Question

Regional Steel, Inc., and Overland Transport Company enter into a con-tract. Smooth Oil Corporation, which will indirectly benefit from the deal, is prevented from having rights under the contract by the principle of?

Answer 1

Answer: By the principle of Privity.

Explanation: Privity is a relationship between two entities seen as being a result of their mutual interest or participation in a given transaction, contract etc. Privity in contracts cannot grant rights or obligations to any entity that is not a part of the contract. Smooth Oil Corporation is not part of the contract signed by Regional Steel, Inc., and Overland Transport Company and as such cannot claim any right to the contract.