Other Third Party Issues Flashcards
assignment
transfer of rights under k to a 3P after k is formed
- assignor assigns rights under k to assignee who is now in a k w/ obligor
- assignor can only transfer rights they ahve in k @ time of assignment
ET: 2 steps - OG k THEN assignment
assignor
party that assigns rights under k to 3P
assignee
3P who gets assignor’s rights under 3P
- NOT OG party to k
NOTE: can enforce rights against party who ows duty (obligor)
obligor
remaining OG party to assignment k
- now owes duties to assignee
consideration & assignment
consideration is NOT required
- BUT, assignment w/out consideration is considered gratuitous (but still ok to do)
common law limitations to assignment
CL bars any assignment that substantially changes the duties of the obligor
- assignment of payment is NOT a substantial change (usually NOT money)
- assignment of rights fails if the obligor’s risk is substantially altered
valid assignment
language of present transfer
- Present tense ONLY to be valid (eg, “I assign”)
- NOT promise to assign (eg, “I will assign”)
K limitations on assignment
Ks may contain non-assignment clauses:
1. Non-assignment of K: bars delegation of assignor’s duties only (ie, does NOT prohibit assignment of rights)
2. Non-assignment of rights: bars right to assign, but NOT the power to assign (ie, upon assignment, obligor may sue assignor for breach)
3. Assignment as void: assignment will be ineffective (ie, assignor has neither power nor right to assign)
k’s language controls
ET: restrictions on assignments
-
Prohibition: assignments NOT permitted
- assignment w/out knowledge can still collect BUT OG party breached -
Invalidation: assignments null and void
- assignee CANNOT collect
**ET: assume prohibition if unclear
revocability of assignments
gratuitous assignments may be revocable BUT assignments made for consideration are irrevocable
- Assignments for consideration: irrevocable
- Gratuitous assignments: revocable
gratuitous assignment = assignment made w/out consideration
gratuitious assignments revocability exceptions
gratuitous assignment is irrevocable if either:
1. obligor has already performed,
2. assignee has received a written claim or tangible object signifying a right to collect (eg, stock certificate), or
3. detrimental reliance by assignee (ie, estoppel)
line of gift assignments
last gratuitous assignee wins
- later gift revokes previous assignment
- BUT 1st assignee for consideration wins against ALL subsequent assignee AND previous gift assignees UNLESS later subsequent assignee for consideration doesn’t know about previous and enforces first (does NOT need to notify)
Remember: asignee can recover from obligor directly
asginee right to sue
assignee can sue:
1. obligor: for non-performance
- obligor can raise any defense to k that he could have raised against assignor (+ obligor must be aware of assignee)
2. assignor: for breach of any of the following assignor’s implied warranties
- no prior assignment of same right
- the right to assign was not subject to defenses
- no interference w/ assigned right
delegation
one party unilaterally finds replacement party to perform (even without other obligee’s consent)
- occurs when one party to a K delegates the duties she owes to another party to the K to a third party
OG party’s obligations NOT excused
delegator
the party who unilaterally delegates her duties to a third party
delegatee
the third party who assumes the delegator’s duties
obligee
the other OG party to the k (the one who did not delegate)
delegation notes
- obligee must generally accept performance from delegation
- only duties may be delegated (transfer of work NOT rights)
delegation liability
- delegator remains liable for delegatee’s performance (OG party’s obligations NOT excused)
- obligee may sue delegator for non-performance by delegatee
- obligee may only sue delegatee if delegatee has assumed duties of entire k
delegating party always liable to obligee
delegation for consideration
party is liable
1. to both parties
2. created intended TPB obligations to obligee
delegation exceptions
duties are non-delegable if:
1. duties involve personal judgment or special skill,
2. delegation materially changes obligee’s expectancy under k
3. the k prohibits delegation, or
4. prohibited by statute or public policy
k language limitations to delegation
- “prohibtion against delegations” = NO delegations allowed
- “no assignments” = no delegations
delegation v. assignment
- delegation: transfer of OG’s duties to 3P
- assignment: transfer of OG’s rights to 3P
delegation v. novation
- novation: both parties agree that a substitute person will take over duties under k
- delegation: one party independently decides to delegate duties to 3P
