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Contracts > Third Party Problems > Flashcards

Third Party Problems Flashcards

1
Q

Define 3rd Party Beneficiary

A

Not a party to the k. Able to enforce the k other made for her benefit.

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2
Q

Define Promisor.

A

Party to the k. Party making promises that benefits the third party.

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3
Q

Define Promisee.

A

Party to the k. Person who obtains the promise that benefits the 3rd party.

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4
Q

Only _____ beneficiaries have k law rights.

A

Intended

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5
Q

Intended beneficiaries are either _____ or _____.

A

Donees or creditors.

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6
Q

If a third party beneficiary knows of and has relied on OR has assented as requested, in what situation can the contract be cancelled or modified?

A

Only with her consent UNLESS the k provides otherwise.

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7
Q

P and X enter into a k in which P agrees to pay X $900 to paint O’s house.

Can P and X cancel the k before O learns of the k?

A

Yes

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8
Q

P and X enter into a k in which P agrees to pay X $900 to paint O’s house.

Can P and X cancel the k after O learns of the k and makes plans to be away from his home during the painting??

A

No. O has learned of the k AND has relied on it.

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9
Q

A beneficiary can recover from a promisor. True or false.

A

True

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10
Q

A beneficiary can never recover from a promisee. True or False.

A

Mostly true.

There is a limited exception. A creditor beneficiary can recover from a promisee BUT ONLY on pre-existing debt.

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11
Q

When can a creditor beneficiary recover from a promisee?

A

When the recovery is for pre-existing debt.

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12
Q

P and X enter into a k in which P agrees to pay X $900 to paint O’s house.

Can O recover from P if P owed O $100 before P contracted with X to satisfy that debt and X never painted? Explain

A

Yes. A creditor-beneficiary can recover from a promisee on the original debt.

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13
Q

If a third-party beneficiary sues the promisor, the promisor can assert which defenses?

A

Any defense that he would have had if he had been sued by the promisee.

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14
Q

P and X enter into a k in which P agrees to pay X $900 to paint O’s house.

The check X receives from P bounces. X does not paint. O sues X for breach. Does X have any defenses? Explain.

A

Yes. He has all of these defense he would have had if sued by P.

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15
Q

What is an assignment?

A

A transfer of RIGHTS under a k.

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16
Q

What are the two steps in an assignment?

A

K between only 2 parties.

One of the parties later transfers rights under that k to a 3rd party.

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17
Q

How many parties can there be in the original contract in which an assignment is made?

A

2

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18
Q

E offers to sell you his 73 Caddy for $400. Can you assign the offer to Conviser? Explain

A

No. Offers CANNOT be assigned.

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19
Q

Can offers be assigned?

A

No

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20
Q

E offers to sell you his 73 Caddy for $400. You accept. Can you assign the k to conviser?

A

Yes. Contracts can be assigned.

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21
Q

Can contracts be assigned?

A

Yes

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22
Q

On Jan 15, Batman contracts with Gothan to provide security services for a year. The k provides that Batman is to be paid $300k for the services.

Batman later transfers his rights under the k to Robin. Is this an assignment or a third-party beneficiary k? What are the key words?

A

Assignment

KW = Later transfers his rights

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23
Q

On Jan 15, Batman contracts with Gothan to provide security services for a year. The k provides that Gotham will pay Robin $300k for the services. Is this an assignment or a 3rd party beneficiary k? Key words?

A

3rd party beneficiary k. KW = contract . . . will pay Robin (directly).

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24
Q

The party to the k who later transfer rights under the k to another is the . . .

A

Assignor

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25
Q

A non-party to the original k who is able to enforce the k because of an assignment is an . . .

A

Assignee

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26
Q

The party to a contract which is later assigned, who does not partake in the assignment is the . . .

A

Obligor.

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27
Q

On Jan 15, Batman contracts with Gothan to provide security services for a year. The k provides that Batman is to be paid $300k for the services.

Batman later transfers his rights under the k to Robin. This is an assignment. Label the parties.

