68 4: Formation of contract II Part B The law of obligations
Exceptions
Agency In normal circumstances the agent discloses to a third party with whom they
contract that they are acting for a principal. The contract, when made, is between
the principal and the third party. The agent has no liability under the contact and no
right to enforce it.
Covenants A restrictive covenant may run with land
Tulk v Moxhay 1848
The facts: The claimant owned several plots of land in Leicester Square. He sold
one to X, who agreed not to build on it, but to preserve it in its existing condition. It
was sold on, eventually being purchased by the defendant, who, although he was
aware of the restriction, proposed to build on it. The claimant sought an injunction.
Decision: The injunction was granted.5.2 Contracts (Rights of Third Parties) Act 1999
This Act has a fundamental effect on the rule of privity of contract by setting out the circumstances in
which a third party has a right to enforce a contract term or have it varied or rescinded, and a right to all
the remedies that are available for breach of contract. There is a two-limbed test for the circumstances in
which a third party may enforce a contract term.
Whether the contract itself expressly so provides.
Where the term confers a benefit on the third party, unless it appears that the contracting parties
did not intend them to have the right to enforce it.
The third party must be expressly identified in the contract by name, class or description, but need not
be in existence when the contract is made (for example, an unborn child or a future spouse). The Act
enables a third party to take advantage of exclusion clauses as well as to enforce 'positive' rights.
The Act also protects third parties from the original parties varying contract terms without their consent
and the promisor is protected from double liability. Damages awarded to the third party will be reduced
by the amount of damages already awarded to the original promisee. The Act does not confer third party
rights in relation to a company's constitution, or employment contracts. So, for example, a customer of
an employer cannot use this Act to enforce a term of a contract of employment against an employee.6 The electronic contract
The pace of technological change raises issues for modern contract law. Problems arise as contracts are
often electronic, are digitally signed, are accepted by email and consideration is often provided by credit
card.It could be said that the case of Byrne v Van Tienhoven, dating from 1880, is an early example of an
electronic contract. In that case, the sending of an acceptance by telegram was an important action in a
chain of events leading to the formation of a contract. Since then, technology has permitted such actions
to become almost instantaneous. Fax messages, emails and use of the internet may all play a part in the
communication of offers and purported acceptances. This is a potentially wide ranging topic and the law is
still in its infancy. The following is a summary of the issues which will need to be considered.
(a) In writing? There are two main reasons why contracts need to be in writing.
(i) A written contract provides evidence of the terms of the contract.
(ii) The requirement of formality allows a weaker party to 'think twice' before entering into a
transaction.
An electronic contract meets the reasoning behind the requirement for writing, and can
thus be said to be in writing.FAST FORWARD