Third parties

Question 1

Exceptions to privity of K

Answer 1

Assignment of rights - assignor transfers to assignee, allowing enforcement against obligor and extinguishing assignor’s rights.

Delegation of duties - delegator remains liable if delegatee fails to perform

Third-party beneficiary - 3rd party who is intended to benefit from K

Question 2

When is assignment permitted?

Answer 2

Always, except when:

Prohibited by statute
Personal services
Materially alter
Forbidden under K

Question 3

When is assignment effective?

Answer 3

Immediately, but obligor may satisfy performance to assignor PRIOR to NOTICE

Question 4

Assignment of multiple parties

Answer 4

Majority rule - first takes priority UNLESS subsequent assignee does not know about prior irrevocable assignment, then 2nd assignee can retain those benefits.

English rule - first RECORDED assignment is effective.

Question 5

When is delegation permitted?

Answer 5

Always, except when:

Prohibited by statute
Personal services
Materially alter
Forbidden under K

Note: Delegator remains liable under K and delegation is SUPPORTED BY CONSIDERATION.

Question 6

Types of beneficiaries

Answer 6

Creditor - 3P who benefits from K where p-or promises to pay debt of p-ee

Donee - 3P for whom K was made

Question 7

3P beneficiary rights - when do they vest?

Answer 7

If someone stole you vest, you would be SAD:

S - Sue - Intended B sues to enforce
A - Assent - 3P assents
D - Detrimental reliance - 3P detrimentally relies

Question 8

3P - Who can sue whom and what defenses can be raised?

Answer 8

IB → promisor
IB → promisee when D - detrimentally relied
P-ee → p-or for specific performance

P-or → IB - ANY defense P-or can use against p-ee

Incidental beneficiary (ICB) - NO contractual rights

Question 9

Creditor and donee beneficiaries are which type of beneficiary? And why?

Answer 9

Intended.

Creditor - contract intends to satisfy a debt of 3P

Donee - contract intends to give benefit to donee

Question 10

Main difference between assignee and intended 3p beneficiary?

Answer 10

Promisor and 3pb retain right to sue, whereas only assignee would have right to sue, and the assignor’s rights are extinguished upon assignment.

Question 11

What is the test for whether a non-party to a K (who is not listed in the K) is intended or incidental as a beneficiary?

Answer 11

If a reasonable person in the beneficiary’s position could believe that the parties intended for the person to have enforceable rights emanating from the contract, then the beneficiary is an intended beneficiary.