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Question
Apply the legal principles to the facts given below and select the most appropriate answer.
Legal Principles:
1. A contract comes into being from the acceptance of an offer, When the person to whom the offer is made signifies his assent thereto, the proposal is said to be accepted and the parties are at consensus and idem regarding the terms of the agreement.
2. Consideration is something that moves from the promise to the promisor, at the implied or express request of the latter, in return for his promise. The item that moves can be a right. interest, profit, loss, responsibility given or suffered, forbearance, or a benefit which is of some value in the eyes of law.
3. Contractual rights and liabilities are exclusive to the parties to contract.
4. There are few exceptions to the doctrine of privity of contracts like agency, trust, assignment, and third party beneficiary.
5. A quasi-contract is a contract that is created by the court when no such official contract exists between the parties to prevent a party from being unjustly enriched, or from benefitting from the situation when he/she does not deserve to do so.
Facts: Goodtyre is a tyre manufacturer who agreed with their dealer to not sell the tyres below a recommended retail price (RRP). As part of the agreement, Goodtyre also required their dealers to gain the same agreement with their retailers, who in this instance was Bestmotors. The agreement held that if tyres were sold below the RRP, they would be required to pay ₹ 500 per tyre in damages to Good tyre. This was agreed between the dealer and Bestmotors, which effectively made Goodtyre a third party to that agreement. Sometime after this, Bestmotor sold the tyres below the agreed price and Goodtyre sued for damages and an injunction to prevent them from continuing this activity. Bestmotors is arguing that Goodtyre could not enforce the contract as it was not part of the contract between the dealer and Bestmotors. The court decided that Goodtyre had no right to access damages. Which of the following is the correct reasons?
I. The good tyre could not claim for damages as only a party to a contract can claim damages under it.
II. The good tyre had not given any consideration to Bestmotors and therefore there could be no binding contract between the parties.
III. The good tyre was not listed as an agent within the contract and could therefore not be included as a valid third-party who had rights to claim on the contract.
Options
I only
II only
I and II
I, II, III
Solution
I, II, III
Explanation:
The contract is between Goodtyre and the dealer. There was also an agreement between the dealer and Bestmotors. In this case, Good tyre could have been considered as a third party to the contract but Goodtyre was not listed as an agent and therefore could not be a valid third party. In this case, Good tyre is not seen to give any consideration to Bestmotors to make the contract a binding contract.
