Contract - Parties (2) Flashcards
What parties can be privy to a contract?
Parties: As a general common law rule, contracts cannot confer rights or impose obligations onto any person other than parties to it (Tweddle v Atkinson). This is privity of contract.
What third parties cna enforce a contract?
Third Party Rights: As an exception, a third party may enforce a contract if: a) the contract expressly provides that they may acquire a benefit; or b) the term purports to confer a benefit on them (s1(1) Contract (Rights of Third Parties) Act 1999).
(1) Exception: (b) does not apply if it appears the parties did not intend for the term to be enforceable by the third party (s1(2)).
(2) Requirement: The third party must be expressly identified in the contract, either by name or by reference to a class into which they fall.
(3) Gift Receipts: This, for example, allows people to refund goods bought by others using a gift receipt.
What is agency?
Agency: Agency occurs where one party (an ‘agent’) acts on behalf of another party (a ‘principal’), with the power to affect the principal’s legal position in respect of a third-party.
Authority
Authority: An agent must have authority to act on behalf of a principal.
(1) Actual Authority: Actual authority is given through the appointment of an agent by a principal.
Appointment: Appointment may be express or implied/incidental.
Express Appointment: The legal relationship is expressly agreed to through a consensual agreement between principal and agent.
Implied Appointment: The legal relationship is implied contextually, such as a shopkeeper impliedly appointing a clerk to sell goods on their behalf. ← BASED ON PERSPECTIVE OF AGENT (Unless it is not obvious a principle exists)
In Practice: In practice, an agent may exceed the rights conferred to them, so long as they remain within the bounds of customary practice for a reasonable agent within that industry.
(2) Apparent Authority: Apparent/ostensible authority (agency ‘by estoppel’) arises where a principle has given a false impression to a third-party that an individual (the ‘agent’) has authority to contract on its behalf. ← BASED ON PERSPECTIVE OF THIRD-PARTY
Requirements: The principal must have represented that the ‘agent’ had authority at some point, a third-party relied on this representation believing it to be still true, and the third-party therein altered their position, such as by entering into a contract.
Lying Agents: Where an individual purported to act as an agent, whilst the principal did not, apparent authority does not arise and no contract is formed.
In Practice: In practice, the contract will still form and bind the principal, who is ‘estopped’ from denying agency.
(3) Ratification: If an agent exceeds their authority, and therein has no agency, a principal may nonetheless adopt a contract through ‘ratification’.
Requirements: This must be done in a reasonable time, and only provided the third-party has not already sold/bought their goods elsewhere (they cannot hold ratification over someone’s head).
