University of Central Florida (UCF) BUL3130 Legal and Ethical Environment of Business Practice Exam 2

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What does "privity of contract" mean in legal terms?

All parties can claim benefits from any contract.

A third party can enforce contract terms.

A stranger cannot benefit from a contract.

Privity of contract is a legal doctrine that describes the relationship that exists between the parties to a contract. Specifically, it means that only those who are parties to the contract (the individuals or entities who have entered into the agreement) have the right to enforce it and are bound by its terms. Therefore, a stranger—or a third party—cannot assert rights or benefits from that contract unless certain exceptions, such as third-party beneficiary doctrines, apply.

This principle ensures that contractual obligations are limited to those who have directly engaged in the agreement, thereby maintaining clarity and enforceability of the contract between the specific parties involved. In many legal systems, this principle helps protect parties from unintended obligations that may arise from contracts to which they have not consented.

The terms of the contract are public knowledge.

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