Defination :
Section 2(d) of the Indian Contract Act defines consideration as follows, “When at the desire of the promiser, the promisee or any other person has done or abstained from doing, or does or abstains from doing, or promises to do or to abstain from doing, something, such act or abstinences or promise is called a consideration for the promise.”

A stranger to a contract cannot sue:
A person may be a stranger to the consideration but he should not be a stranger to the contract because 'privity of contract' is essential for enforcing any of the rights arising out of the contract. It being a fundamental principle of the law of contracts that' a stranger to a contract cannot sue, only a person who is a party to a contract can sue on it. Thus, where A mortgages his property to B in consideration of B's promise to A to pay A's debt to C, C cannot file a suit against B to enforce his promise, C being no party to the contract between A and B (Iswaram Pillai vs Sonnivaveru7)

Exceptions: The above rule that 'a stranger to a contract cannot sue' is subject to the following exceptions:

(i) Where an express or implied trust is created. In case of a trust, the beneficiary can sue in his own right to enforce his rights under the trust, though he was not a party to the contract between the settler and the trustees.

Illustrations. (a) A transfers certain properties to B to be held by B in trust for the benefit of M. M can enforce the agreement i.e., trust (At. K. Rapai vs John8).
(h) An addressee of an insured article is entitled to sue the Post Office in case of loss, as on receipt of such article, the Post Office becomes in Jaw a constructive trustee for the addressee (Ami" Ullah vs Central Govt.9).

(ii) Family settlement. Where a provision is made in a pal1ition or family arrangement for maintenance or marriage expenses of female members; such members, though not parties to the agreement, can sue on the footing of the arrangement.

Illustration. A daughter along with her husband entered into a contract with her father whereby it was agreed that she will maintain her mother and the property of the father will be conveyed to them. The daughter subsequently refused to maintain the mother. On a suit it was held that the mother was entitled to require her daughter to maintain her, though she was a stranger to the contract (Veeramma vs Appayya).10

(iii) When the defendant constitutes himself, as the agent of the third party. Thus if A receives some money from B to be paid over to C and he admits of this receipt to C, then C can recover this amount from A who shall be regarded as the agent of C (Surjan vs Nanat). II.

(iv) In case of agency. Where a contract is entered into by an agent, the principal can sue on it.


(v) In case of assignment of rights under a contract in favour of a third party either voluntarily or by operation of law, the assignee can enforce the benefits of the contract, e.g., the assignee of an insurance policy or the official assignee on the insolvency of a person can. sue on the contract even though originally they were not parties to it.