Parties to a Contract

Question 1

What is the doctrine of privity of contract?

Answer 1

Only the parties to a contract have rights & liabilities under it

(ie. only the parties to a contract can sue or be sued)

Question 2

Can a third party sue on a contract to which it is a not a party?

Answer 2

Only if:

• It was clearly intended that the third party should benefit from the contract (ie. they should be able to enforce it)

AND

• The third party was identified by name or as a member of a particular class

Contracts (Rights of Third Parties) Act 1999

Question 3

What rights to third parties to a contract have under The Contracts (Rights of Third Parties) Act 1999?

Answer 3

Third party can sue on a contract to which it is not a party if:
- it was clearly intended that they should be able to enforce it
and
- the third party was identified by name or as a member of a particular class

(Nb. they can’t be sued - can only sue)

The third party will have the same rights as if it were a party to the contract

The Act an be excluded in a contract

Question 4

Can an authorised agent bind the principal to a contract?

Answer 4

Yes, so long as the agent is authorised to bind the principal to a contract

The resulting contract will be between the Principal and the third party

Question 5

In a shop, there is a checkout operator employed by the shopkeeper & a customer - who is the agent?

Answer 5

The checkout operator is the agent - employed by the shopkeeper (principal). The customer (third party) deals directly with the checkout operator (agent), but the ultimate contract is between the customer (third party) and the shopkeeper (principal).

Question 6

What are the main ways an agent can have authority?

Answer 6

Actual authority
- Express (eg. to sell particular goods)
- Implied (eg. doing things incidental to selling goods such as advertising)

or

Authority arising by estoppel (apparent/ostensible authority)
- Representation by the principal that the agent is authorised
and
- The third party relies on that representation
and
- The third party alters their position in reliance of that representation

(ie. principal gave distinct but false impression that agent had authority & TP relied on that representation)

If agent has authority, principal will be bound

Question 7

What is the effect of authority for an agent which arises by estoppel?

Answer 7

Provided that all three conditions of estoppel are satisfied, if the principal is sued by the third party for breach of contract, the principal cannot deny that the agent had authority

Question 8

What are the 3 conditions for authority to arise by estoppel? (Agency)

Answer 8

1. Representation by the principle to the TP that the agent is authorised
2. TP relies on that representation
3. TP alters their position in reliance of that representation

Question 9

Where a contract with the object of leisure & enjoyment is made by one party on behalf of a group, who can that party claim for?

Answer 9

The party to the contract can claim on the group’s behalf

(eg. Woman books luxury holiday for herself, son & friend. Holiday is not luxury. Woman can claim damages for full cost of holiday for all 3 of them)