Good The Interests OF The Parties Versus The Interests OF Seller Essay Example
With the unprecedented proliferation of the difference technological advancements, the mistakes in contract law have become increasingly popular. Very often these contracts involve third-party beneficiary. The most popular forms of such legal relationships are insurance contracts, gifts contracts, banking deposits contracts, and many others. Moreover, contracts of sale are another popular example in this regard. The practice indicates, that the intended recipient of the commodities in international sales of goods contracts are innocent third parties. Sometimes, however, the practice demonstrates that these legal relationships are brutally violated by the buyer. Onto such situations, typically two parties become affected: an innocent seller and an innocent third party, which is typically a beneficiary under the provisions of a particular legal situation. For instance, a common situation in the contemporary commercial practice occurs when a buyer and a third-party beneficiary have a contract between themselves, under which buyer owes an obligation to deliver commodities to the third-party. The buyer, purchases specific commodities from the seller, and under the contract of sale the seller becomes obliged to deliver these commodities to the third-party. However, the buyer defaults on payment after the commodities have been successfully delivered. Reasonably, the question arises whether the seller becomes entitled to reclaim his commodities back. In order to answer this question unambiguously and thoroughly a number of relevant legal cases and authorities should be consulted.
Overall, the objective of this paper is to demonstrate that the interests of an innocent third party should always supersede the interests of an innocent seller under any circumstances. This analysis takes into consideration both legal and ethical aspects of such circumstances. The first part of the paper speaks about the nature of innocent third party beneficiaries and sellers. It provides an informative conceptual framework, explaining the way these terms are defined and interpreted by the theory and the practice. Further, it explains the most popular situations when such relationships arise. The second part of the paper provides case law which regulate such relationships and provide legal and ethical substantiation thereof.
The Concept of Innocent Third Party
The practice demonstrates that the concept of innocent third-party regularly overlaps with the concept of innocent third-party beneficiary. An innocent third-party in the context of local contracts is a person, both physical and legal, who is entitled to the right to sue on a contract despite the fact that it has not been among the creators of this contract. Legal realities indicate that these rights become enforceable in the cases where the third-party is an intended beneficiary, as opposed to the cases where the third party may be an incidental beneficiary. Theoretically, the party beneficiary is entitled to sue both the seller and the buyer, depending on the legal circumstances which regulate a particular relationship. A contract or an agreement created in favor of a third party is known as third-party beneficiary contract, and any activities initiated by the third-party, whose rights have been allegedly violated are considered as the third-party actions.
Traditionally, the doctrine of ius quaesitum tertio is not recognized in the common law. Both, the British and Australian courts traditionally follow the principle of privity of contract, which confines they concerned parties to the original ones. However, with the adoption of the contracts act 1999 large number of novelties has been introduced to reconsider this state of legal affairs. Today, more and more rights and privileges are provided to the third-party beneficiaries, in contrast to the legal system of the United States of America, which abandonded the privity of contract principle in the early 19's century.
Whereas the legal provisions of the different countries substantially right, there are nonetheless comes accepted standards of third-party rights in the legal systems of the majority of the countries. Most typically, a right of action is granted to the third-party only in the situation when the object of the relationship was intended to benefit the party and the concerned third-party either relied on the acceptance of these benefits, or has already accepted this benefit. The most common situations where a third-party is nominated to a transaction occur when a promise owes something to the third-party, and the present legal relationships is concluded to discharge the past one. Alternatively, another common example of creating third-party agreements is to receive something material from the third-party on the basis of another agreement. Under any circumstances, third party agreements should be different from agency relationships. Under the principles of agency representation, the agent acts on the behalf of the promisee, while in this case the promisee acts on his own name and assumes obligations on himself.
Furthermore, it is important to highlight the fact that the existence of the third-party might not necessarily be present at the moment of the contract conclusion. This provision means that the contract may benefit a person which has not been born yet, or it can be designed to secure specific financial benefits for the legal company which is still in the process of registering. The most common examples include creation of the contract for an unborn family member, such as bank deposit, or contracts of international sale.
At the same time, it is vitally important to remember that specific criteria are applicable to any contract involving a third-party. In order for this contract to become enforceable, the following aspects should be taken into consideration. First and foremost, a valid contract must exist between the two contracting parties. Other relationships, except for the legal contract, do not qualify under these criteria. Consequently, a third-party seeking restitution or other legal remedy for reimbursement purposes bear the burden of proof that the legal relationship between the promisor and promisee previously existed. Secondly, the contracting parties should have contended to give special benefits to the concerned third-party. An important condition in this regard is that these benefits must be real. Simple interest in the outcomes of the transaction between the promissory promisee do not qualify under the conditions of benefit. At the same time, the intention between the promisor and promisee can be both express and implied. Therefore, the third-party must be expressly named in the transaction although the benefits might not be expressly listed. Finally, the intention of the parties must be irrevocable in its nature. The most common exception from this rule is insurance policies contracts.
The aspect of irrevocability is typically satisfied by one of the following factors. Firstly, delivery of the contract benefits to the third-party. Secondly, registration for publication is another indicator of an irrevocable nature of the transaction. Finally, intimation of the third-party also qualify under these criteria. Then, the concept of acceptance and its importance should also be stressed in the context of this paper. A third-party beneficiary acquires the right of action and may legitimately enforce it only after this third-party accepts the performance under the contract. In accordance with the contemporary common-law, before the scheduled execution of the contract takes place, the concerned third-party endangers the right of expectation, i.e. is not authorized to intervene to the procedures. Some scholars vigorously advocate the idea that acceptance do not generate the right, but rather entrench and solidify it. This statement is further supported by the argument of the contracting parties enjoy the right to rescind the contract until it is ultimately accepted.
Finally, for third-party to become a legitimate one, it must be an intended beneficiary, as it is commonly opposed to incidental beneficiary. The practice indicates that the burden of proof lies on the relevant third-party to demonstrate that it is really an intended beneficiary under a particular contract. Doctrinally, and incidental beneficiary is defined as a party which was not initially designed to benefit from the execution of a particular contractual privity. The main distinction between incidental and intended beneficiaries is that promisee enters into agreement to give some consideration to the second party, which in its turn should exercise some actions or deliver some products to the third-party beneficiary. In other words, under such transactions the promisee must have an intention to benefit the concerned third-party.
The Concept of Innocent Seller
Practice, Theory and Ethics in Collision between the Interests of Seller and Third Party
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Gareth Jones, Goff and Jones: The Law of Restitution (1st supp, 7th edn, Sweet & Maxwell 2009)
David J. Joubert, "Agency and Stipulatio Alteri", Southern Cross: Civil Law and Common Law in South Africa, eds. Reinhard Zimmerman & Daniel Visser (Oxford: Oxford UP, 1996), 356.
Philip Sutherland, "Third-Party Contracts", European Contract Law: Scots and South African Perspectives, eds. Hector L. MacQueen & Reinhard Zimmermann (Edinburgh: Edinburgh UP, 2006), 215-6.
Hoyt's Pty Ltd v Spencer (1919) 27 CLR 133,
Gordon v Selico (1986) 18 H.L.R. 219
Bisset v Wilkinson  AC 177
Esso Petroleum Co Ltd v Mardon  EWCA Civ 4
Smith v Land and House Property Corporation (1884) LR 28 Ch D 7
Leaf v International Galleries  2 KB 86
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