Contracts - Third Party Problems

Front 1

Third Party Beneficiary ("TPB")

Back 1

Person trying to enforce K she did not make -- not a party to K; able to enforce K that other parties made for her benefit.

Front 2

Intended/Incidental Beneficiary

Back 2

-Person named on K = intended beneficiary
- P NOT named on K = incidental beneficiary

Front 3

TPB Efforts to Cancel or Modify K

Back 3

Agreement affecting TPB may be modified w/o TPB's consent PRIOR TO the time his rights become VESTED.

Front 4

TPB Rights are VESTED when:

Back 4

TPB ASSENTS in a manner requested by the parties, DETRIMENTALLY RELIES on the K, or BRINGS LAWSUIT to enforce it.
- If vested, K cannot be canceled/modified w/o her consent unless K otherwise provides.

Front 5

Who can recover from whom?

Back 5

- TPB can recover from promisor
- Promisee can recover from promisor
- TPB CANNOT recover from promisee except creditor beneficiary may recover from promisee ONLY on pre-existing debt

Front 6

Defenses if TPB sues promisor:

Back 6

Promisor can assert any defense that he would have had if sued by promisee.

Front 7

Assignment of Ks Rights =
(person trying to enforce K she did not make)

Back 7

= Transfer of rights under a K in two separate steps:
1) K between only two parties &
2) One of the parties later transfers rights under K to a third party.

Front 8

What rights can be assigned:

Back 8

- Existing rights can be assigned; future, non-existent rights CANNOT be assigned.

Front 9

Rights of Assignee:

Back 9

Once assignment is effective, assignee becomes the real party in interest & is entitled to performance of K.
- Once obligor has knowledge of assignment, must render performance.

Front 10

Limitations on Assignments - CL

Back 10

CL bars an assignment that SUBSTANTIALLY CHANGES duties of obligor.
- Assignment to right of payment, never a substantial change.
- Assignment of right to performance, usually a substantial change, often prohibited.

Front 11

Prohibition of Assignments ("rights hereunder are not assignable")

Back 11

Takes away the right to assign but not the power to assign, which means that the assignor is liable for breach of K but an assignee who does not know of the prohibition can still enforce the assignment

Front 12

Invalidation of Assignments ("all assignments of rights under this K are void")

Back 12

Takes away BOTH the right to assign & the power to assign so that there is a breach by the assignor & no rights in the assignee.

Front 13

Gratuitous Assignments

Back 13

- Last assignee in time generally wins if there are multiple assignments.
- May make assignment w/o consideration.

Front 14

Assignments for Consideration

Back 14

Assignor warrants: right assigned actually exists & is not subject to any defenses by obligor & assignor will do nothing to impair value of the assignment.
- Generally, if multiple assignments, first assignee for consideration wins.

Front 15

Delegation of K Duties =

Back 15

= Party to a K transfers work under K to a third party.

Front 16

Relationship of Assignment & Delegation (can be both)

Back 16

Assignment = transfer by a party to a K of his RIGHTS or BENEFITS under K to a third party.
Delegation = transfer by a party to K of his DUTIES or BURDENS under K to a third party.

Front 17

Duties (of general contractual duties) are delegable UNLESS:

Back 17

K prohibits delegations or assignments, or K calls for VERY SPECIAL skills, or person to perform K has a VERY SPECIAL reputation.

Front 18

Consequences of Delegation: nonperformance by third party delegatee:

Back 18

- Delegating party ALWAYS REMAINS LIABLE
- Delegatee liable only if she receives consideration from delegating party.