A

Batman = Assignor

Robin = Assignee

Gotham = Obligor

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28
Q

Can the parties to a k insert a provision prohibiting assignment?

A

Yes

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29
Q

What is the difference between a contractual provision prohibiting assignment and a provision invalidating assignment?

A

Language of prohibition takes away the RIGHT to assign, but not the POWER to assign (meaning that an assignor can be liable for breach, but an unknowing assignee can still enforce the assignment).

Language of invalidation takes away both the power and the right to assign so that there is no breach by the assignor and no rights in the assignee.

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30
Q

Language of _______ takes away the RIGHT to assign, but not the POWER to assign (meaning that an assignor can be liable for breach, but an unknowing assignee can still enforce the assignment).

A

Prohibition

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31
Q

Language of _______ takes away both the power and the right to assign so that there is no breach by the assignor and no rights in the assignee.

A

Invalidation

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32
Q

Batman-Gotham k provides “rights hereunder are not assignable.” Notwithstanding this provision, Batman assigns the right to the $300,000 payment to Robin, who does not know about the k provision. Can Robin collect from Gotham? Explain.

A

Yes.

Language of prohibition takes away the RIGHT to assign, but not the POWER to assign (meaning that an assignor can be liable for breach, but an unknowing assignee can still enforce the assignment).

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33
Q

Batman-Gotham k provides “all assignment of rights under this k are void.” Notwithstanding this provision, Batman assigns the right to the $300,000 payment to Robin, who does not know about the k provision. Can Robin collect from Gotham? Explain.

A

No.

Language of invalidation takes away both the power and the right to assign so that there is no breach by the assignor and no rights in the assignee.

Robin’s knowledge is irrelevant.

34
Q

Batman-Gotham k provides “rights hereunder are not assignable.” Notwithstanding this provision, Batman assigns the right to the $300,000 payment to Robin, who knows about the k provision. Can Robin collect from Gotham? Explain.

A

No.

Language of prohibition takes away the RIGHT to assign, but not the POWER to assign (meaning that an assignor can be liable for breach, but an unknowing assignee can still enforce the assignment).

Here, Robin knows of the provision, so he is not qualified to take.

35
Q

Even if a k does not in any way limit the right to assign, common law bars an assignment that does what?

A

Substantially changes the duties of the obligor.

36
Q

When does the assignment of a payment under a k constitute “substantial change” so as to be prohibited?

A

Never

37
Q

Is the assignment of the right of contract performance, other than the right to payment, considered a substantial change in the duties of the obligor?

A

Usually.

38
Q

Gotham assigned its right to security services under the k with Batman to Metropolis. Does this substantially change the duty of the obligor so that the assignment is not enforceable? Explain.

A

Yes. The assignment of the right of contract performance, other than the right to payment, is usually considered a substantial change in the duties of the obligor

Here, Batman would be dealing with an entirely different city with an entirely different set of villains.

39
Q

Is consideration required in an assignment?

A

No

40
Q

Can an assignment for consideration be revoked?

A

No

41
Q

Can gratuitous assignments be revoked?

A

Yes.

42
Q

Batman assigns the right to payment under his security k with Gotham to Richmond Law School for no consideration. Before Gotham pays RLS, Batman changes his mind.

Can Batman revoke the assignment to RLS? Explain.

A

Yes. Gratuitous assignments may be revoked.

43
Q

When can an assignor NOT recover from the obligor?

A

When consideration has been paid.

44
Q

Batman contracts to perform security services for Gotham for $300k. Batman then assigns his rights under the k to Robin, and Batman performs the k. When Gotham refuses to pay Robin, Robin sues Gotham. Can Robin collect from Gotham for breach? Explain.

A

Yes. An assignee can recover from the obligor.

45
Q

True or False: An assignee can recover from an obligor?

A

True.

46
Q

Batman contracts to perform security services for Gotham for $300k. Batman then assigns his rights under the k to Robin, for $10 and Batman performs the k. When Gotham refuses to pay Robin, Batman sues Gotham to collect. Can Batman collect from Gotham for breach? Explain.

