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AI Drafter - (New and Powerful) ✕ Generate professional replies, appeals, opinions to Show Cause Notices, assessment orders, audit objections, and other legal communications using TaxTMI's AI Drafter.
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Issues: Whether a third person can sue to enforce a stipulation in a contract for payment to him, where no trust, agency, novation, charge, or other recognised exception is established.
Analysis: The stipulation in the sale-deed was treated as a direction by the vendor to the vendee to pay certain creditors and not as the creation of any express or implied trust in favour of the plaintiff. The oral agreement to pay the plaintiff was found not proved. The governing principle applied was that a stranger to a contract cannot enforce it merely because the contract was made for his benefit, unless the case falls within a recognised exception such as a trust, a charge on property, a settlement within the applicable exception, estoppel, or novation. The existence of all necessary parties before the Court does not by itself create a cause of action where none exists. Order 1, Rule 3 of the Civil Procedure Code was noted as requiring an existing right to relief before joinder of parties can enlarge the plaintiff's rights.
Conclusion: A third party cannot sue on such a contract merely because it contains a covenant to pay him, and the suit against the third defendant was not maintainable.
Ratio Decidendi: A stranger to a contract cannot enforce a promise made between others unless the contract creates a legally recognised enforceable interest in his favour, such as a trust, charge, novation, or other accepted exception.
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