Ch 17 Third Parties

Question 1

Third Party Beneficiary

Answer 1

A third party beneficiary is someone who was not a party to the contract but stands to benefit from it.

Question 2

Intended Beneficiaries

Answer 2

• intended beneficiary: Someone who may enforce a contract made between two other parties
  a.enforcing the promise will satisfy a duty of the promisee to the beneficiary or
  b.the promisee intended to make a gift to the beneficiary.
• promisor: Makes the promise that a third party seeks to enforce
• promisee: The contract party to whom a promise is made

Question 3

Incidental Beneficiaries

Answer 3

• incidental beneficiary: Someone who might have benefited from a contract between two others but has no right to enforce that agreement

Question 4

Assignment and Delegation

Answer 4

• assignment: Transferring contract rights
• delegation: Transferring contract duties

Question 5

Assignment
(What Rights Are Assignable?, How Rights Are Assigned, Rights of the Parties after Assignment, Special Issue: The Uniform Commercial Code and Assignments of Security Interests

Answer 5

obligor: The party obligated to do something
[What Rights Are Assignable?]
Any contractual right may be assigned unless the assignment:
-Would substantially change the obligor’s rights or duties under the contract,
-Is forbidden by law or public policy, or
-Is validly precluded by the contract itself
(Substanital Change)
(Public Policy)
(Contract Prohibitoin)

[How Rights Are ASsigned]
(Writing)
(Consideratoin)
An assignment for consideration is irrevocable.
* gratuitous assignment: One made as a gift, for no consideration
A gratuitous assignment is generally revocable if it is oral and generally irrevocable if it is written.
(Notice to Obliagator)

[Rights of the Parties after Assignment]
-Once the assignment is made and the obligor notified, the assignee may enforce her contractual rights against the obligor.
-The obligor may generally raise all defenses against the assignee that she could have raised against the assignor.
(Assignor’s Warranty)
1. the rights he is assigning actually do exist and
2. there are no defenses to the rights other than those that would be obvious, such as nonperformance.

[Special Issue: The Uniform Commercial Code and Assignments of Security Interests]
* security interests: Rights in personal property that assure payment or the performance of some obligation
-Under UCC §9-404, the obligor on a sales contract may generally assert any defenses against the assignee that arise from the contract, and any other defenses that arose before notice of assignment.
-Under UCC §9-403, an agreement by a buyer (or lessee) that he will not assert against an assignee any claim or defense that he may have against the seller (or lessor) is generally enforceable by the assignee if he took the assignment in good faith, for value, without notice of the potential defenses.

Question 6

Delegation of Duties
(What Duties Are Delegable?, Novation)

Answer 6

Most duties are delegable. But delegation does not by itself relieve the delegator of his own liability to perform the contract.

[What Duties Are Delgable?]
-Delegation would violate public policy, or
-The original contract prohibits delegation, or
-The obligee has a substantial interest in personal performance by the obligor
(Public Policy)
(Contract Prohibition)
(Substanital Interst in Personal Performance)
(Improper Delegatoin and Repudiation)

[Novation]
* novation:A three-way agreement in which the obligor transfers all rights and duties to a third party