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ADMS 2610 (409)


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York University
Administrative Studies
ADMS 2610
Robert Levine

ADMS2610 Session 3 Chapter 12 (pg. 217-226) The Extent of Contractual Rights Privity of Contract - Privity (a person cannot incur liability under a contract to which he or she is not a party) o Strangers or third parties have no liability nor rights under a contract o Only parties to a contract have liabilities or rights under a contract o These rights can be transferred in manners that are exceptions to the rule of Privity - Prior Interests in land o Exception to rule of Privity o 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 o Such rights run with the land o Notice of such rights (due diligence) - Constructive Trusts o Is an equitable concept o Normally, beneficiary is not a party and gave no consideration so would have no rights o Beneficiaries are not a party to the trust but can enforce its terms under equity o Trusts (an agreement or arrangement whereby a party (trustee) holds property for the benefit of another (beneficiary) - Promises under Seal o Third parties can enforce agreements for their benefit if made under seal - Statutory Rights and Liabilities o Third party has statutory right to enforce contract  Example: beneficiary under a life insurance policy under the Insurance Act - Other Privity Exceptions o Tort – end users of products can sue manufactures under tort for injuries even if no contract exists o Collateral Warranty – can enforce a warranty against a third party o Employment – employees may limit their liability under the contact entered in by their employer Assignment of Contractual Rights - Novation (the substitute of parties to an agreement, or the replacement of one agreement by another agreement) o Allowed because consensual amongst the parties o Terminate original agreement and replaced it with another o Most common in creditor/debtor relations o Requirements:  (1) New debtor assumes complete liability  (2) Creditor accepts new debtor as principal debtor and not merely as an agent or guarantor  (3) Creditor must accept the new contract in full satisfaction and substitution for old contract o Allows for one to transfer contractual rights to a third party -
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