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