Third Parties in Contracts Flashcards
Who are THIRD-PARTY Beneficiaries?
Parties who BENEFIT UNDER A CONTRACT FORMED BY TWO OTHER PARTIES.
Where A and B enter into a contract under which B will perform an act to benefit C, who is the PROMISSEE?
A is the promisee - that is, A is the party who contracted for the benefit to go to C.
What is an INTENDED third-party beneficiary?
An intended third-party beneficiary is a person that the original parties INTEND TO BENEFIT WHEN THEY ENTER INTO THE CONTRACT.
Does the specific person need to be named in the contract?
No, the specific person does NOT need to be named in the contract, BUT MUST BE IDENTIFIABLE.
(E.g., payment to go to “any doctor who provides medical services to A during the term of this agreement.)
What is an INCIDENTAL beneficiary, and what rights does that person have under a contract?
One who WOULD HAPPEN TO RECEIVE A BENEFIT if the contract were fulfilled, even though that was NOT PARTY OF THE ORIGINAL PURPOSE OF THE CONTRACT.
-An incidental beneficiary has NO RIGHTS under a contract.
When may an intended third-party beneficiary ENFORCE rights under a contract?
An INTENDED third-party beneficiary may ENFORCE her rights:
- If she had KNOWLEDGE of the agreement, and REASONABLY AND DETRIMENTALLY RELIED on the promise contained in the agreement; OR
- If she has ASSENTED TO the arrangement at the request of either or both parties.
What is the difference between a CREDITOR beneficiary and a DONEE beneficiary?
A CREDITOR beneficiary is OWED SOMETHING by the promisee.
A DONEE beneficiary is ONE UPON WHOM THE PROMISEE INTENDS TO CONFER A GIFT.
WHICH PARTY OR PARTIES may an intended third-party beneficiary SUE to enforce a contract?
Either a CREDITOR or DONEE beneficiary MAY SUE THE PROMISOR who promised to confer the benefit.
ONLY a CREDITOR BENEFICIARY may sue the PROMISEE (for whatever performance the promisee originally owed the intended beneficiary).
NOTE: The PROMISOR MAY ASSERT against the third-party beneficiary ANY DEFENSE he would have against the promisee (e.g. fraud, lack of consideration, etc.)
When may the original parties to a contract MODIFY
or RESCIND a contract that has a third-party beneficiary?
The original parties MAY NOT discharge or modify their contract IF:
– an intended third-party beneficiary with knowledge of the contract has REASONABLY AND DETRIMENTALLY RELIED on the promise;
–an intended third-party beneficiary has already BROUGHT SUIT TO ENFORCE THE PROMISE;
OR
–the intended third-party beneficiary has MANIFESTED ASSENT to the promise at the request of either or both of the contracting parties.
UNLESS or UNTIL one of the those things has happened, the original contracting parties are free to modify or discharge their contract.
Define ASSIGNMENT
An assignment is the PRESENT TRANSFER OF RIGHTS OR BENEFITS under an EXISTING CONTRACT to a third party.
Note that an assignee differs from a third-party beneficiary in that the benefit to the assignee was not part of the original contract.
WHO are the parties to an assignment?
OBLIGOR - The party who owes duties under the contract.
ASSIGNOR - The person who manifests a present intent to transfer rights or benefits.
ASSIGNEE - THE PERSON WHO RECEIVES THE RIGHTS OR BENEFITS Is the ASSIGNEE.
After receiving notice of an assignment, to WHOM does the OBLIGOR owe duties?
After receiving notice of an assignment, an OBLIGOR OWES DUTIES to the assignee only.
The OBLIGOR NO LONGER HAS DUTIES TO THE ASSIGNOR under the original contract.
TIP: A contract RIGHT is like a FOOTBALL: When an assignor passes that right to another person, the assignor no longer retains that right.
When must an ASSIGNMENT be in writing?
An assignment must be in writing if it is an assignment of:
WAGES
- an interest in LAND
- Goods OVER $5,000
- A security interest (per UCC)
Otherwise, no writing is required to effectuate an assignment.
Does an ASSIGNMENT require consideration?
No, an assignment does not need consideration to be effective.
When can an ASSIGNMENT be revoked by the assignor?
A GRATUITOUS ASSIGNEMNT (that is, one lacking consideration) MAY BE REVOKED by the ASSIGNOR
AN ASSIGNMENT SUPPORTED BY CONSIDERATION is NOT revocable.