A

No. An assignor for consideration cannot recover from an obligor.

47
Q

In a situation where the assignee sues the obligor, to what defenses is the obligor entitled?

A

All of the defenses it would have against the assignor.

48
Q

Batman contracts to perform security services for Gotham for $300k. Batman then assigns his rights under the k to Robin, for $10 and Batman never performs the k. When Gotham refuses to pay Robin, Robin sues Gotham to collect. Can Robin collect from Gotham for breach? Explain.

A

No. Robin has not greater rights than Batman, and Gotham is entitled to same defenses it would have had against Batman (i.e., non-performance).

49
Q

In a post-assignment situation, payment by the obligor to the assignor is effective until . . .

A

Obligor is made aware of the assignment.

50
Q

True or False: Modification agreements between an obligor and assignor are effective if the obligor did not know of the assignment.

A

False. Modification agreements between an obligor and assignor are NOT effective if the obligor did not know of the assignment.

51
Q

You rent furniture from Acme Furn. Rentals. In March, Acme assigns your rental k to Baker Rentals. You do not know of the assignment and continue to make your rental payments to Acme. Baked then sues you for the payments he has not received. Can Baker recover from you? Explain.

A

No. Payment to Acme (assignor) is effective until You (obligor) knows of the assignment.

52
Q

In an assignment for consideration, which three things does the assignor warrant?

A

The right assigned actually exists.

The right assigned is not subject to any then existing defenses by the obligor.

The assignor will do nothing after the assignment to impair the value of the assignment.

53
Q

In an assignment for consideration, which warranty is missing?

The right assigned is not subject to any then existing defenses by the obligor.

The assignor will do nothing after the assignment to impair the value of the assignment.

A

The right assigned actually exists.

54
Q

In an assignment for consideration, which warranty is missing?

The right assigned actually exists.

The assignor will do nothing after the assignment to impair the value of the assignment.

A

The right assigned is not subject to any then existing defenses by the obligor.

55
Q

In an assignment for consideration, which warranty is missing?

The right assigned actually exists.

The right assigned is not subject to any then existing defenses by the obligor.

A

The assignor will do nothing after the assignment to impair the value of the assignment.

56
Q

In an assignment for consideration, what does the assignor NOT warrant?

A

What the obligor will do after the assignment.

57
Q

X signs a k promising to pay Y $1k. Y assigns the k to Z for $800. X was an infant when he signed the k with Y and refuses to pay Z. Can assignee Z recover from assignor Y? Explain.

A

Yes. The right assigned was subject to a then-existing defense by the obligor (infancy).

58
Q

E assigns the right to royalties from his k to Sharon Stone for $1k. Later, E writes to the obligor and releases it from any obligation to pay royalties. Obligor does not pay SS. Can SS collect from E for breach of implied warranty of assignment? Explain.

A

Yes. E did something post-assignment to affect its value.

59
Q

E assigns the right to royalties from his k to Sharon Stone for $1k. Later, Obligor files for bankruptcy and receives a discharge. Can SS collect from E for breach of implied warranty of assignment? Explain.

A

No. Assignor does not warrant what the obligor will do post-assignment.

60
Q

Who takes priority when there are multiple gratuitous assignments?

A

The last assignee

61
Q

Who takes priority when there are multiple assignments, some for consideration and some gratuitous?

A

The first assignee for any consideration.

62
Q

In what limited situation will a subsequent assignee take priority over an earlier assignee for value? (2, second has 4)

A

If he does not know of the earlier assignment AND

Is the first to obtain 1) payment, 2) novation, 3) judgment, or 4) indicia of ownership.

63
Q

Batman assignes to Robin for consideration, then assigns to Conviser for consideration. Conniver does not know of the assignment to Robin. Conviser is the first to notify Gotham that he is an assignee. Gotham learns of the earlier assignment to Robin before it pays Conviser. To whom should Gotham make the payment? Explain.

