Chapter 17

Father contracts with Contractor to build house for Son. If contractor breaches, who can sue him?

Since Son is the intended beneficiary, he can Contractor if Contractor breaches the contract. Father may also sue Contractor.

Susan buys a car from CarMax for $10,000 on credit. Joe's daughter likes the car, so Joe buys the car from Susan. Joe also agrees to pay the balance due to CarMax on behalf of Susan. Joe defaults. Who can CarMax sue for breach of contract?

The correct answer is (d).

A delegation of a duty does not extinguish the duty owed by the delegator.

True

A delegator can be relieved from his duty to perform to the original obligee by a novation.

True

A induces B's consent to contract under duress. A later assigns his rights under the contract to C. B may assert the doctrine of duress against C as a ground for avoiding the contract.

True

Anti-assignment clauses in contracts are enforceable.

True

Debtor (D) owes a debt to Creditor (C). S contracts with D to pay D's debt to C. C is a creditor beneficiary of the contract between S and D.

True

Like assignments, Delegations may be made in any way sufficient to show delegator's intent to delegate. No formal language is necessary, and no writing is necessary, unless required by the statue of frauds.

True

When does someone who is not an original party to a contract have legally enforceable rights under the contract?

When a contract has been assigned (transferred) to the 3/P, or When a contract is intended to benefit a 3/P (a "third-party beneficiary"). -INTENT MUST BE PROVEN BY 3RD PARTY TO BE AN INTENDED BENEFICIARY. iF NOT PROVEN, 3/P IS CONSIDERED TO BE AN "INCIDENTAL BENEFICIARY"

Steven purchases a house and obtains a mortgage loan from Bank. Steven later sells the house to Brian, who assumes the mortgage (i.e., Steven delegates his duty to pay the mortgage to Brian). Bank (3/P) is a creditor beneficiary of the contract between Steven (promisee) and Brian (promisor), and can sue both Steven and Brian if Brian does not pay. Brian's performance (to pay the mortgage) is intended to satisfy a legal duty that Steven owes to the Bank. Can Bank do this?

YEs. Brian's performance (to pay the mortgage) is intended to satisfy a legal duty that Steven owes to the Bank.

The transfer of one's rights under a contract is

an assingment

What is the Effect of an assignment?

the obligee-assignor's right to receive the performance from the obligor is extinguished; the right to receive the obligor's performance is transferred to the assignee. Assignor is off the hook.

Ex.: Mike contracts to mow Janet's lawn on a weekly basis for $25 per week. Mike becomes ill and arranges for Sonny to mow Janet's lawn.What are the 3 people labled as?

-Janet is the obligee (the one to whom the duty is owed). -Mike is the both the obligor (the one who owes the duty to perform) and the delegator (the one who delegates the duty). -Sonny is the delegatee (the one to whom the duty is delegated).

Assignment will not be effective if it:

-Violates public policy -Adversely affects obligor in some significant way (materially changes obligor's duties or increases obligor's burden or risk). -The contract involved a personal relationship between the parties. -It would violate a non-assignment clause in the contract.

A delegation will not be effective if:

1) It violates public policy. 2) The contract duty involved an element of personal skill or character. (Ex.: Susan contracts with Picasso to paint a portrait of her for $5,000, and then Picasso delegates the contract duty to Bubba.) 3) It violates a non-delegation clause in the contract.

When does someone who is not an original party to a contract have legally enforceable rights under the contract?

1) When a contract has been assigned (transferred) to the 3/P, or 2) When a contract is intended to benefit a 3/P (a "third-party beneficiary").

The delegator remains liable to the obligee unless

1) the obligee agrees to release the delegator from his promise and to substitute the delegatee (novation). 2) The delegatee fully performs the duties that were required by the obligee

It is important that the assignee immediately provide notice of the assignment to the obligor and that the obligor should now render performance directly to the assignee because . . . A) Notice is a necessary legal requirement for a valid assignment. B) An obligor who renders performance to the assignor without notice has no further liability under the contract. C) The obligor who renders performance to the assignor without notice remains liable to the assignee.

B) An obligor who renders performance to the assignor without notice has no further liability under the contract.

