Chapter 16 Business Law

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ASSIGNMENT OF RIGHTS

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Definition of Assignment voluntary transfer to a third party of the rights arising from a contract so that the assignor’s right to performance is extinguished

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Assignor

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party making an assignment

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Assignee

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party to whom contract rights are assigned

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Obligor

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party owing a duty to the assignor under the original contract

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Obligee

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party to whom a duty of performance is owed under a contract

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Requirements of an Assignment include

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intent but not consideration

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Revocability of Assignment

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when the assignee gives consideration, the assignor may not revoke the assignment without the assignee’s consent

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Partial Assignment

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transfer of a portion of contractual rights to one or more assignees

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Assignability most contract rights are assignable except

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Assignments that materially increase the duty, risk, or burden upon the obligor
Assignments of personal rights
Assignments expressly forbidden by the contract
Assignments prohibited by law

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Rights of Assignee the assignee stands in the shoes of the assignor

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• Defenses of Obligor may be asserted against the assignee
• Notice is not required but is advisable

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Implied Warranties

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obligation imposed by law upon the assignor of a contract right

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Express Warranty

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explicitly made contractual promise regarding contract rights transferred

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Successive Assignments of the Same Right the majority rule is that

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the first assignee in point of time prevails over later assignees; minority rule is that the first assignee to notify the obligor prevails

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DELEGATION OF DUTIES

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Definition of Delegation transfer to a third party of a contractual obligation

• Delegator party delegating his duty to a third party
• Delegatee third party to whom the delegator’s duty is delegated
• Obligee party to whom a duty of performance is owed by the delegator and delegatee

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Delegability most contract duties may be delegated except:

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Duties that are personal
Duties that are expressly nondelegable
Duties whose delegation is prohibited by statute or public policy

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Duties of the Parties

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• Delegation delegator is still bound to perform original obligation

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• Novation Contract

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substituted contract to which the promisee is a party, which substitutes a new promisor for an existing promisor, who is consequently no longer liable on the original contract and is not liable as a delegator

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THIRD-PARTY BENEFICIARY CONTRACTS

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Definition a third-party beneficiary contract is one in which one party promises to render a performance to a third person (the beneficiary)

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Intended Beneficiaries

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third parties intended by the two contracting parties to receive a benefit from their contract

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Donee Beneficiary

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a third party intended to receive a benefit from the contract as a gift

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Creditor Beneficiary

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a third person intended to receive a benefit from the contract to satisfy a legal duty owed to him

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Rights of Intended Beneficiary

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an intended donee beneficiary may enforce the contract against the promisor; an intended creditor beneficiary may enforce the contract against either or both the promisor and the promisee

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Vesting of Rights

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if the beneficiary’s rights vest, the promisor and promisee may not thereafter vary or discharge these vested rights

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Incidental Beneficiary

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third party whom the two parties to the contract have no intention of benefiting by their contract and who acquires no rights under the contract