Chapter 13: Third Party Rights and Discharge Flashcards
The relationship that exists between the promisor and the promisee of a contract
Privity of Contract
The transfer of contract rights to a third person
Assignments
The transfer to another of all or part of one’s rights arising under a contract
Assignments
Assignments are often used in
Business financing
A party who transfers his or her rights under a contract to another party
Assignor
A party to whom the rights under a contract are transferred or assigned
Assignee
One to whom an obligation is owed
Obligee
One who owes n obligation to another
Obligor
The assignee has a right to demand performance from
the original party to the contract
Who has right to demand performance from the original party
Assignee
What rights does the assignee obtain?
Only those that the assignor originally had
Assignee’s rights are subject to these defenses
The defenses the obligor has against the assignor
What rights CANNOT be assigned?
When a Statute Expressly prohibits assignment
When a Contract is Personal in Nature
When an Assignment will significantly change the risk or duties of the obligor
When the contract Prohibits Assignment
A contract cannot prevent an assignment of the right to do what?
Receive funds
The assignment of ownership rights in real estate often cannot be prohibited. Why?
It is Alienation and seen as contrary to public policy in most states
The assignment of these cannot be prohibited
Negotiable instruments
The right to receive damages for breach of contract or for payment of an account owed may be assigned even though the sales contract
Prohibits such an assignment
The third party should notify whom of the assignment?
The Obligor
Who should notify the obligor of the assignment?
The third party
Priority is given to whom?
The first assignee who gives notice
Until the obligor has notice, the obligor can discharge to the assignor how?
By performance to assignor
The transfer to another of all or part of one’s duties arising under a contract
Delegation of duties
Delegation does not relieve the party making the delegation of what?
The obligation to perform
A party who transfers her or his obligations under a contract to another party
Delegator
A party to whom contractual obligations are transferred, or delegated
Delegatee
no special form is required to create a valid
Delegation of duties
What duties cannot be delegated?
When the performance depends on the personal skill or talents of the obligor
When special trust has been placed in the obligor
When performance by a third party will vary materially from that expected by the obligee
When the contract expressly prohibits delegation
The obligee must accept performance from whom?
Delegatee
Delegation does not relieve whom of the obligations under the contract?
Delegator
In a bilateral contract, who is the promisor?
Both parties
Courts determine the identity of the promisor by asking which party made the promise that benefits the third party
Third Party Beneficiary Contracts
Privity of contract must exist in this contract
Third Party Beneficiary Contracts
When does privity of contract not need to exist with third party beneficiary contracts?
When the original parties, at the time of contracting, that the contract performance directly benefit a third person
One for whose benefit a promise is made in a contract but who is not a party to the contract
Third Party Beneficiary
A third party for whose benefit a contract is formed
Intended Beneficiary
Benefits from a contract in which one party promises another party to pay a debt that the promise owes to a third party
Creditor Beneficiary
Contract is made for the express purpose of giving a gift to a third party
Donee Beneficiary
The rights have taken effect and cannot be taken away
Vested
When do the rights of an Intended Beneficiary Vest?
Third party demonstrates express consent to the agreement
Third party materially alters his or her position in detrimental reliance on the contract
Conditions for vesting are satisfied
A third party who benefits from a contract even though the contract was not formed for that purpose
Incidental Benefficiary
Incidental beneficiary has no rights in the contract and cannot
Sue to have it enforced
The termination of an obligation such as occurs when the parties to a contract have fully performed their contractual obligations
Contract Discharde
The fulfillment of one’s duties under a contract
Performance
What is the normal way of discharging one’s contractual obligations
Performance
Must be performed, or the party promising the act will be in breach of contract
Absolute Promises
A qualification, provision, or clause in a contractual agreement, the occurrence or nonoccurrence of which creates, suspends, or terminates the obligations of the contracting parties
Condition
A condition in a contract that must be met before a party’s promise becomes absolute
Conditions Precedent
Precedes the absolute duty to perform
Conditions Precedent
A condition in a contract that, if it occurs, operates to terminate a party’s absolute promise to perform
Conditions Subsequent
Condition follows the absolute duty to perform
Conditions Subsequent
Conditions that must occur or be performed at the same time
Concurrent Conditions
They are mutually dependent
Concurrent Conditions
No obligations arise until these conditions are simultaneously performed
Concurrent Conditions
An unconditional offer to perform an obligation by a person who is ready, willing, and able to do so
Tender
If the other party refuses to perform, the party making the tender can consider the duty discharged and do what?
Sue for breach of contract
Conditions expressly stated in the contract must fully occur in all aspects for complete performance
Complete Performance
Any deviation breaches the contract and discharges the other party’s obligations to perform
Complete Performance
A party who in good faith performs substantially all of the terms of a contract can enforce the contract under this doctrine
Substantial Performance
Agreement to settle a debt
Accord
An executory contract to perform some act to satisfy the existing contractual duty
Accord
Payment of debt
Satisfaction
The performance of the accord of agreement
Satisfaction
Attempts to allocate the debtor’s assets to the creditors in a fair and equitable fashion
Bankruptcy
Bankruptcy bars the creditors from
enforcing most of the debtor’s contracts
doctrine under which a party to a contract is relieved of his or her duty to perform when performance becomes objectively impossible or totally impracticable
Impossibility of Performance
Impossibility is only applied when the parties could not have _______________ the event or events that rendered performance impossible
Reasonably foreseen
What are the 3 types of impossibility of performance?
When a party whose personal performance is essential to the completion of the contract dies or becomes incapacitated prior to performance
When the specific subject matter of the contract is destroyed
When a change in the law renders performance illegal
Suspends performance until the impossibility ceases
Temporary Impossibility
Courts may excuse parties from their performance obligations when the performance becomes more difficult or expensive than the parties originally contemplated at the time the contract was formed
Commercial Impracability
A court-created doctrine under which a party to a contract will be relieved of her or his duty to perform when the objective purpose for performance no longer exists, due to reasons beyond the party’s control
Frustration of Purpose
