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22 Cards in this Set

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What is a third party beneficiary?
A third party beneficiary is a third party whom parties to a K intended a benefit through the K.
Why are TPB k's not allowed in England?
England requires PRIVITY of contract. American jurisprudence created an exception to this rule. (Lawrence v. Fox - 3rd P loaned money to D to give to P. D didn't give money to P and P sues. No privity btwn TP and P, but courts allowed suit b/c when one person makes a promise to another for the benefit of a third person, that 3rd person may maintain an action upon it.
What is the difference between a Creditor TPB and a Donee TPB?
A creditor beneficiary is a TPB whose underlying right is a DEBT; a donee beneficiary is a TB whose underlying right is a GIFT. Seavor v. Ransom (gift promise)
Origins of third party beneficiary status.
1. Trust - the holder is holding the money or goods in trust for the benefit of the 3rd party
2. When the orig. party gives $ to holder, the holder becomes an agent of the orig. party and a promisor to the 3rd party (promisee). However, the promise must be ratified by some affirmative step by the 3rd party promisee.
3. The holder of the money becomes the primary debtor (orig. party is secondary debtor), but requires 3rd party (creditor consent) and once that occurs, there is an implied release of the orig. party.
Does the intent to benefit a third party need to be clear in the contract?
YES - the intent must be clear. The intent may be express or implied. It is not necessary that the primary purpose benefit the TPB, but it must be a substantial purpose (fire cases - it must clearly state that water is to be supplied to put out fires).
R2K: Intended vs. Incidental Beneficiary - Intended when a) the perf. of a promise will satisfy an obligation of the promise to pay $ or b) the circum. indicate that the promisee intends to give the beneficiary the benefit of the promise an incidental beneficiary is anyone who is not intended AND HAS NO RIGHT.
How do you determine who is a TPB?
1. By expressly naming the TPB in the k (Anderson v. FoxHill Village Homeowners Corp. - plf' was not intended ben., only incidental to the contract)
2. The court may infer an intent to benefit a given TPB: 1) for the creditor TPB, the implication is made through the duty owed test (by promisee to creditor TPB), or 2) for the donee TPB, the implication is made through w/the direct benefit test (running directly to the donee-beneficiary and not to the promisee) test (H.R. Moch v. Rensselaer Water Co. - incidental benefit - no direct assumption of duty)
Why would a TPB sue in tort?
If a duty runs from the promise to a TPB, then the TPB may alternatively sue in tort for the breach of this duty. It is rare and usually occurs in malpractice cases. Used when SOL has run b/c K SOL runs from breach and tort SOL runs from discovery. Heyer v. Flaig - atty messed up will and daughters sued under tort for malpractice
Can a contract relating to a creditor TPB be modified?
1. Btwn the promisor and the TPB, the k can be modified.
2. For creditor TPB, the promisee and the promisor, the k CANNOT be modified b/c the debt is pre-existing and the creditor TPB is deemed to have relied on the TPB-K for payment.
2. For donee TPB, it can be modified or revoked at anytime before delivery UNLESS donee TPB has NOTICE of the k AND has relied on k to her detriment (Robson v. Robson - husband and wife get divorced, wife still wants benefit from husband's business - no b/c she's a donee TPB and husband can change)
What defenses are available against a TPB?
1. Promisor's defense: Can use any defense the promisor has against the promisee (Rouse v. United States - Rouse can use defense of fraud aginst US as it would apply against promisee)
How do you determine if the intent of the parties was to PRIMARILY benefit the TPB?
Can make references to extrinsic evidence (parol): (1) performance rendered to a 3rd party - if k requires direct perf to 3rd party, it indicates a right of TPB to enforce the k (2)presence of provisions purporting to create rights in 3rd party - 3rd party given right to designate or control the promsior's performance (3)whether the 3rd party is expressly named (4) relationship between promissee and TPB, absent some legal or social relationship, it may be impossible to demonstrate intent
What are the definitions of assignment, delegation and assumption?
ASSIGNMENT relates to transferring of rights under a K. - To be enforcible, it must be agreed either orally or in writing.
DELEGATION relates to transferring duties under a k.
ASSUMPTION is an agreement to PERFORM the duties transferred by DELEGATION.
What is the difference between a delegation and an assignment?
A delegation of contractual duties is not a transfer of such duties as in an assignment, b/c the delegating party always remains liable for performance if the delegated party fails to perform. An effective assignment operates to give the assignee a direct right against the obligor under the k.
Does an assignee have a duty to perform the assignor's contractual provisions?
Traditionally, the assignee was not obligated to perform the duties under the k. His acceptance of the k benefits was not deemed sufficient to imply a promise to bear the k burdens.
Modern cases imply a promise by the assignee to assume the duties of performance (unless agreed to the contrary).
What constitutes an effective assignment?
Any manifested intent by the obligee under a k to make a present transfer of his rights to another will constitute an assignment. MUST intend to vest in the assignee a PRESENT right.
What rights cannot be assigned?
1. Rights that would materially vary (doesn't have to be bad, just different) the risk assumed by the obligor. Whenever obligor would have to extend any degree of trust or confidence to the particular obligee that would be affected by teh assignment, no assignment is permitted.
How to determine if an assignment is revocable?
1. if the assignment is made for consideration, it is irrevocable
2. a gratuitous assignment is usually revocable -- EXCEPTION: (a) a token chose (symbol of rights) is delivered to assignee -- destroys both right and power to revoke (b) assignment in writing (c) estoppel (d) assignee already rec'd payment or performance from obligor (e) novation (all parties agree that right should be transferred to assigne)
What is meant by an "irrevocable" assignment?
An assignment that is irrevocable means that once the assignment is made, the assignor does not have the RIGHT to revoke it or make subsequent assignment of the same power to another party. The fact remains that he does have the POWER.
How is a gratuitous assignment revocable?
1. successive assignment by the assignor of the same right to another party
2. death by assignor
3. bankruptcy by assignor
4. notice of performance given by the assignor to either assignee or obligor
5. payment or performance that is accepted by the assignor directly from the obligor
What is the effect of a clause prohibiting assignment?
1. Trad'l - Clause held valid
2. Modern Trend - Trend is to hold restraints unenforceable, at least where the only right involved is the receipt of money (want to be able to assign $ to cover debt).
3. UCC§9-406 commercial assignments holds ineffective any term prohibiting assignment
Can a person assign future rights?
An assignment of future rights can be done, effective when made and enforced when acquired.
What defenses are available to the obligor against the assignee?
The obligor's defense against the assignor are also available against the assignee when provided in the contract or arise before notification of the assignment. (Ford Motor Credit v. Morgan)
If the assignor and the obligor modify the k in good faith after notice of the assignment, does the modification impair the rights of the assignee?
Modern Rule - Modification of the contract to cut off the rights of the assignee cannot be done to the detriment of the assignee after notice, except for unforeseen circumstances. Homer v. Shaw