Assets Taxable Under Wealth Tax in India

 Doctrine of Privity of Contract

The doctrine of privity of contract is a principle that dictates only the parties to a contract can sue or be sued under it. A third party, even if affected by the contract or benefitted by it, has no legal standing to enforce its terms. This principle upholds the sanctity of the contractual relationship.

Key Elements:

1. Stranger to Contract: A third party cannot claim rights or liabilities under a contract.
2. Contractual Relationship: Rights and obligations are confined to the contracting parties.

Exceptions to the Doctrine:

Over time, several exceptions have been recognized to prevent injustice:

1. Beneficiary Clause: A person intended to benefit under a contract can enforce it (e.g., trusts).
2. Agency: An agent can act on behalf of a principal to enforce contractual obligations.
3. Collateral Contracts: A separate but related contract can give rise to third-party rights.
4. Family Arrangements: Third parties in family settlements can enforce terms.
5. Statutory Provisions: Laws like the Indian Contracts Act, 1872, provide exceptions, e.g., negotiable instruments.

Judicial Perspective:

Indian courts have upheld the doctrine but have also recognized its exceptions in cases where strict adherence would lead to injustice. For example:

• Dunlop Pneumatic Tyre Co. Ltd. v. Selfridge & Co. Ltd. (1915) established the doctrine in English law.
• Indian courts have refined the doctrine through case law to accommodate evolving commercial and social realities.