Third Parties Flashcards

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1
Q

Three types of 3Ps

A
  • TP Beneficiaries
  • Assignments
  • Delegations
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2
Q

Steps to determine whether a third party can sue to enforce a K made by two other people

A
  1. ID the 3 parties (promisor, promisee, TPB)
  2. Is TP an intended or incidental beneficiary?
  3. If intended TP, have their rights been revoked?
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3
Q

Who are the three parties in a TPB K?

A
  1. Promisor = person making promise that TP is trying to enforce (breacher)
  2. Promisee = contractual counterparty to that promise; person could enforce the promise but is not
  3. TP = outsider suing the promisor for the breach
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4
Q

Intended v Incidental beneficiaries – what rights do they have; how to know which the TP is?

A

Intended = has right to sue
Incidental = does not have right to sue

Ask: did the promisor/promisee intend to convey enforcement rights to the TP in the event of a breach.

Two types of intended TPB:
- Creditor beneficiary (debt repayment)
- Donee beneficiary (life insurance)

Example 195: Cam loaned Abe $500 last month. In satisfaction of this debt, Abe agrees to pay Beth $500 if Beth mows Cam’s lawn 10 times. Beth never shows up, and Cam files a lawsuit against Beth. Cam can sue Beth because he is a creditor beneficiary.

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5
Q

Four ways a TPs rights cannot be revoked

A
  1. TP knows about promise and changes position in reasonable reliance on the promise. If so, TP can make a Promissory Estoppel claim.
  2. TP’s right vests: beneficiary detrimentally relies on the rights
  3. TP’s right vests: beneficiary manifests assent to the K.
  4. TP’s right vests: beneficiary files a lawsuit to enforce the K.

If the TP’s rights have vested, the original parties cannot rescind the K by mutual agreement. TP can still enforce the K.

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6
Q

How can a promisor defend against a TPB?

A

Promisor can assert any K defense against the TP that he would be entitled to assert against the promisee.

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7
Q

What is an assignment?

A

An assignment is the transfer of rights under a K.

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8
Q

What is a delegation?

A

A delegation is the transfer of duties under a K.

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9
Q

What is the difference between a TPB an an assignee?

A

TPB – benefit occurs to TP all in one step (the creation of the K)

Assignment – first step = formation of K; second step = transfer the benefits of the K from original party to TP

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10
Q

What benefits can be assigned? Under what two circumstances can assignments in K not be made?

A

Almost all K benefits can be assigned, in whole or in part, unless K explicitly (1) prohibits or (2) invalidates assignments.

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11
Q

What are the consequences of the K prohibiting assignments?

A
  1. assigning party breaches when he assigns
  2. TP can still recover guarantor (non-assigning party to K)

AKA, power to assign persists, even if right to assign does not.

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12
Q

What are the consequences of the K invalidating assignments?

A

TP cannot recover because there is no power or right to assign.

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13
Q

What happens if someone assigns the same rights twice?

A
  1. if the rights are assigned without consideration (from assignee) –> assignment is revocable and last assignment controls
  2. if rights are assigned for consideration –> first assignment for consideration is typically irrevocable and will hold.

Exception to 2: later assignment takes priority if second assignee does not know of initial assignment and is first to obtain payment or judgment (second assignee is a bona fide purchaser for value without notice)

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14
Q

Are delegations permitted?

A

Yes, unless:

  • K prohibits delgations
  • other party does not have a special interest in having specific individual perform
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15
Q

Can a delegatee be held liable for breach?

A

No, unless he receives consideration from the DELEGATING party.

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