Contracts - Parties
Card Set Information
Contracts - Parties
Contracts - Parties
Third Party Beneficiary?
Two parties contracting with common intent to benefit a 3rd party, the beneficiary.
Intended vs. Incidental 3rd party beneficiary Beneficiary?
1) generally identified in the K
2) Receives performance directly from promisor
3) Has some relationship w/ promisee to indicate intent to benefit
Only intended beneficiaries have K law rights
Creditor or Donee 3rd party beneficiary?
: Donee beneficiary
2) Look at whether third-party beneficiary was a creditor of the promisee before the contract.
Can a K be modified or cancelled, when there is a 3rd party beneficiary?
Before 3rd partys rights vest, K can be modified w/o his consent.
If vested, K cannot be cancelled or modified without 3rd party's consent, unless K says otherwise.
When have the third party beneficiary's rights vested?
1) Beneficiary manifests assent [in a manner invited or requested by the parties]
2) Beneficiary sues to enforce its rights
3) Beneficiary learns of the K and detrimentally relies on it
Who can sue whom, in a 3rd party beneficiary case?
1) Beneficiary can sue Promisor
Promisor can raise any defense she has against Promisee
2) Promisee can sue Promisor [specific performance included]
3) Beneficiary generally cannot sue Promisee
------a) Creditor Beneficiary can sue both Promisee and Promisor, but limited to one satisfaction, only on pre-existing debt.
------b) Donee beneficiary cannot sue Promisee unless foreseeable detrimental reliance, and beneficiary reasonably relied on it
What is an Assignment of rights?
1) transfer of contract rights
2) by one party to a third party
3) by another contract
: party to K who later transfers rights under K to another
: not party to K, able to enforce K b/c of assignment
: other party to K
When are rights assignable?
Rights are generally assignable unless
1) assignment substantially changes obligor's duty or risk;
2) assignment is for future rights based on future contracts; or
3) assignment is prohibited by a non-assignment provision, or by law
Prohibition against assignment?
: takes away right to assign, but not power to assign
rights hereunder are not assignable
Assignee can still enforce K (if didnt know of prohibition)
Invalidation against assignment?
: takes away both right AND power to assign
all assignments under this contract are void/disregarded
Assignee, no rights
Requirements contracts, assignable?
Generally, right to receive goods under a requirement contract is not assignable because the obligors duties could change substantially.
However, the UCC allows the assignment of requirements contracts if the assignee acts in good faith not to alter the terms of the contract.
What can you assign, what is a substantial change to duty or risk?
1) Can assign right to be paid (right to be paid is never a substantial change)
2) Cant assign right to performance (not involving a payment)
Is consideration required to assign?
Consideration not required to assign; but gratuitous assignments can be revoked.
Generally, assignment for consideration is irrevocable.
Assignments for consideration have implied warranties of what assignor will do:
1) Right assigned actually exists
2) Right assigned not subject to defenses by obligor
3) Assignor wont do anything to impair value of assignment (but no warranty of what obligor will do)
How to revoke gratuitous assignment?
Gratuitous assignment can be revoked by the assignor taking performance directly from the obligor.
However, cannot revoke when assignor is estopped because he should reasonably foresee the assignee changed position in reliance on the assignment to his detriment.
Assignee suing Obligor?
1) can sue under the K
2) obligor can raise any defenses against assignee that it would have against assignor
Assignor for consideration suing obligor?
cannot recover from obligor
Assignment for consideration cannot be revoked
Assignee suing Assignor
1) can sue if irrevocable
2) assignor not liable if obligor unable to perform; assignor does not warrant that the obligor will perform
Multiple assignments? w/irrevocable assignment
assignments for consideration, first assignee in time wins, except if subsequent assignee
1) pays for value
2) is unaware of earlier assignment, and
3) is first to obtain payment, judgment, novation, or ownership
Multiple assignments w/revocable assignment?
when it's ONLY gratuitous assignments, last assignee in time wins, except if
1) gratuitous assignment is irrevocable
2) assignee receives ownership, or
3) assignee reasonably and detrimentally relied
Delegation of duties definition?
Transfer of duty created in one contract to a third party by another contract
Duties are generally delegable, except?
1) involves special (personal) skill or special reputation of delegator [requires a novation]
2) substantially alters obligee's risks
3) special trust was reposed in delegator, or
4) K prohibits delegation OR assignment [no assignment = no delegation]
1) new K
2) replacing a valid K
3) with all parties agreeing
4) to release one original party and substituting a new party, and
5) extinguishing the old K
Obligee v. Delegator
Delegating party always remains liable if delegatee fails to perform
Obligee v. Delegatee
Delegatee is liable ONLY if she receives consideration from delegator
: because Delegation for consideration creates a 3rd party beneficiary obligation!