Chapter 16

Factors of Intended Beneficiaries

- Performance is rendered directly to TPB - TPB's right to control contact details - TPB's expressively designated as beneficiary

Effect of a Delegation

-Delegator remains liable -Delagatee is liable if delegation contract creates a 3rd party beneficiary relationship in the obligee

Courts hold that a 3rd parties' beneficiary vests when:

-TPB materially alters position in reliance on the contract -TPB brings a lawsuit on the promise -TPB demonstrates consent to the promise at request of promisor/promisee

Duties that cannot be delegated

-When duties are personal in nature -When performance by a 3rd party will vary materially from that expected by the obligee -When contract prohibits delegation

Third party beneficiaries

2nd exception to privity of contract. Original parties to the contract intend at the time if contracting to directly benefit a 3rd person

Exceptions to privity of contract

Assignment or Delegation AND third party beneficiary contract

Assignments Terminology

Assignor Assignee Obligee Obligor

Creditor Beneficiary

Benefits from a contract in which promisor promises the promisee to pay a debt the promisee owes to a 3rd party

Donee Beneficiary

Contract is made for the express purpose of promisor giving a gift to a 3rd party (donee), the donee can sue the promisor directly if the promisor breaches the contract

Delegations

Contractual duties in a bilateral contract that are delegated to a 3rd party

Intended beneficiaries

Creditor beneficiary, Donee Beneficiary

Intended Beneficiaries: Today

Distinguish only between intended and incidental beneficiaries

Assignment of "All Rights"

Generally, when an assignment is made in a contract, the implication is an assignment of ALL rights and duties; however, assignee remains liable for performance of duties

Alternate change of TPB's rights

If contract reserves rights to contracting parties to rescind, cancel, or modify the contract

Assignments- If notice is not given:

Obligor can discharge his obligation by performance to assignor

Notice of Assignment

Once assignment is made, assignee should notify the obligor of the assessment

Privity of Contract

Only original parties to a contract have rights and liabilities under the contract

Assignments- Form of the Assignment

Oral or written

Delegatee

Party to whom the duty is owed

Obligor

Person who is obligated to perform a duty

Assignments- Rights as assigned

Subject to same defenses

Incidental Beneficiaries

TPB's benefit from contract between 2 parties is unintentional. Cannot sue to enforce the contract.

Delegations

Transfer of contractual duties

Assignments

Transfer of contractual rights

Rights that cannot be assigned

When a statute expressly prohibits assignment When a contract is personal in nature Assignment materially changes rights or duties of obligor When an assignment will significantly change the risk or duties of the obligor

Effect of an Assignment

When rights of assigner are unconditionally assigned, his rights are extinguished

The third party (assignee)

has right to demand performance from original party to contract

Assigner

party assigning rights to 3rd party

Delegator

party making the delegation of duty

Assignee

party receiving rights

Obligee

person to whom a duty or obligation is owed

Intended Beneficiaries

promisee intended to confer on the beneficiary the right to bring suit to enforce the contract