Venkata Chinnaya Rau vs. Venkataramaya Garu||Case Summary||1881 ILR 4 Mad 137||Privity of Consideration under Indian Contract Act

Privity of Consideration under Indian Contract Act

FACTS

In Venkata Chinnaya Rau vs. Venkataramaya Garu an elderly woman conveyed some property in the form of a few acres of land in the name of her daughter Venkataramaya Garu, the defendant, through a deed of gift. The deed of gift was registered by the concerned authorities. The contract terms said that the defendant will pay an amount of Rs. 653 every year to the sister of the woman, the plaintiff: Venkata Chinnaya Rau. The defendant executed an Iqrarnama (agreement), in favour of the plaintiff, promising to do the same. But after the death of the old woman, the defendant did not pay the money she had promised to the plaintiff. Therefore, the plaintiff sued the defendant to claim the promised money.

ISSUES

1. Whether the plaintiff is entitled to sue the defendant for the promised amount in a contract in which the consideration for the promise has been supplied by a person other than the plaintiff herself?

2. Whether the rule of "Privity of Consideration" can be invoked in the Indian context or not?

RELEVANT LAWS

Section 2(d) of Indian Contract Act: Where a promisor wishes so, the promisee or any other individual does or refrains from doing something, or undertakes to do or refrain from doing something, that act of abstinence or undertaking is consideration for the promise.

JUDGEMENT

The High Court held that the plaintiff could recover the annuity from the defendant. Innes J noted in the current case that the plaintiff was already getting a sum amount of money from her sister's estate even prior to the formation of the contract in question. When the plaintiff's sister handed over the property to her daughter (respondent), the respondent promised the plaintiff that the same arrangement would be continued by her. Thus, on account of the defendant's failure to pay the annuity, the plaintiff incurred a loss that was valid consideration for the promise. Since the plaintiff had already furnished the consideration, she could recover the annuity from the respondent. Justice Kindersley reached the same conclusion but on other reasons. He merged the gift deed and the promise of the defendant into a single transaction and held that the gift deed was the consideration for the defendant's promise to pay the annuity to the plaintiff.

CONCLUSION

This case discussed the application and validity of the doctrine of privity of consideration in Indian contract law. In Venkata Chinnaya Rau v. Venkataramaya Garu, the court held that the doctrine of privity of consideration does not exist in India. In the Indian Contract, the pledge or a third person may supply the consideration. Under the Indian Contract Act, 1872, consideration can move not from the promisee but even from a third party who is not a party to the contract, unlike English law, which insists that consideration must move only from the promisee.

Vinita Pathak