Purchasers often nominate a third party to perform the obligations under an agreement for sale and purchase.  They flag their intention to do so by using the words “and/or nominee” on the front of the agreement.

 

The standard form agreement makes it clear that even if the purchaser signs the agreement with provision for a nominee, the purchaser remains liable.

 

So what does “and/or nominee” mean?  How does it work? Who has a right to sue for a breach of the agreement terms?

 

Whether the nominee can enforce the agreement was recently the subject of Court of Appeal and Supreme Court decisions.

 

The Contracts Privity Act is relevant.  If a sale and purchase agreement confers a benefit on a purchaser that is not a party to the agreement but that person is designated, that person can enforce the agreement.  A designation may be made by referring to the person by their name, their description or reference to a class.

 

The issue in the recent case was whether the words “and/or nominee” was a sufficient designation for this legislation to apply.  It was.  A description by a purchaser of a third party as “and/or nominee” was a good enough designation for a nominated third party to be able to enforce the agreement.

 

The case dealt with circumstances where the words “and/or nominee” were included in the description of the purchaser.

 

In another case recently, the Courts also considered whether the original purchaser who nominated a third party still had the power to enforce the agreement for sale and purchase.  The purchaser had also been described as “X and/or nominee”.

 

The decision was made that the original party could enforce the contract.  Part of the rationale for that was the use of the words and/or which were said to indicate an intention the named purchaser and the nominee might be entitled to enforce the agreement.  The words “and/or” anticipated the possibility that the purchaser could be:

 

• the person originally named on the agreement; or the nominated person; or
  
• the person named on the agreement and the nominee.
  

 

Lessons to learn

 

Given many purchasers look for the flexibility to appoint a nominee, to avoid any doubt as to whether the nominee can enforce the agreement include the words “and/or nominee” in the description of the purchaser as a matter of course.

 

If for any reason the vendor does not want a purchaser to have the right to nominate, include a provision in the agreement that specifically deals with this.

 

By Debra Dorrington