Chapter 16- Third Parties Flashcards
Who is the person who owes a duty under a contract?
obligor
What is the definition of an obligor?
A person who owes a duty under a contract
Who is the person who contractual duty is owed?
Obligee
Assignment of Rights (Define)
Voluntary transfer to a third party of the rights of the original contract
Who is the assignor?
The person who hands over their rights of the original contract
Name 2 ways third parties can become a part of a contract
Assignment of the rights of a party to the contract
Delegation of the duties of a party to the contract
You can ________ rights and _____________ duties
Assign, delegate
What happens to the rights of the original party to the contract when they assign their rights?
They are terminated or voided
What are the writing and consideration requirements of assignments
No writing required, unless over $5000 stated by the UCC
Consideration is not required
When do assignments vest?
Some states say immediately upon making a contract
OR when third parties learn about the contract and assents to it
What are some limitations on assignments? (examples)
liability of an automobile
automobile insurance
right to receive monthly payments
right to paint part of a house under contract
What is an express warranty?
Explicitly made contractual promise regarding property of contract rights transferred
What is an implied warranty?
obligation imposed by law upon the assignor of a contract right
delegation of duties (define)
The transfer of a contractual obligation to a third party
When are delegations not permitted?
The nature of the duties is personal in that the obligee has a substantial interest in having the delegator perform the contract
Performance is expressly made nondelegable
Delegation is prohibited by statue or public policy
What is a novation?
The delegator is discharged and the third party becomes directly bound upon his promise to the obligee
What is an intended beneficiary?
A person who is intended by the two parties to the contract (promisor and promisee) to receive a benefit from the performance of their agreement
What is an incidental beneficiary?
Third party not intended to receive a benefit under the contract
Distinguish between an assignment of rights and a delegation of duties
Assignment of rights: transferring the rights of a contract to a third party voluntarily (ex. Ann transfer her right under the contract to Clark)
Delegation of duties: the transfer of a contractual obligation to a third party
(ex. A promises to sell B a new automobile for which B promises to pay 10,000 by monthly installments over next 3 years)
Identify:
The requirements of an assignment of contract rights
no special form or particular words are necessary to create an assignment
can be oral- unless over $5000 stated by the UCC
consideration is not required for an effective assignment
Identify:
Those rights that are not assignable
materially change the obligor’s duty or materially increase the risk or burden upon the obligor
transfer highly personal contract rights
validly prohibited by the contract
are prohibited by statute or public policy
Identify those situations in which a delegation of duties is not permitted
the nature of the duties is personal in that the obligee has a substantial interest in having the delegator perform the contract
the performance is expressly made nondelegable
the delegation is prohibited by statute or public policy
Distinguish between an intended beneficiary and an incidental beneficiary
Intended beneficiary: when 2 parties to the contract receive a benefit from the performance of their agreement
Incidental beneficiary: third party not intended to receive a benefit under the contract
Explain when the rights of an intended beneficiary vest
immediately upon making of the contract.
OR when third party learns of the contract and assents to it
Third party must change his position in reliance upon the promise made for his benefit
What is a third party contract?
A third party is a person who are not parties to the contract but have a right to, or an obligation for, its performance
When do the third parties rights or duties arise?
In an assignment of rights: after contract made
in a delegation of duties: after the contract is made
Expressed terms entered into the benefit of third person: at time contract formed
