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Lecture 6

ADMS 2610 Lecture 6: B.Law10th ppt notes Ch12

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Administrative Studies
ADMS 2610
Rudi Lof

Extent of Contractual Rights  Privity – only parties to a contract have rights under it – exceptions: ➢ Prior interests in land ➢ Constructive trusts ➢ Promises under seal  Privity ➢ A person cannot incur liability under a contract to which he or she is not a party ▪ Strangers or third parties have no liability nor rights under a contract ▪ Only parties to a contract have liabilities or rights under a contract ▪ These rights can be transferred in manners that are exceptions to the rule of privity  Privity  Prior Interests in Land ➢ Exception to rule of privity ➢ Buyer takes land subject to the rights of others who have acquired prior interests in the property before the purchase is made, or which interests appear on title ➢ Such rights run with the land ➢ Notice of such rights (due diligence)  Privity  Trusts ➢ An agreement or arrangement whereby a party (trustee) holds property for the benefit of another (beneficiary)  Constructive Trust (equitable concept) ➢ Normally beneficiary is not a party and gave no consideration so would have no rights ➢ Beneficiaries are not a party to the trust but can enforce its terms under equity  Other Exceptions  Promises under seal  Third parties can enforce agreements for their benefit if made under seal  Statutory Rights and Liabilities  Third party has statutory right to enforce contract ○ Example: beneficiary under a life insurance policy under the Insurance Act  Other Exceptions  Tort ➢ End users of products can sue manufacturers under tort for injuries even if no contract exists  Collateral Warranty ➢ Can enforce a warranty against a third party  Employment ➢ Employees may limit their liability under the contract entered into by their employer  Assignments  Novation ➢ The substitution of parties to an agreement, or the replacement of one agreement by another agreement ➢ Allowed because consensual amongst the parties ➢ Terminate original agreement and replaced it with another ➢ Most common in creditor/debtor relations  Novation  Requirements 1. New debtor assumes complete liability 2. Creditor accepts new debtor as principal debtor not merely as agent or guarantor 3. Creditor must accept the new contract in full satisfaction and substitution for old contract 4. Novation allows one to transfer contractual rights to a third party  Equitable Assignments  Assignments ➢ Can only assign rights not obligations  Choses in Action ➢ A paper document that represents a right or interest that has value ➢ Common law originally only recognized rights in contracts between parties as
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