. The law does not allow a stranger to file a suit on the contract.
Detailed explanation-2: -Privity is a doctrine of contract law that says contracts are only binding on the parties to a contract and that no third party can enforce the contract or be sued under it.
Detailed explanation-3: -1) A person who is not a party to a contract cannot sue even if the contract is for his benefit and he provided consideration. (Or) A stranger to a contract cannot sue. 2) A contract cannot provide rights (or) impose obligations arising under it on any person other than the parties to it.
Detailed explanation-4: -The rule of privity of contract is the principle that a third party cannot sue for damages on a contract to which he is not a party. This rule has been strongly criticized in recent times, particularly where the contract is for the benefit of the third party.