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Textbook notes Ch 11.docx

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Department
Business
Course Code
BU231
Professor
David Scallen

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Chapter 11 Privity of Contract: relationship that exists between parties to a contract. Generally, in order to win a contract lawsuit, the plaintiff must prove privity of contract with the defendant- that they are both parties to the same contract. The third party usually cannot be directly sued because he has not given any consideration for the promise. Not only must consideration for a promise be given by a party to the contract, but it must be given by the party seeking to enforce the promise. Liability of sellers of goods: the consumer should receive the benefit of implied terms that the goods are reasonably suited for. Liability of Manufacturers: may be liable for negligence (duty to warn/ defective unit) Vicarious performance: a third party performs contractual obligation on behalf of the promisor who remains responsible for proper performance; someone hired to do the job on contract the original promisor cannot escape liability by using a substitute. • Vicarious performance is allowed when it is not specified in the contract who should perform the job. • Injured party of tort liability in this may sue both the employee and the employer; but obviously it would be smarter to sue the employer • Exemption clauses: eployees are often protected by the exemption clauses; if they can prove that the clause was intended to be for their benefit and the damage occurred in the course of their employment Trusts: a fund in which is to be handed to a beneficiary in the future (ex. a mom saving money for her child in the future; college fund) Trustee: a person who is entitled to the trust Trust agreement: document that conveys property to a trustee to be used for the benefit of a third party beneficiary Constructive trust: a relationship that permits a third party to obtain performance of a promise included in a contract for his benefit. Unfortunately, parties involved in the contract are not likely to be aware of the subtleties of a constructive trust. Other exceptions to the Privity of Contract rule Insurance: each province has a statue that gives beneficiary the right to force the insurance company to pay out the contract; this is indemnification, not guarantee. Undisclosed principal: an agent involved with the contract may sue or be sued on the contract; without necessarily proving privity of contract for that guy. Contracts concerning land: people who acquire land are subject to the rights and obligations created in earlier contracts that are recorded on the public record; even though new owner is not a party to the previous contracts (ex. if a tenant promises landlord to keep repairing the property while paying rent, they must do that for the next owner as well, legally.) The principled extension- exemption clauses: Supreme Court of Canada’s two criteria to decided whether or not a third party may rely on contractual provisions to protect it from liability: 1. Did the parties to the contract intend to extend the protection to the third party claiming it? 2. Are the activities of the third party within the scope of the contract general, and the exemption clause in particular? If these two are satisfied, the exclusion clause will protect the third party from liability. It also allows the third party to sue to enforce the terms of the contract, too. Assignment of Rights Transferring the unperformed right or benefit of the contract to a third party Choses in action: rights to intangible property; ex. patent, copyright, stock, bonds…etc; used to accumulate wealth; assignment of rights Choses in possession: rights to tangible property; sale of goods Equitable Assignment: requires that a clear intention to assign all part of a contractual benefit be show neither orally or in writing. If a legal action is necessary to collect from the promisor, the assignee must make the assignor a party as well. Statutory Assignment: enables the assignee to sue the other party without joining the assignor to the action An assignee may sue the promisor without joining the assignor in the lawsuit provided: a) The assignment must be complete: it wouldn’t be complete if there is a remaining balance to be paid afterwards b) It must be unconditional c) It was in writing; doesn’t have to be, so be reasonable about this; if it was oral, call the assignor as a witness to prove The effect of notice from multiple assignees: The assignee who first gave notice to the debtor is the one entitled to payment. It may be easier (nay, necessary) to pay the money (obligation) into court, and let them decide where it goes. Fundamental rule is that the assignee can never acquire a better right to sue the promisor than the assignor had. In legal terms, the assignee’s claim is “subject to the equities”: her claim i
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