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Third-party contracts: vocabulary check

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a. “There are exceptions to the general Scottish principle that only signatories to the agreement have standing to enforce its provisions. The first of these exceptions is agency. Under the law of agency, the principal is able to enforce and be sued on a contract made between his agent and the other contracting party. Where a person acting as an agent acts without authority or outside the scope of its authority, its acts are not binding upon the principal and the third party. However, the principal may ratify the agent’s acts. Failing ratification by the principal, the agent is liable to pay the third party such damages as will place the third party in the same position as if the agent had acted with authority.”

b. “The final argument raised was that, on the proper construction of the agreement, the parties intended to created a waiver of subrogation clause. Subrogation means, in a legal sense, that one party has the right to ‘step into the shoes’ of another party for the purposes of bringing a claim for damages. Typically, subrogation occurs when an insurance company that pays its insured client for injuries and losses then sues the party that the injured person contends caused those injuries and losses. However, not all types of claims may be subrogated. A waiver of subrogation clause would seek to prevent the recovery of damages from a third party who may be responsible.”

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