Parties to a contract Flashcards
What is privity of contract
Only the actual parties to a contract are bound by it and therefore have rights and obligations under it.
What does the rule of privity of contract mean for the third parties
This rule of privity effectively means that third parties could neither sue nor be sued on a contract.
What is the situation if a contract has been made for the benefit of a third party?
The privity rule meant that the third party still had no rights under the contract. However, important to note that there are some exceptions, the main one being Contracts ( Rights of Third Parties) Act 1999.
What effect does the Contracts ( Rights of Third Parties) Act 1999 have?
Under this act a third party can acquire rights if:
*The contract expressly provides that they may acquire a benefit? or;
- The term purports to confer a benefit on them. However, This would not apply if on true construction of the contract it was not intended that the term be enforceable by a third party.
The Contracts ( Rights of Third Parties) Act 1999 provides the criteria for a 3rd party to acquire rights, but how can a third party enforce a term of a contract in their own right?
They must be expressly identified in the contract by name or as a member of a class, or answering a particular description.
Who are agents
They are persons who have the ability or power to change the legal relations of the person for whom they are agent. This person is called the principal.
Who is the person whom the agent contracts on behalf of the principal
The third party.
How is a third party different in the context of an agency compared to contracts where there is no agent?
The third party is not a third party in the normal sense, standing outside the contract formed with the principal. The whole point is that they are party to the contract with the principal
How can an agency be created
By the principal giving the required authority to the agent to contract on its behalf.
What are the two types of authority that can be given by principal to create an agency?
Actual Authority & Apparent authority
How can actual authority be ascertained?
By looking at what the parties have said and done, and any relevant surrounding circumstances. It can be granted expressly, or it can be implied.
What is apparent authority?
This is where the agent does not have actual authority from the principal but, the authority has been made apparent to the third party by the principal.
Important to note that it is not sufficient that so called ‘agent’ appears to be authorised. The appearance of authority must be created by the principal
What are the three conditions that have to be satisfied for apparent authority to arise.
- At some stage the principal must have represented by words or conduct that the agent had authority.
- The third party must rely on this representation, believing that the agent has authority; and
- The third party must alter their position eg by entering into a contract.
Are agents exempt from the doctrine of privity?
An authorised agent has no rights (or indeed obligations) under the resulting contract. The agent is authorised to enter the contract on behalf of someone else (called the principal) and the resulting contract Is between the principal and other party. The agent simply drops out.
