Third Party Problems

Question 1

Third Party beneficiary

Answer 1

not a party to the K. but able to enforce K others made for her benefit

intent of parties determine whether incidental or intended.

Intended: have K rights. On MBE will be NAMED IN THE K.

Question 2

Promisor

Answer 2

Person making the promise that benefits the third party

Question 3

Promisee

Answer 3

Person who obtains the promise that benefits the third party

Question 4

Creditor/Donee

Answer 4

intended beneficiaries are either creditors or donees

Creditor: person whom a debt is owed by the promisee; donee: person whom the promisee intends to benefit gratuitously

Question 5

Vesting of Third Party’s Rights

Answer 5

Can enforce ONLY once rights have vested. Occurs when third party KNOWS of the right and either (1) assents to it, or (2) relies on it, or (3) brings a suit to enforce it.

Prior to vesting, parties are free to modify or rescind the beneficiary’s rights under the K. Can remove third party w/o consulting him or her

MBE: if call of question has MBE bringing suit, it is probably vested

Question 6

Third Party vs. Promsor

Answer 6

3PB may sue promisor on the K

Promisor may raise against 3PB any defense that promisor has against promisee

Question 7

Promisee v. Promisor

Answer 7

Promisee may recover from promisor

Question 8

Third Party v. Promisee

Answer 8

Creditor beneficiary can sue promisee on the PRE-EXISTING obligation between them (limited)

HOWEVER, donor beneficiary has NO RIGHT to sue the promisee unless detrimental reliance

Question 9

Assignment

Answer 9

Transfer of rights under a K.

Involves two steps (1) K between two parties; and (2) one party later transfers rights under K to a third party

Can’t assign OFFERS, but can assign K (once it is a butterfly)

Question 10

Assignor

Answer 10

Party to the K who transfers rights under the K to another

Question 11

Assignee

Answer 11

Not a party to the K. able to enforce the K because of the assignment

Question 12

Obligor

Answer 12

The other party. Non assigning party

Question 13

Prohibitions on assignment

Answer 13

“rights are not assignable”

takes away right to assign but not the power to assign

Assignor remains liable for breach of K, but an assignee who DOES NOT KNOW of the prohibition can still enforce the assignment

If doubt between prohibition and assignment, prob prohibition

Question 14

Invalidations on Assignment

Answer 14

“all assignments … are void”

Takes away both right to assign and power to assign

breach by assignor AND no rights in assignee

Question 15

Common law limitation on assignment

Answer 15

Common law bars assignments that substantially change the duties of the obligor

Substantial change – usually anything other than merely changing right to payment

Question 16

Consideration in Assignments

Answer 16

NOT REQUIRED. but Gratuitous assignments can be revoked.

Question 17

Assignee v. Obligor

Answer 17

Assignee may sue obligor since assignee is the real party in interest that is entitled to performance

Obligor has any defense inherent in the K (consideration, etc.) but can’t raise defenses assignor might have against assignee

Question 18

Assignor v. Obligor

Answer 18

If CONSIDERATION, assignor CANNOT recover from obligor

Question 19

Assignee v. Assignor (Warranties of Assignor in assignments for consideration)

Answer 19

Assignor warrants (1) the right assigned actually exits, (2) the right assigned is not subject to any THEN EXISTING defenses by the obligor, and (3) the assignor will do nothing after the assignment to impair the value of the assignment

NOTE: no warranty for what obligor will do after assignment

Question 20

Payments to assignor that assigned rights

Answer 20

Payments by obligor to assignor are effective UNITL OBLIGOR KNOWS OF THE ASSIGNMENT.

Thus, assignee can’t sue for sending payments to assignor if you didn’t know of assignment

Question 21

Multiple Assignments

Answer 21

All gratuitous – last assginee wins

All consideration – first assignee for consideration wins

Limited exception: subsequent assignee for value takes priority over earlier assignee for value only if he both (1) does not know of the earlier assignment and (2) is the first to obtain payment (from obligor), judgment, novation, or an indicia of ownership (four horsemen rule)

Question 22

Exceptions to revocability of gratuitous assignments

Answer 22

irrevocable if (1) obligor has performed; (2) a token chose is delivered (tangible claim like stock certificate); (3) detrimental reliance can be shown

Question 23

Delgation

Answer 23

Party transfers work to a third party.

Assignment is transfer of rights or benefits under a K to a third party who was not a party to the K

Delegation is the transfer of duties or burdens (work) under the K to a third party who was not a party to the K

Used interchangeably on MBE though

Question 24

What is delegable?

Answer 24

all contractual duties are delegable

Exceptions: (1) contractual restriction on delevations or assignments, (2) delegation would change obligee’s expectancy (e.g. output contracts); or (3) personal service contracts that calls for VERY SPECIAL skills

Question 25

Nonperformance by delegatee

Answer 25

delegating party ALWAYS remains liable.

Delegatee will be liable only if she receives CONSIDERATION from the delegating party