3P problems Flashcards
3 kinds of 3p problems
3p beneficiaries, assignments of k rights, and delegation of k duties
3P beneficiary
3p beneficiary k: 2 parties to a k with common intent to benefit a 3p, for ex. life insurance.
Vocab
ii. Promisor—person making promise that benefits the 3p. for ex the life insurance co.
iii. Promisee: person who obtains the promise that benefits the 3P.
iv. intended/ incidental
1. only intended beneficiaries of the 2 parties to the k have rights
2. for ex you hire painter to paint parents’ house. your parents may sue the painter.
a. incidental beneficiary has no rights
v. creditor/ donee: intended beneficiaries are either donees or creditors.
1. donee intended beneficiary—wife of husband’s life insurance k
2. Creditor intended beneficiary—for ex. someone with judgment against the promisee, and the promisee then names the person as beneficiary of life insurance k.
Efforts to cancel or modify ks with 3p beneficiaries
3P beneficiary rights vest when 3P knows of and relies on or assents or brings suit on the k
If rights have vested, k cannot be canceled or modified without 3p beneficiary consent unless k otherwise provides
3p beneficiary ks: Who can sue whom?
four important rules
i. Beneficiary can recover from promisor: 3P beneficiary can directly sue
ii. Promisee can recover from promisor
1. direct contractor can recover with other party to contract
iii. General rule: beneficiary cannot recover from promisee
1. parents cant sue kid who contracted with painter to paint their house.
2. Exception: creditor beneficiary can recover from promisee BUT ONLY on preexisting debt
3p beneficiary ks: Defenses
i. If 3p beneficiary sues the promisor, promisor can assert any defense he would have had if sued by the promisee
Assignment of rights
a. What an assignment is:
i. Assignment is a transfer of righs under a k. Involves two separate steps:
1. first step—k between only 2 parties, and
2. second step—one of the parties later transfers rights under that k to a third party.
ii. Assignee is able to enforce the k because of the assignment
iii. Obligor: other party to the k.
1. Assignment establishes privity between the obligor and assignee. AND extinguishes privity between obligor and assignor.
Limits on assignment
K may either 1) prohibit or 2) invalidate assignents
- prohibition:IMPOSES A PENALTY on assignor. but assignee who didn’t know of prohibition can still enforce. a. “rights hereunder are not assignable”
b. 3p can still collect if he didn’t know. , original party is in trouble.
these are more common - invalidation: VOIDS the assigment. breach by assignor, no right for assignee.
a. “all assignments of rights under this k are void”
b. doesn’t matter if 3p didn’t know of language of invalidation
- assignments that changes the duties of the obligor are barred.
- for example, gotham assigns its right to batman’s services to metropolis– barred
Cannot assign ks of specifc performance!!
- assigning a right to payment is never substantial– always ok.
Reqs for assignment
Consideration for assignment is not required.
Gratuitious assignments can be revoked. Last gratuitious assignment wins
Assignments for consideration cannot be revoked. First assignment for consideration wins.
Exception later assignee for consideration takes priority over an earlier assignee for consideration ONLY if he both
a. doesn’t know of the earlier assignment AND
b. is the first to obtain payment, judgment, or novation
c. for ex.: B assigns to Robin for consideration and then assins to C for consideration. C doesn’t know off the assignment to Robin and C is the first to notify Gotham that he is an assignee (irrelevant). GGotham learns of the earlier assignment to Robin before it pays C. Gotham should still pay ROBIN!!
Assignments: who can sue whom?
i. Assignee can recover from the obligor–
ii. Assignor for consideration CANNOT recover from the obligor, only assignee can
iii. Obligor has same defenses against assignee as it would have agiainst assignor
iv. Payment /modifications to the k by obligor to assignor is effective until obligor knows of assignment.
Once obligor knows of assignment, must render performance to or pay the assignee. If obligor renders performance to the assignor, he does so at his own risk.
v. Implied warranties of assignor in an assignment for consideration: in an assignment for consideration, assignor warrants
1. right assigned actually exists and
2. the right assigned is not subject to any then existing defenses by the obligor
3. the assignor will do nothing after the assignment to impair the value of the assignment
- assignor however doesn’t warrant what the obligor will do after the assignment
- for ex. if obligor didn’t have capacity when signed the k, the assignee CAN recover from the assignor because assignee warranted that the right assigned was not subject to defenses by the obligor
Delegation of duties
a. Definition of delegation
i. k party is “transferring” work under that k to a 3P. BUT NOT A REAL TRANSFER. for ex delegating work of house painting.
i. usually see assignment and delegation together.
ii. For ex. delegate duty to paint house, but also assign rights to money for painting house.
1. Can also have a delegation + separate agreement that P will pay X→ this is not an assignment, it’s a separate k. No rights by X against O. But P can recover from O.
c. Which duties are delegable
i. Generally, kual duties are delegable.
Limits on delegation.
Delegations are permitted unless either
1. k prohibits delegations or prohibits ASSIGNMENTS
OR
2. personal services k that calls for very special skills.
Nonperformance by delegatee
What if after delegation, the 3P delegate does not perform?
i. Delegating party always remains liable
ii. Delegatee liable only if she receives consideration from delegating party.
- if delegation without consideration→
Neither delegating party nor obligor can recover from delegatee is off free.
Obligor can recover from delegating party.
If delegation for consideration:
Obligor and delegating party can recover from delegatee
Obligor can recover from delegating party
BUT delegating party can’t sue obligor back for breaches.
