Introduction
A contract is a legal binding agreement that can be enforceable and confers obligations to the parties involved. Parties to the contract are those who are given responsibilities by the contractual terms or those who make promises in exchange of consideration.” (koffman and Macdonald, 2007, p. 475). The question is will the obligation to the contract be assigned?
In general, an obligation under a contract cannot be assigned without the consent of the other contracting party. In Tolhurst v Associated Portland Cement Ltd, it was held that the liabilities of a contract cannot be shifted off the shoulders of the contractor on to those of another without the consent of the contractee. A debtor cannot be relieved of his liability to his creditor by assigning it to someone else, except by the consent of all the three. However, a transfer of liabilities may occur in the following ways:
- By novation: It is the recession of the original contract and the substitution of a new one in which the obligations under the original contract are undertaken by new parties voluntarily. In this case the old contract is discharged and there is a substitution of anew contract (Macdonald and Koffman, 2007, p. 476)
- By vicarious performance: It is open to the parties to have their contract performed vicariously by another person, provided the contract does not expressly or implicitly insist on the performance of the contract by the promisor himself. In the absence of any such condition in the contract, the promisee must accept the work done by a third party if it has been carried out in accordance with the terms of the contract. But even in such cases, the promisor remains liable under the contract because vicarious performance in its application is similar to the law of agency i.e. the principal remains liable to the third party, and the agent does not incur any liability. In this type of arrangement, the original parties remain liable to each other for all practical purposes. The vicarious performance is not permissible where the contract is to render personal services or personal performance by the promisor is the essence of the contract (Redfern, 2004, p. 278).
Sand Diego Case
A third party can be defined as a legal entity that is other than the principal parties to a contract or transaction or an agreement. Sec 1 of the Contracts (Rights of Third Parties) Act 1999 provides definition of a third party though the rights that have been assigned to him under a contractual term.
“…a person who is not a party to a contract (a “third party”) may in his own right enforce a term of the contract if—
- the contract expressly provides that he may, or
- Subject to subsection (2), the term purports to confer a benefit on him.
…
- The third party must be expressly identified in the contract by name, as a member of a class or as answering a particular description but need not be in existence when the contract is entered into.
- This section does not confer a right on a third party to enforce a term of a contract otherwise than subject to and in accordance with any other relevant terms of the contract.
- For the purpose of exercising his right to enforce a term of the contract, there shall be available to the third party any remedy that would have been available to him in an action for breach of contract if he had been a party to the contract (and the rules relating to damages, injunctions, specific performance and other relief shall apply accordingly).
- Where a term of a contract excludes or limits liability in relation to any matter references in this Act to the third party enforcing the term shall be construed as references to his availing himself of the exclusion or limitation.”
….[(Rights of Third Parties) Act, 1999]
In the case of Robson and Sharpe v Drummond, 1831, Sharpe was contracted to paint a hired coach by Drummond. When Sharpe retired he transferred the rights to paint the coach to Robson but Drummond refused to accept the arrangement. It was held that Drummond was entitled to refuse the arrangement and Sharpe could not assign liabilities under the contract without Drummond consent (Chen-Wishart, 2007 p. 652).
From the above discussion it can be noted that the benefits and liabilities of a contract could not be assigned without the consent of the contracting parties. If some rights and benefits under a contract are assigned, then the assignee can demand performance from the other party. Where the other party fails to perform his obligations, the assignee can sue him in his own name. However, in this case under study, Park objected to transfer of the contractual rights thus the contract can not be assigned.
Case Study Two
In the case of assignment of a debt the law requires it to be in writing, should be signed by the ‘assignor, Written notice of assignment must be given to the debtor and should be absolute and not by the way of charge. After such a notice has been given, any payment to the original party will not discharge the debtor from being liable into the assignee. In other words, the debtor can assert no equity against the assignee arising out of transaction with the assignor after notice of assignment (Chen-Wishart, 2007 p. 651).
In this case it means that since Andy was not informed in a written notice, he is not liable to Carl. Even if Bill assigns this right to Carl, he can demand payment from Andy. But if Andy can prove that he has already paid, then Carl can not demand. This is when Andy has been informed in writing. Thus, in an act of contract there are certain constraints or difficulties that a third party has to face.
Carl has legal rights against Bill since Bill did not inform Andy to pay Carl and he has already collected the amount from Andy.
Conclusion
The doctrine of “privity of contract”, though it has been regarded as one of the most controversial issues in case of contractual agreements but there is no denial of the fact that in case of third party agreement this doctrine has contributed to a great extent in case of legal development. As third party contract mostly introduce some kind of complications that is why it is generally tough for a third party member to come under contractual terms with any other organizations or those third parties often find it quite difficult for them to act as an organ or agent to contract on behalf of an organization.
There are certain legal restrictions as those have been imposed over a third party in undertaking such a crucial role in undertaking special roles in an act of contract. One major barrier is that a third party to a contact needs to prove the issue of contractual promise. Thus, liability of proving the issue of such contractual promise rests upon the third party who wishes to act as an organ or agent to a contract (Chen-Wishart, 2007 p. 652).
Though the Contracts (Rights of Third Parties) Act 1999 prohibits principal parties to contract from imposing any kind of burdens over a third party but such rule is not followed always. There are two types of burdens that principal parties to contract can impose over a third party, namely,
- imposing positive burdens on a third party (i.e. to do something) and
- Depriving a third party of some right or restricting his freedom of action (i.e. not to do something). (Chen-Wishart, 2007, p. 650).
Work Cited
Chen-Wishart, Contract Law. London: Oxford University Press (Oxford), 2007.
Contracts (Rights of Third Parties) Act 1999. Web.
Macdonald, Elizabeth and Koffman, Lawrence. The Law of Contract, London: Oxford University Press, 2007.
Redfern, Alan. Law And Practice Of International Commercial Arbitration. New York): Sweet & Maxwell, 2004.