Legal Aspects

Topics: Contract, Tort, Contract law Pages: 9 (2840 words) Published: March 17, 2013
Legal Aspect of Purchasing
Passing of Title – exceptions to the rule, Privity of Contract and potential problems * Doctrine of Privity
* Circumvent by Collateral Contracts
* Circumvent by Collateral Warranty
* Other methods to circumvent
* Contract Rights of Third Parties Act 1999
* Liability in Tort
* Subcontractor liability
* Product Liability
* Agency role and relationships
* Agency Agreement
* Agent’s rights and duties
* Breach and Termination
* Principal’s remedies for breach of duty by Agent
* Termination 1993 regulations
Group 4
Aton, Lester
Berganting, Glenallen
Cruz, Christine Joy
Daniel, Maridict
Jalimao, Michelle
Lachano, Ruby
Orbigo, Alyzsa
Doctrine of Privity
Privity is the legal term for a close, mutual, or successive relationship to the same right of property or the power to enforce a promise or warranty. * A doctrine of contract law that prevents any person from seeking the enforcement of a contract, or suing on its terms, unless they are a party to that contract. * Privity of contract occurs only between the parties to the contract, most commonly contract of sale of goods or services. Example:

A promises B, for consideration moving from B, to pay C $ 100. Here A and B are parties to the contract – privy to the contract – and can sue each other if there is a breach by the other. C is not a party to the contract and cannot sue A if A fails to pay C the sum of $ 100.

Exceptions to General Rule of Privity:
Collateral Contracts: A collateral contract is one that accompanies the main contract between two parties. It is one involving either of them and a third party. A classic example of this happened in England in 1953 in the case of Shanklin Pier v. Detel Products Ltd. In this case Shanklin Pier (plaintiff) employed contractors to paint a pier. The contractors then instructed Detel Products to supply them paint. This instruction was given based on a statement made by the defendants to the plaintiffs that the paint would last for seven years. When after just three months the paint work fell apart, the plaintiff sued and was given the go ahead by the courts to proceed with the suit against the defendant because even though the main contract had been between the contractor and the defendant there was in existence a collateral contract between the plaintiff and the defendant guaranteeing seven years protection.

Multilateral Contracts: When a person joins an unincorporated association such as a club, it could be said that he has gone into a contractual relationship with other members even if he may not be aware of their identity and if the person only liaises with the secretary of the organization. In one case the courts decided that a competitor in a race contracted not only with the organizers but with other competitors.

Agency: The status and vicarious liability issues of an agent also create exceptions to the rule of privity. When an agent negotiates a contract between his principal and a third party, it is generally regarded as being between the principal and the third party. However there are situations where it is subject to question as to whether or not an agent acted on his own behalf or not. It may even reach new heights of complexity when an agent makes use of a sub-agent, spawning twin questions of whether or not the contract will now be between the principal and the sub-agent or the agent and the sub-agent.

Circumvent by Collateral Contracts- separate from main contract, but dependent on it A collateral contract may be between one of the parties and a third party. Example:
If X agrees to buy goods from Y made to Z, and does so on the strength of Z’s assurance as to the high quality of the goods, X and Z may be held to have made a collateral contract consisting of Z’s promise to quality given in consideration of X’s promise to enter into the main contract with Y. A collateral warranty is...
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