3rd Party Benificiaries, Assignment of Rights and Duties

Question 0

Creditor Beneficiary - 1st Restatement Definition

Answer 0

Promissee seeks performance to satisfy obligation owed to a 3rd party

Question 1

Critical issue of 3rd Party Beneficiary Law

Answer 1

standing to enforce the contract

Question 2

Donee Beneficiary - 1st Restatement - Definition

Answer 2

promissee seeks performance to make a gift of performance to 3rd party.

Question 3

Incidental Beneficiary

Answer 3

3rd parties who benefit from performance

but are neither creditor or donee beneficiary.

Question 4

Second Restatement classification of beneficiaries

Answer 4

Intended beneficiaries - includes creditor and donee
Incidental Beneficiaries

Key determination is intent to benefit test.

Question 5

Incidental Beneficiaries Rights to enforcement of a contract

Answer 5

no rights to enforce a contract

Question 6

Rights of 3rd party’s against the promisor

Answer 6

Intended beneficiaries can enforce a contract.

Landlord seek payment from lawyer
Law school seek performance of mural from artist

Question 7

3rd Party Rights against the Promisee

Answer 7

no rights against promisee in connection with promised performance.

rights against promisee are based on existence of a prior obligation between the promisee and the 3rd party beneficiary

Question 8

Vesting of the 3rd Party’s Right to Sue

Answer 8

Parties can modify/rescind it by mutual consent,
or modify/rescind the beneficiary provision
without beneficiaries consent
until the beneficiary’s rights vest

Question 9

Situations causing 3rd party beneficiary rights to vest (4)

Answer 9

1. beneficiary brings suit on the matter.
2. Beneficiary changes position in justifiable reliance.
3. Beneficiary manifests assent at the request of promisee or promisor.
4. rights vest under the express terms of the contract.

Question 10

Defenses available to promisor and beneficiary

Answer 10

defense available to promisor against promisee
are valid against the 3rd party
rights of the 3rd party are entirely dependent on the contract.

Question 11

What defenses may the promisor NOT assert

Answer 11

Defenses based on a separate transaction with the promisee.
ie. setoff of prior obligations with performance promised to benefit a 3rd party.

Question 12

Promisee’s rights against the promisor - in general

Answer 12

promisor does not perform,

promisee has a breach of contract claim against the promisor.

Question 13

Promisee’s rights against the promisor if performance is for donee beneficiary.

Answer 13

promisee suffered no economic loss
cannot sue for damages from breach.
May seek specific performance if appropriate.

Question 14

Promisee’s rights against promisor for

performance benefiting a creditor beneficiary

Answer 14

Promisee may seek specific performance of promisor’s obligation.

Such claim for money damages will expose promisor to double liability since the promisor also owes the 3rd party.

Some courts don’t allow promisee to recover damages against the promisor unless he has paid the creditor beneficiary to cover default.

Question 15

Assignment - defined

Answer 15

Transfer of a RIGHT to receive performance under a contract.

Question 16

How to make an assignment

Answer 16

Manifest intent
to make a present transfer
of an existing right

Question 17

When are rights NOT assignable (3)

Answer 17

assignment materially alters risks or obligations of the other party.

obligor has a personal interest in rendering the performance to obligee.

Assignment violates applicable law or public policy.

4. When assignment is prohibited by contract. However such a violation of a contractual restriction will cause a breach but not nullify the obligee’s rights

Question 18

Legal Effects of an Assignment for Value

Answer 18

Valid against he obligor

cannot be revoked by the assignor.

Question 19

Legal Effects of A Gratuitous Assignment

Answer 19

Between assignee and obligor:
valid against obligor. cannot claim lack of consideration as a defense - he gave it away!

Between Assignor and Assignee:  
an executory gift is revokable - executed gift is not. 
A gift is executed with 
(1) manifest intent to make a gift and 
(2)actual or symbolic delivery.

Question 20

When is a gift Executed?

Answer 20

intention + actual or symbolic delivery

Question 21

Rights of Assignee against Obligor

Answer 21

Assignee takes rights of assignor under the original contract.
subject to defenses the obligor could raise against the assignor.

Question 22

Payment to the Assignor as Defense

Answer 22

defense can be raised against the assignee if payment is made before notice of assignment was given to obligor.

Once notice is given, payment to assignor is no longer a defense.

Question 23

Rights of Assignee against Assignor

Answer 23

assignor who makes assignment for value impliedly warrants:

1. he will not defeat or impair the value of the assignment and has no knowledge of any fact that will do so.
2. The right as assigned actually exists and is subject to no limitations or obligations against the assignor.

Question 24

how does a delegation occur?

Answer 24

3rd party agrees to satisfy a performance obligation of a party to a contract.

Question 25

Rights of an Obligee against the Delegator

Answer 25

Delegation does not transfer of duties to the delegatee.

delegator is not relieved from obligations under contract.
Absent Novation

Obligee can sue the delegator.

Question 26

Liability of the Delegatee

Answer 26

To the Delegator
delegation for consideration - delegator has breach of contact action against delegatee who does not perform.

To the Obligee
delegation for consideration - obligee can bring action against the delegatee as an intended 3rd party beneficiary

Question 27

What Duties are Not Delegable (2)

Answer 27

When the performance is personal

the contract prohibits delegation.

Question 28

Rights of 3rd party against promisee.
Law school against lawyer
Landlord against artist

Answer 28

3rd party beneficiary has rights against Promisee if a prior obligation between them exists