chapter 19 third party rights to contracts

creditor beneficiary

is a third party that benefits from a contract in which the promisor agrees to pay the promises debt.

third-party beneficiary

is created when two parties enter into a contract with the purpose of benefiting a third party, called the intended beneficiary.

promisee

is the party who owes the promisor something in exchange for the promise made to the third party beneficiary.

assignee

The party to whom a contract is assigned is called the:

English rule

a few states have adopted the English rule which means that the first assignee to give notice of assignment to the obligor is the party with rights to the contract.

legal principle 3

a party transferring her or his duties under the contract is the delegator, and the one receiving the transfer is the delegate. after the delegation, although the delegate is bound to perform, the delegator remains liable if the delegate fails to perform.

legal principle

a person who transfers his or her rights under a third party is an assignor, and the person who receives the transfer and is now entitled to enforce the rights is the assignee.

promisor

a third party beneficiary contract is the party who makes the promise that benefits the third party

intended beneficiary

a third party to a contract whom the contracting parties intended to benefit directly from their contract.

vest

although an intended beneficiary can enforce her rights to a contract she cannot do so until her right to the contract vest, or mature such that she can legally act on them.

legal principle 4

both a done beneficiary and a creditor beneficiary are intended beneficiaries of a contract and can therefore sue to enforce its performance.

obligors

contractual parties who agreed to do something for the other party

obligees

contractual parties who agreed to receive something from the other party

first-assignment in time rule

gives the contractual right to the first party granted the assignment

delegation

occurs when a party to a contract a delegator transfers her duty to perform to a third party- a delegate who is not part of the original contract. assignments transfer rights to a contract, delegations transfer duties

assignment

occurs when a party to a contract an assignor transfers her rights to receive something under the contract to a third party an assignee.

legal principle 2

the assignee should always give notice to the obligor as soon as possible after receiving the assignment, because the obligor may satisfy his or her obligations by performing for the assignor until receiving notice of the assignment from the assignee

assignor

the party making the assignment

legal principle 5

the third party beneficiary who is in the strongest legal position is the creditor beneficiary because he can sue both the person who made the contract on his behalf and the person who was supposed to perform for him. the donee beneficiary is in the second strongest position because she can sue the person who is supposed to perform the contract for her. the incidental beneficiary is in the worst legal position because he cannot sue anyone.

done beneficiaries

third parties who benefit from a contract in which a promisor agrees to give a gift to the third party. ie life insurance policies.

incidental beneficiary

when the contracting parties do not intend to benefit someone but unintentionally do so.