Contracts-3rd Party Rights

Question 1

Third-Party Beneficiary (fact pattern for issue-spotting)

Answer 1

3 ppl:
Two ppl have a valid K
Third party will benefit from K

Question 2

Incidental Beneficiary

Answer 2

Parties to K did not intend/contemplate third party to benefit from K
NEVER has rights against parties to K

Question 3

Intended Beneficiary

Answer 3

Parties to K intended for third party to benefit from K
MAY have rights against parties to K (see next card on vesting)
Could be unnamed

Question 4

Intended beneficiary’s rights vest when:

Answer 4

Either:
(A) Party to K informs intended beneficiary of rights who then accepts, OR
(B) Intended beneficiary learns of their rights and begins to rely

Question 5

Once vested, intended beneficiary has:

Answer 5

The same rights & defenses as original parties

Question 6

Assignment & Delegation (fact pattern for issue-spotting)

Answer 6

2 parties have a valid K
One of the original parties transfers their obligation/rights under the K to a third party
(Unlike 3rd party beneficiary, assignee takes the place of the original party)

Question 7

Are assignments & delegations (generally) valid?

Answer 7

YES (unless expressly prohibited by the K or falls into another exception, see later cards)

Question 8

For assignment/delegation to be valid, there has to be a PRESENT intent to transfer

Question 9

Generally, the non-breaching party can sue BOTH the assignee AND the assignor, unless the original parties have executed a

Answer 9

Novation: a release of the original party from the K

Question 10

Failure to comply w/ Anti-Assignment clause means:

Answer 10

Generally, the assignment IS STILL VALID*, but you can sue for breach
*Unless the Anti-Assignment clause uses the magic word “void”, then any attempt to assign will be INVALID
If Anti-Delegation clause contains “no delegation (of duty)” = enforceable and any delegation will be INVALID

Question 11

Exceptions to Assignment/Delegation

Answer 11

(1) If assignment would MATERIALLY ALTER THE RISK or obligation of the other party = No assignment
(2) If the performance is UNIQUE or PERSONAL SERVICE* = No assignment
*Incl. when K requires some expertise (even if assignee has the same expertise)

Question 12

Can assignee change terms of K?

Answer 12

NO b/c assignee only gets the same rights/obligations as the original assignor

Question 13

If party is transferring rights to $, then notice to other party is required