third party rights Flashcards
privity of contract
the relationship created between people who are parties to the same contract - have the right to enforce contract
a. normally only the parties to the contract have rights and duties under the contract
exceptions to privity of contract
- product liability- manufacturers are liable to any person who is injured by a defective product
- assignment of rights or delegation of duties under the contract. hamer-sidway
- third party beneficiaries, people whom the parties intend to benefit
assignment
rights and duties in each contract.
when one party transfers her rights under the contract to a third party.
example: Kim gets a student loan for 30000 from first bank. first bank assigns its rights to collect from Kim to second bank.
-Kim has the duty or obligation to pay back the loan, she is the obligor
-first bank has the right to collect money, its the obligee (the one who receives benefit of kim’s obligation)
-first bank assigns its right to collect the money, it is the assignor-making the assignment
-second bank receives first bank’s right to the money, it’s the assignee
-if kim doesn’t repay the loan, second bank, not first bank, can sue kim
why are assignments necessary?
they are crucial
a. the assignee steps into the shoes of the assignor, the assignor can no longer enforce the obligation
b. assignment can be oral or written
c. any contract right is assignable except
1. if prohibited by statute (workers comp)
2. if assignment materially increases or alters the risk or duties of the obligor- cleaning lady assigned to parents big house
3. even if contract specifies that “rights cannot be assigned” you can always assign the right to receive money or an interest in real estate- b/c we came from england, don’t have property get tied up.
note: if the obligor knows about the assignment, only fulfilling his promise to the assignee will discharge the obligation
delegation of duties
when one party delegates his duties under the contract to a third party
example: kim gets a student loan for 30000 from first bank. Kim delegates her duty to pay the loan to Han
- Kim delegates her duty to repay first bank to Han, making kim the delegator
- Han now has the obligation to pay first bank, he is the delegatee
delegation does not
delegation does not extinguish all of the delegator’s obligations under the contract, if the delegatee does not perform, the delegator is still liable.
ex. if Han does not pay first bank, kim must. if neither han nor kim pays, first bank can sue either or both of them
most contractual duties can be
most contractual duties can be delegated, except when performance by delegatee will vary materially from that expected by the obligee, heart surgeon delegating surgery to resident
rights are, duties are
rights are assigned, duties are delegated. but an assignment of “all rights” or an assignment of the contract, is both an assignment and a delegation
-effect is to end all of the assignor’s rights under the contract, but assignor is still liable if assignee doesn’t perform all of the assignor’s duties
third party beneficiary
a third party whom the contracting parties intend the contract to directly benefit can enforce the contract against the party whose performance will benefit the third party
-only intended beneficiaries have a right to enforce the contract- may be other people receiving benefits but they can’t enforce
creditor beneficiary
when party a promises party b to pay a debt party b owes third party.
classic case: hollly owed lawrence 300. Fox promised to pay lawrence for holly in exchange for consideration. Fox never paid, so lawrence sued fox. Although lawrence wasn’t party to the contract, he could recover against fox
donee beneficiary
intent of contract is to give third party a benefit. one party wants to give gift, other party delivers gift
-uncle mike gives alex new car. New car never delivered. alex can enforce contract against jacks auto
incidental beneficiaries
cannot enforce a contract, even if they obtain some unintentional benefit from it. Tyson ear biting
