Privity of contract

Question 1

How can a third party acquire rights?

Answer 1

A third party can acquire rights if:
* the contract expressly provides that they may acquire a benefit (s 1(1)(a)); or
* the term purports to confer a benefit on them (s 1(1)(b))

Question 2

When does subsection 1(b) not apply?

Answer 2

Subsection (1)(b) does not apply, however, if on a true construction of the contract it was not intended that the term be enforceable by a third party (s 1(2))

Question 3

Who is the principal? (in the context of agency)

Answer 3

The person who has an agent

Question 4

Who is the third party? (in the context of agency)

Answer 4

The person with whom the agent contracts, on behalf of the principal, is called the third party.

Normally, a third party is someone who isn’t privy to the contract (non-agency context)

Question 5

In what conditions do apparent authority arise?

Answer 5

• 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.