Identifying the Right to Demand Performance in Contracts

Signing a contract feels simple: one party promises something, the other expects it delivered. But when it’s time to enforce that promise, a trickier question comes up. Who actually has the legal standing to walk up and say “perform your promise”? Under the Indian Contract Act, 1872, the answer is far more restrictive than most people assume, and understanding the exceptions matters just as much as knowing the rule.

The general rule: only the promisee can demand performance 🔗

Contract law rests on a foundational idea called the doctrine of privity of contract. It means that only the parties who actually entered into an agreement can enforce it. Section 37 of the Indian Contract Act places the obligation to perform on the parties to the contract, and this same logic extends to who can insist on performance. According to Section 42, the right to demand fulfilment of a promise belongs exclusively to the promisee named in the contract.

This means that even if a contract is drawn up specifically to benefit someone, that person cannot sue on it unless they were a party to it. Say a wholesaler agrees to supply raw material to a manufacturer, and the manufacturer’s payment terms indirectly benefit a third vendor. That vendor, however pleased they are with the arrangement, has no legal right to step in and demand the wholesaler deliver goods on time. Only the manufacturer, as the promisee, holds that right.

This rule protects the sanctity of contracts. If every person even loosely connected to a deal could enforce it, businesses would face a flood of claims from parties they never negotiated with. Keeping enforcement rights tied to the actual promisee brings predictability to commercial dealings.

Why this rule sometimes feels unfair 🔗

Critics have long pointed out that strict privity can produce unjust outcomes, especially when a contract is clearly designed to benefit an outsider. Indian courts have acknowledged this tension, which is why several well-established exceptions exist. We’ll get to those shortly, but first, it’s worth understanding what happens to the right to demand performance when the promisee is no longer around.

When the promisee dies: the role of legal representatives 🔗

Contracts don’t automatically end just because one party passes away. If the promisee dies, their legal representative steps into their shoes and can demand performance of the contract, provided two conditions are met. First, the contract must not show a contrary intention. Second, the contract must not be of a personal nature.

This distinction between personal and non-personal contracts is important. A contract to deliver goods, pay a sum of money, or transfer property is impersonal in nature. Anyone competent, including a legal representative, can step in to demand or complete it. But a contract that depends on someone’s unique skill, judgment, or personal reputation is treated differently. If an artist agrees to paint a portrait and dies before finishing it, their legal representative cannot force the client to accept a substitute painter, nor can the client’s representative compel the deceased artist’s estate to somehow deliver the painting. The personal element makes the promise die with the person.

This principle also applies in reverse for promisors, as detailed under Section 37, which states that promises bind the representatives of promisors in case of death, unless the contract says otherwise. So legal representation cuts both ways: it lets the promisee’s estate claim performance and obligates the promisor’s estate to deliver it, always subject to the personal-nature exception.

Joint promisees and the right to demand performance 🔗

Contracts often involve more than one promisee. Two business partners might jointly lend money to a client, or a group of shareholders might jointly enter into a supply agreement. In such cases, the rule under Section 45 requires that, unless the contract indicates otherwise, all joint promisees must act together to demand performance. One promisee cannot unilaterally enforce the entire contract without involving the others.

Death among joint promisees complicates this further, but the Act sets out a clear order of succession for the right to demand performance:

This joint-action requirement exists to protect the promisor from being harassed by multiple, possibly conflicting, demands from different promisees. It also ensures that any settlement or acceptance of performance is binding on everyone involved, since it reflects a decision reached collectively rather than by a single individual acting alone.

Can a stranger to the contract ever demand performance? 🔗

The privity rule sounds absolute, but Indian courts have carved out real exceptions over the decades, largely because a rigid application of privity sometimes defeats the very purpose a contract was created for. These exceptions allow certain third parties, technically strangers to the agreement, to step in and demand what was promised.

Trusts and beneficiaries 🔗

When a contract creates a trust in favour of someone, that beneficiary can enforce their rights even though they never signed the agreement. The classic illustration comes from a Privy Council decision where a father transferred his estate to his son in trust, with an obligation to provide for his illegitimate son. The beneficiary was allowed to enforce this arrangement, since the trust conferred a real right in his favour, not merely a promise between two other people.

Family arrangements and marriage settlements 🔗

Where a family settlement or marriage arrangement is made specifically to secure a benefit for someone outside the contract, that person can sue in their own right. This principle traces back to a well-known Privy Council ruling involving a promise to maintain a young bride, where the beneficiary was permitted to enforce the promise made for her benefit despite not being a party to it. Indian courts continue to apply this logic in disputes over partition deeds and maintenance provisions carved out for family members.

Acknowledgment and estoppel 🔗

If a party to a contract acknowledges, through words or conduct, that they hold money or property on behalf of a third person, that acknowledgment can create an independent obligation enforceable by the third party, even without a direct contractual relationship.

Assignment and agency 🔗

When contractual rights are validly assigned, or where one party acts through a properly authorised agent, the assignee or the principal can demand performance because the law treats them as effectively standing in the shoes of the original contracting party.

Indian courts have been notably more flexible than English courts on this front. As legal commentary on the subject notes, exceptions such as trusts, family settlements, and acknowledgment are well-recognised and consistently applied by Indian judiciary, even though the list isn’t treated as closed or exhaustive.

Why this distinction matters in practice 🔗

Understanding who can demand performance isn’t just an academic exercise for exam preparation. It has real consequences in business disputes. Suppliers, franchisees, insurance beneficiaries, and even shareholders regularly find themselves asking whether they have standing to enforce a contract they weren’t directly part of. Getting this wrong can mean a case gets dismissed at the very first hearing for want of locus standi, regardless of how strong the underlying claim is.

For anyone studying business law or working in a commercial setting, the safest approach is to always check three things before assuming enforcement rights: was the person a named party to the contract, has that party since died and if so does a legal representative now hold the right, and does the situation fall within one of the recognised exceptions to privity. Getting this sequence right avoids a lot of wasted litigation.

What do you think? If a contract is clearly designed to benefit someone who never signed it, should the law make it easier for that person to enforce their rights directly, or does keeping enforcement strictly tied to the original parties protect businesses from unpredictable claims?

References

1. https://ibclaw.in/section-37-of-indian-contract-act-1872-obligation-of-parties-to-contracts/
2. https://drishtijudiciary.com/to-the-point/ttp-indian-contract-act/performance-of-the-contract
3. https://lawbhoomi.com/performance-of-contract-and-section-37-of-indian-contract-act/
4. https://blog.ipleaders.in/the-doctrine-of-privity-and-exceptions-to-its-application/
5. https://vidhijudicial.com/ica:-privity-of-contract.html
6. https://www.mondaq.com/india/contracts-and-commercial-law/243778/treatment-of-doctrine-of-privity-by-indian-judiciary