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Contracting with Third Parties

Contracting with Third Parties 2025

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The document discusses the role of third parties in bilateral contracting, particularly in the context of holdup and moral hazard models. It argues that introducing a third party can facilitate the implementation of first-best outcomes even when renegotiation is possible. The authors demonstrate that fines paid to a third party can incentivize truth-telling and investment, and this holds true even if the third party is corruptible, provided that all coalitions have access to the same contracting technology. The paper explores various models, including buyer-seller relationships and moral hazard in teams, showing how well-designed contracts can prevent side contracting and ensure efficient outcomes.

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Got questions?

We have answers to the most popular questions from our customers. If you can't find an answer to your question, please contact us.

Is a contract binding if only one party signs?

You need to sue the person or business who signed or entered into and then breached the contract. Generally, someone cannot sue a third party they do not have a contract with. Only the one who signed or entered into the agreement with you is responsible for the damages to you.

Can a contract bind third parties?

It is only the contracting parties who may have rights conferred or obligations imposed on them by a contract. This is the odd doctrine of privity of contract. It precludes third party enforcement even though it was the intention of the contracting parties that he benefit from their agreement.

Can a contract bind a third party?

A principal consequence of the doctrine of privity is that, at common law, a third party generally has no right to enforce a contract to which they are not a party, even where that contract was entered into by the contracting parties specifically for their benefit and with a common intention among all of them that they

What is the benefit of a third party contract?

A third party can benefit from a contract if one of the parties recognisably wishes to bestow the performance on that third person or that this party is obviously obliged to care for this third person by law or by contract.

What is third party contracting?

A third party contractor is an independent professional or organization that provides specific services to a company under a contractual agreement.

Can there be 3 parties to a contract?

A tri-party agreement is a deal between three parties. The term can apply to any deal but is commonly used in the mortgage market. With mortgages, the tri-party, or tripartite, agreement, usually happens during the construction phase of a property to secure bridge loans.

Can a third-party beneficiary be bound by a contract?

The beneficiary may get named in a contract to have contractual rights, but it is not necessary for them to be identifiable at the time the contract is formed. Meanwhile, even if the promise is not made to them directly, they may still enforce the contract.

Contracting with Third Parties 2025

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