All India Bar Examination (AIBE) 3-III Previous Year Question Papers with Answers

The correct option is A: A contract cannot usually confer rights or impose obligations under it to any person except the parties to such contract.

This is because the doctrine of privity of contract is a common law principle which provides that a contract cannot confer rights or impose obligations upon anyone who is not a party to that contract. This means that only the parties to a contract can sue or be sued for its breach, and no third party can claim any benefit or liability under the contract, even if the contract was made for their benefit or detriment. The doctrine of privity of contract protects the parties from unwanted interference by strangers to the contract, and ensures that they are bound only by the terms that they have agreed upon.

The other options are incorrect because:

Option B is incorrect because it confuses the doctrine of privity of contract with the concept of confidentiality of contract. Confidentiality of contract means that the terms of a contract are not disclosed to any third party unless expressly provided for in the contract or required by law. However, confidentiality of contract does not affect the rights and obligations of the parties or third parties under the contract, unlike the doctrine of privity of contract.

Option C is incorrect because it also confuses the doctrine of privity of contract with the concept of confidentiality of contract. However, it also adds an additional condition that both parties must agree to reveal the terms of a contract to a third party, which is not always necessary. For example, a party may be compelled by law to disclose the terms of a contract to a third party, such as a court or a regulator, without the consent of the other party.

Option D is incorrect because it relates to the concept of consideration, not the doctrine of privity of contract. Consideration is one of the essential elements for a valid contract, and it refers to something of value given or promised by one party to another in exchange for their promise. Indian law permits consideration to be moved by persons who are not parties to the contract as long as it is at the request of the promisor. However, this does not mean that such persons can enforce the contract or be bound by it, as they are still strangers to the contract.

Option E is incorrect because it contradicts the doctrine of privity of contract. A third party is not entitled to demand performance of the contract, even if the contract results in a benefit to such third party, unless there is an exception to the doctrine. For example, if a third party is a beneficiary under a trust created by a contract, or if a third party has acquired rights under an assignment or charge created by a contract, then such third party may be able to enforce the contract. However, these are exceptions to the general rule that a third party cannot sue or be sued under a contract.