Download Chapter 16: Third Parties to Contract

Chapter 16: Third Parties to Contract
ASSIGNMENT OF RIGHTS
Definition of Assignment voluntary transfer to a third party of the rights arising from a contract so that the
assignor’s right to performance is extinguished
• Assignor party making an assignment
• Assignee party to whom contract rights are assigned
• Obligor party owing a duty to the assignor under the original contract
• Obligee party to whom a duty of performance is owed under a contract
Requirements of an Assignment include intent but not consideration
• Revocability of Assignment when the assignee gives consideration, the assignor may not revoke the
assignment without the assignee’s consent
• Partial Assignment transfer of a portion of contractual rights to one or more assignees
Assignability most contract rights are assignable except:
Assignments that materially increase the duty, risk, or burden upon the obligor
Assignments of personal rights
Assignments expressly forbidden by the contract
Assignments prohibited by law
Rights of Assignee the assignee stands in the shoes of the assignor
• Defenses of Obligor may be asserted against the assignee
• Notice is not required but is advisable
Implied Warranties obligation imposed by law upon the assignor of a contract right
Express Warranty explicitly made contractual promise regarding contract rights transferred
Successive Assignments of the Same Right the majority rule is that the first assignee in point of time prevails
over later assignees; minority rule is that the first assignee to notify the obligor prevails
DELEGATION OF DUTIES
Definition of Delegation transfer to a third party of a contractual obligation
• Delegator party delegating his duty to a third party
• Delegatee third party to whom the delegator’s duty is delegated
• Obligee party to whom a duty of performance is owed by the delegator and delegatee
Delegability most contract duties may be delegated except:
Duties that are personal
Duties that are expressly nondelegable
Duties whose delegation is prohibited by statute or public policy
Duties of the Parties
• Delegation delegator is still bound to perform original obligation
• Novation Contract a substituted contract to which the promisee is a party, which substitutes a new promisor
for an existing promisor, who is consequently no longer liable on the original contract and is not liable as a
delegator
THIRD-PARTY BENEFICIARY CONTRACTS
Definition a third-party beneficiary contract is one in which one party promises to render a performance to a
third person (the beneficiary)
Intended Beneficiaries third parties intended by the two contracting parties to receive a benefit from their
contract
• Donee Beneficiary a third party intended to receive a benefit from the contract as a gift
• Creditor Beneficiary a third person intended to receive a benefit from the contract to satisfy a legal duty
owed to him
• Rights of Intended Beneficiary an intended donee beneficiary may enforce the contract against the
promisor; an intended creditor beneficiary may enforce the contract against either or both the promisor and
the promisee
• Vesting of Rights if the beneficiary’s rights vest, the promisor and promisee may not thereafter vary or
discharge these vested rights
Defenses against Beneficiary in an action by the intended beneficiary to enforce the promise, the promisor
may assert any defense that would be available to her if the action had been brought by the promisee
Incidental Beneficiary third party whom the two parties to the contract have no intention of benefiting by their
contract and who acquires no rights under the contract