Third Party Beneficiaries & Assignees

Question 1

What is a Third Party Beneficiary?

Answer 1

A third party beneficiary is not a party to the contract, but nonetheless may enforce a contract made for her benefit.

Question 2

How does the court determine whether one is an Intended third party beneficiary?

Answer 2

Only an intended beneficiary has contract law rights, as determined by the intent of the parties. Typically, such a beneficiary: (1) is identified in the contract, (2) receives performance directly from the promisor, or (3) has some relationship with the promisee to indicate intent to benefit.

Question 3

When do the rights of a third party beneficiary Vest?

Answer 3

A third party’s rights to enforce the contract vest when: (1) he manifests assent to the promise in the manner requested; (2) brings a suit to enforce the promise; or (3) materially changes position in justifiable reliance on the promise. After vesting, the promisee and promisor can no longer freely modify or rescind the beneficiary’s rights under the contract.

Question 4

What Defenses can be asserted when a third party beneficiary dues to enforce a contract?

Answer 4

If the third party beneficiary sues the promisor, the promisor may assert any defense he would have had if sued by the promisee.

Question 5

What is an Assignment?

Answer 5

An assignment is a transfer of rights under an existing contract to a third party.

Question 6

What Rights may be assigned?

Answer 6

All rights may be assigned except those that change an obligor’s duty.

Question 7

When is a writing Required for assignment?

Answer 7

There is no writing requirement for assignment, except for the following: (1) Interests in land, (2) Wage assignments, (3) Security interests

Question 8

When is an assignment Irrevocable?

Answer 8

A gratuitous assignment can be revoked at will. However, where there is consideration supporting an assignment, it is irrevocable (i.e. obligor performed, delivery of tangible item, or foreseeable detrimental reliance)

Question 9

What is Delegation?

Answer 9

Delegation occurs where a party to the contract transfers the performance under the contract to a third party.

Question 10

What duties cannot be Delegated?

Answer 10

Generally, all contract dues are delegable, except where duties involve personal judgment and skill.

Question 11

Who is Liable for breach of a delegated duty?

Answer 11

The transferor of duties remains liable on the contract. The delegatee is liable to either party if receiving consideration for their performance.