7. Third-Party Problems

Question 1

An intended beneficiary will ALWAYS

Answer 1

be named in the contract.

Question 2

Only INTENDED beneficiaries have contract law rights. The intent of the two parties will determine whether beneficiary was

Answer 2

intended or incidental.

Question 3

If the third party beneficiary knows of and has relied on or assented to a contract as requested,

Answer 3

that party’s rights have vested and the contract cannot be canceled or modified without their consent.

Question 4

Who can sue whom?

Answer 4

1) A beneficiary can recover from a promisor OR 2) Promisee can recover from promisor.

General Rule: Beneficiary cannot recover from promisee.

Question 5

Limitations on assignment: Prohibition vs. Invalidation -

Answer 5

The language of a prohibition takes away the right to assign but not the power to assign while the language of an Invalidation takes away the right and the power to assign. Invalidation carries with it repercussions for breaching parties.

Question 6

Common Law bars an assignment that

Answer 6

substantially changes the duties of the obligor. Assignment of a right to payment is never considered a substantial change, while assignment of right to performance is usually considered a substantial change.

Question 7

Gratuitous assignments can be

Answer 7

revoked.

Question 8

Nonperformance following delegation:

Answer 8

Delegating party always remains liable, delegatee liable only if they receive consideration from the delegating party.