Third Party Flashcards
third party beneficiaries
3rd party that benefits from a K entered into b/w other parties is a third party beneficiary
- intended TPBs–parties to K intended for TPB to benefit from K at time K was made
- TPB has rights under the K - can sue for beach of K even though not party
A (promisee) contracts with B (promisor)
B will render some performance to C (TPB)
I (promisee) contract with Drake (promisor) for Drake to play at my sister’s (third party beneficiary) birthday party
how to determine TPB status
whether a TPB is an intended beneficiary under K is a question of fact
ask:
1) is TPB expressly designated in the K
2) does TPB receive performance directly from promisor; OR
3) 3rd party is in some relationship with promisee to indicate intent to benefit
creditor TPBs and donee TPBs
- creditor TPBs–promisee owes a debt to the TPB and promisor will pay; promisee’s primary intent in contracting is to discharge an obligation to the third party
-
donee TPBs-benefit is conferred gratuitously (given by one of the parties to the K); a person that the promisee intends to benefit as a gift
promisee doesn’t owe debt to donee, but wants to give them benefit of promisor’s performance
creditor beneficiary can sue promisee on existing obligation between them
donee beneficiary may only sue promisee if detrimental reliance exists
to enforce rights under a K, a TPB:
rights must VEST
vesting of rights occurs when TPB either:
1) assents to K
2) sues to enforce; or
3) detrimentally relies on the K
***if TPB doesn’t know about the K, then his rights have not vested
what if third party’s rights have not vested?
IF third party’s rights have NOT vested… the promisor and promisee are free to change K’s terms, which includes changing the beneficiary
TPB’s rights and promisee’s rights
- THIRD PARTY BENEFICIARY can sue PROMISOR (promisor can raise against the TPB … any defense that promisor has against promisee)
- PROMISEE can sue PROMISOR at law and in equity for specific performance
assignment
- X (obligor - person who provides PAYMENT) contracts with Y (assignor/obligee); Y (assignor/obligee) assigns his rights to X’s performance to Z (assignee)
example: woman (obligor) contracts in writing with artist (assignor). obligor agreed to pay assignor/artist for 10k. assignor/artist assigns rights to obligor’s performance to an assignee.
- all K rights can be assigned (except assignment that would (1) substantially change obligor’s duty or risk; (2) assignment of future rights; and (3) an assignment barred by law)
*asignee is subject to any conditions in the original K that may protect the obligor (such as condition in the K that obligor be satisfied with the service)
effect of assignment
- creates privty of contract b/w obligor and assignee
- obligor must pay/render performance to assignee
what is necessary for effective assignment?
- assignor must manifest intent to immediately and completely transfer their rights
- writing not required
K limits on assignment
- clause barring assignment of the “contract” will be construed as barring only delegation of assignor’s duties
- clause barring assignment of “contractual rights” doesn’t bar assignment–just gives obligor right to sue for damages
- if K provides that attempts to assign will be VOID–>parties can bar assignment
revocability of assignments
- gratuitous assignments (without consideration) by assignor may be revocable; assignments made for consideration are irrevocable
- once assignment is revoked, privity b/w obligor and assignor is restored and assignor/obligee is once again real party in interest
a gratuitous assignment can be irrevocable if either:
- obligor has performed
- detrimental reliance by assignee on gratuitous assignment
assignee right to sue
ASSIGNEE can sue:
1) OBLIGOR for non-performance
obligor can raise any defenses (such as a satisfication condition) to the K that he could’ve raised against assignor — any defense inherent in the K
2) ASSIGNOR/OBLIGEE for breach of certain warranties – in every assignment for VALUE, assignor warrants that they haven’t made a prior assignment of same right
delegation (only duties can be delegated; not rights)
- no need for consent, consideration, or writing to delegate duty
- delegation occurs when one party to a K (delegator/obligor) delegates duties she OWES to another party to K (obligee) to a 3rd party (delegatee)
- obligee must accept performance from delegatee
delegation and liability
- obligee may sue delegator/obligor for non-performance by delegatee (delegator/obligor remains liable!!!!)
- obligee may only sue delegatee IF the delegatee has assumed duties of the ENTIRE K
