doctrine of privity - Indian Laws - General

Doctrine of privity The doctrine of privity means that a contract cannot confer rights or impose liabilities on any person except the parties to the contract. This doctrine has two aspects: first, only the parties to the contract are entitled under it or bound by it; and second, the parties to the contract cannot impose a liability on a third party. As a corollary, a third party cannot acquire rights and entitlements under a contract. In M C Chacko v. State Bank of Travancore, this Court held it as a settled principle of law that a person who is not party to a contract cannot enforce the terms of the contract, subject to certain well-recognised exceptions such as trust, family arrangement, and assignment. (1969) 2 SCC 343 The principle that only the parties to an arbitration agreement are either bound or benefited by such an agreement is fundamental to arbitration. Gary Born (n 44) 1518. This principle is uniformly reflected in international arbitration conventions as well as the Arbitration Act. For instance, Section 7 of the UNCITRAL Model Law defines an arbitration agreement as an agreement by the parties to submit to arbitration all or certain disputes which have arisen or which may arise between them in respect of a defined legal relationship, whether contractual or not. (emphasis supplied) [COX AND KINGS LTD. VERSUS SAP INDIA PVT. LTD. ANR. - 2023 (12) TMI 427 - SUPREME COURT (LB)]