A

Robin

First to notify is irrelevant. First in time still controls.

64
Q

What is a delegation?

A

A party to a k transfers work under that k to a third party.

65
Q

P contracts to paint O’s house for $1k. P and X agree that X will paint O’s house? Type of arrangement? Label the parties.

A

Delegation.

P = Delegating party
X = Delegatee
O = Obligee
66
Q

A k creates both ___ and ____.

A

Rights

Duties

67
Q

How do an assignment and a delegation differ?

A

An assignment is the transfer of a party’s right/benefits under a k to a third party.

A delegation is the transfer by a party to a k of his duties/burdens under the k to a 3rd party.

68
Q

A/an ________ is the transfer of a party’s right/benefits under a k to a third party.

A

Assignment

69
Q

A/an ________ is the transfer by a party to a k of his duties/burdens under the k to a 3rd party.

A

Delegation

70
Q

P contracts with O to paint O’s house for $1000. P and X agree that X will do the painting and collect $1000 from O. Assignment or delegation? Explain.

A

Both. X will do the painting = delegation. X will collect $1000 from O = assignment.

71
Q

P contracts with O to paint O’s house for $1000. P and X agree that X will do the painting and P will pay X $1000. Assignment or delegation or both? Explain.

A

Delegation only. This is delegation for consideration, not an assignment. P is transferring his duties/burdens under the k to X. The payment is not part of the delegation.

72
Q

P contracts with O to paint O’s house for $1000. P and X agree that X will do the painting and P will pay X $1000.

X does the painting and does a great job. Can X recover the $1000 from O? Explain.

A

Not under k law, because X never made a k with O.

73
Q

P contracts with O to paint O’s house for $1000. P and X agree that X will do the painting and P will pay X $1000.

X does the painting and does a great job. Can P recover the $1000 from O? Explain.

A

Yes. Contractual duties are delegable.

74
Q

In which two situations are the delegation of contractual duties prohibited?

A

If the k prohibits delegations or assignments; OR

The k is a “personal services” k that calls for very special skills (e.g., football player)

75
Q

Tom Brady has a k with the Patriots. No k provision regarding assignments or delegation. Can he delegate performance to Epstein? Explain.

A

No. The k is a “personal services” k that calls for very special skills (e.g., football player), so no delegation.

76
Q

What if, after valid delegation, the third party delagatee does not perform? What liability for delegator? delegatee?

A

Delegator always remains liable

Delegatee is liable ONLY if she receives consideration from the delegating party.

77
Q

P contracts to paint O’s house for $1k. X then agrees with P that she (X) will do the painting for P, because P is a good friend. X does not do the work. Can O recover from P? Explain.

A

Yes. Delegating party always remains liable.

78
Q

P contracts to paint O’s house for $1k. X then agrees with P that she (X) will do the painting for P, because P is a good friend. X does not do the work. Can P recover from X? Explain.

A

No. X is a delegatee, but received no consideration. Delegatee is liable ONLY if she receives consideration from the delegating party.

79
Q

P contracts to paint O’s house for $1k. X then agrees with P that she (X) will do the painting for P, because P is a good friend. X does not do the work. Can O recover from X? Explain.

A

No. X is a delegatee, but received no consideration. Delegatee is liable ONLY if she receives consideration from the delegating party.

80
Q

P contracts to paint O’s house for $1000. P and X then agree that X will do the work and P will pay X $900. X does not do the work. Can O recover from P? Explain.

A

Yes. Delegating party always remains liable

81
Q

P contracts to paint O’s house for $1000. P and X then agree that X will do the work and P will pay X $900. X does not do the work. Can P recover from X? Explain.

A

Yes. Delegatee is liable if she receives consideration from the delegating party.

82
Q

P contracts to paint O’s house for $1000. P and X then agree that X will do the work and P will pay X $900. X does not do the work. Can O recover from X? Explain.

A

Yes. Delegatee is liable if she receives consideration from the delegating party.

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