Rights and Duties of Third Parties to the K

Question 1

Entrustment Scenario and BFPs

Answer 1

Problem: P give goods to merchant, usually to fix. Merchant, who ordinarily deals in goods of kind, sells entrusted goods to BFP for value.

Owner has no rights against BFP. BFP always wins.

Question 2

Intended Third Party Beneficiary Scenario

Answer 2

Scenario: Two parties contract to benefit third party

TPB can enforce contract directly even though they are not part of it.

Question 3

Who is an intended beneficiary?

Answer 3

Named in K but not party to it. Can enforce K against breaching party. Parties have defenses if other person is breacher.

Question 4

Promisor

Answer 4

Party who promises to perform for third party

Question 5

Promisee

Answer 5

Party who secures promise (such as pays for service)

Question 6

Incidental beneficiaries

Answer 6

Do not have right to enforce K

Question 7

Promisor liability to promisee

Answer 7

Is liable. Like any other K. EIther promisee or TPB can enforce rights against promissor.

Question 8

Recission and modification of third party deals

Answer 8

General rule: Promisor and promisee can rescind/modify K until TPD’s rights have VESTED (TPD learns and relies on K).

Otherwise, can’t cancel unless TPD consents, or K provides otherwise

Question 9

Assignments

Answer 9

Transfer of rights from one party to another.

Takes two steps (unlike TPD):
1) Two parties K
2) One party (assignor) assigns rights (typically money) to third party (Assignee)

Assignee can now enforce rights against party who owes duty (obligor)

Question 10

Valid Assignments

Answer 10

Assignor must manifest intent to IMMEDIATLY AND COMPLETELY transfer their rights.

Writing usually not required.

Gratiuitous assignment is effective without consideration, but can is eaisly revokable.

Question 11

Restrictions on Assignments

Answer 11

Follow the K language
1) Prohibition: Assignments are not prohibited
—assignee w/o knowledge can still collect
2) Invalidation: Assignments are null and void
—assignee cannot collect

Assignments can’t substantially change obligor’s duties
—–money not usually substantial
—— doing a service elsewhere is

Question 12

Obligor’s duties to assignee

Answer 12

Assignee can collect directly, assuming assignor did the job.

If Obligor Doesn’t know about assignee and pays assignor, obligor is not liable to assignee. Obligor has to know about it. Can keep paying assignor.

Question 13

Multiple Assignments Scenarios

Answer 13

1) Gift assignements
—-easily revocable, so last gift assignee usually wins

2) Assignemnts with consideration
—-first assignee who gives consideration
———EXCEPTION: later assignee for consideration prevails if (1) he doesn’t know of earlier assignemtns and (2) is the first to get a payment from or judgment against the obligor

Question 14

Delegation

Answer 14

Party co contract delegates duty to third party. Transfer of duties.

Generally obligor can delegate duties without obligee’s consent.

Question 15

Limitations on Delegations

Answer 15

1) Prohibitions on delegations = no delegations allowed. (no void vs prohibition distinction)
——note: No assignement ALSO means no delegations

2) Person with special skills/reputation delegating to someone else
——even to someone else with same or better special skills
——-distinguish with novation (agreeing to substitute parties)

Question 16

Rights of obligee after delegation

Answer 16

Delegating party ALWAYS liable to obligee.

Question 17

Liability of delegates

Answer 17

Delegate for consideration = liable to both parties (b/c they create a TPD obligation)

Delegates without consideration = not liable

Question 18

Generally, All contracts are assignable and delegable EXCEPT

Answer 18

Unique personal service Ks

Long term requirement Ks

Question 19

Types of assignments

Answer 19

Gratutitious assignments: Generally revokable

For value assignments: generally irrevocable