Chapter 16- Third Parties

Question 1

Who is the person who owes a duty under a contract?

Answer 1

obligor

Question 2

What is the definition of an obligor?

Answer 2

A person who owes a duty under a contract

Question 3

Who is the person who contractual duty is owed?

Answer 3

Obligee

Question 4

Assignment of Rights (Define)

Answer 4

Voluntary transfer to a third party of the rights of the original contract

Question 5

Who is the assignor?

Answer 5

The person who hands over their rights of the original contract

Question 6

Name 2 ways third parties can become a part of a contract

Answer 6

Assignment of the rights of a party to the contract

Delegation of the duties of a party to the contract

Question 7

You can ________ rights and _____________ duties

Answer 7

Assign, delegate

Question 8

What happens to the rights of the original party to the contract when they assign their rights?

Answer 8

They are terminated or voided

Question 9

What are the writing and consideration requirements of assignments

Answer 9

No writing required, unless over $5000 stated by the UCC

Consideration is not required

Question 10

When do assignments vest?

Answer 10

Some states say immediately upon making a contract

OR when third parties learn about the contract and assents to it

Question 11

What are some limitations on assignments? (examples)

Answer 11

liability of an automobile
automobile insurance
right to receive monthly payments
right to paint part of a house under contract

Question 12

What is an express warranty?

Answer 12

Explicitly made contractual promise regarding property of contract rights transferred

Question 13

What is an implied warranty?

Answer 13

obligation imposed by law upon the assignor of a contract right

Question 14

delegation of duties (define)

Answer 14

The transfer of a contractual obligation to a third party

Question 15

When are delegations not permitted?

Answer 15

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

Question 16

What is a novation?

Answer 16

The delegator is discharged and the third party becomes directly bound upon his promise to the obligee

Question 17

What is an intended beneficiary?

Answer 17

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

Question 18

What is an incidental beneficiary?

Answer 18

Third party not intended to receive a benefit under the contract

Question 19

Distinguish between an assignment of rights and a delegation of duties

Answer 19

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)

Question 20

Identify:

The requirements of an assignment of contract rights

Answer 20

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

Question 21

Identify:

Those rights that are not assignable

Answer 21

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

Question 22

Identify those situations in which a delegation of duties is not permitted

Answer 22

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

Question 23

Distinguish between an intended beneficiary and an incidental beneficiary

Answer 23

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

Question 24

Explain when the rights of an intended beneficiary vest

Answer 24

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

Question 25

What is a third party contract?

Answer 25

A third party is a person who are not parties to the contract but have a right to, or an obligation for, its performance

Question 26

When do the third parties rights or duties arise?

Answer 26

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