Michael contracts with Florist to deliver flowers to Cathy. If Forist breaches contract, can she be sued?

Cathy is the intended beneficiary, and may sue Florist if Florist breaches the contract. Michael may also sue Florist.

The promisor's performance is intended to satisfy a legal duty that the promisee owes to a 3/P. What type of beneficiary is this

Creditor Beneficiaries:

The transfer of one's duties under a contract is a

Delegation

If the promisee's primary purpose is to make a gift to a 3/P, then the 3/P is a donee beneficiary. What type of beneficiary is this

Donee Beneficiaries

In order for an assignment to be valid, the assignee must give some consideration to the assignor.

False

Once the delegator properly delegates a duty to the delegatee, the delegator is relieved (discharged) of any obligation to perform the duty.

False

Assignments MUST be done in writing and consideration to assignor is mandatory

False Assignments may be made in any way sufficient to show assignor's intent to assign. No formal language is necessary, and no writing is necessary, unless required by the statue of frauds. Assignee does not need to give consideration to assignor in exchange for the assignment (i.e., a gratuitous assignment).

The assignor should immediately notify the obligor of the assignment and that the obligor should now render performance directly to the assignee.

False. The ASSIGNNEE should notify the obligor. If an obligor renders performance to the assignor without notice of the assignment, the obligor has no further liability under the contract to pay the correct party which would now be the assignee.

Watts (seller) and MW Development (buyer) entered into contract for the sale of real estate for $2.1m. Simpson loaned MW $200k for the down payment, and as security, MW assigned its rights in the real estate contract to Simpson. MW defaulted. Watts sued Simpson alleging that Simpson must perform the duties of MW (i.e., pay the purchase price) in accordance with the assignment. Issue: Assignment or Delegation? In other words, is Simpson required to perform MW's duties (i.e., pay the purchase price) based on the assignment (i.e., the right to receive the deed)?

Holding: The assignee-Simpson did not assume the assignor-MW's duties to pay the purchase price based solely on the assignment. A delegation would have been needed to hold Simpson responsible for performing MW's duties. Affirmed in favor of Simpson.

The benefit derived by the 3/P was merely an unintended by-product of the contract, and has no legal rights. What type of beneficiary is this

Incidental Beneficiary

A) Samson borrows $500 from Jordan, promising to repay Jordan in 6 months. Who is obligor and who is obligee? B).: 3 months later, Jordan transfers his right to receive the $500 to Ryan. Now what is jordan and what is ryan?

A) Samson owes the duty to repay: obligor. Jordan is the one to whom the duty is owed: obligee. B) Jordan (the original obligee) is now the assignor (transferor). Ryan is the assignee (transferee).

Locke, who was an umpire at a high school baseball game, was attacked and severely injured by the parent of one of the players after a game. Locke sued the Board of Ed. because (a) it failed to provide "adequate police protection" as required by the Alabama High School Athletic Assoc., (b) such failure was a breach of contract between Board and AHSAA, and (c) Locke was an intended third-party beneficiary of the contract. Trial court entered summary judgment for Board. Locke appealed. Was Locke a third-party beneficiary?

Locke must show: (1) contracting parties intended to confer a direct, as opposed to incidental, benefit upon a 3/P; (2) Locke was the intended 3/P beneficiary of the contract; (3) contract was breached. Contract stated that the purpose of providing "adequate police protection" is to ensure "good game administration and supervision." Based on the plain language of the contract between the Board and the Athletic Assoc., and the surrounding circumstances, the contract anticipates the existence of third-parties; the contract was intended to directly benefit umpires. Reversed and remanded in favor of Locke.

Husband purchases a life insurance policy on his life, naming Wife as the beneficiary of the policy. Wife is a donee beneficiary of the contract between Husband (promisee) and insurance company (promisor), and can sue insurance company if Husband dies & insur. co. does not pay the insurance proceeds. Can WIfe sue husbands estate?

No. Husband's primary purpose is to make a gift of the insurance proceeds to Wife.

The person to whom the duty is owed is the

Obligee

A person who owes a duty to perform under a contract is the

Obligor

Delegator retains duty to obligee until

performance is rendered by delegatee