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Flashcards in Third Party Issues Deck (16)
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1
Q

Third-Party Beneficiaries Definitions

A

If two parties contract with some intent of benefitting a third party, that third party is a third-party beneficiary.

2
Q

Third Party Beneficiaries Characteristics

A
  • Not parties to the contract; TPB are merely beneficiaries
    • However, intended TPBs have right under the contract.
3
Q

Creditor TPB v. Donee TPBs

A
  • Creditor TBP’s benefit is conferred based on a debt owed by the promise to the contract
  • Donee TPB’s benefit is conferred gratutously
4
Q

Determining TPB status

A

One becomes an intended TPB to a contract if they are either:

  • Expressly designated in the contract
  • Directly benefit from some perfromance under the contract, or
  • Stand in such a relationship to the promisee under the contract that an intent to benefit the third party can be inferred.
5
Q

Incidental Beneficiary

A

If a third party does not meet the requirment, she is an incidental beneficiary and does not have any rights under the contract.

6
Q

Rights of Third-Party Beneficiaries

Vesting of Rights Elements

A

To enforce rights under a contract, a TPB’s right must vest.

Vesting Rights occurs when either:

  • The TPB assents to the promise in a manner requested by the parties to the contract
  • The TPB brings suit to enforce the promise
  • The TPB materially changes position in justifiable reliance on the promise.
7
Q

Rights of Third-Party Beneficiaries

Enforcing the Contract

A
  • TPB can sue promisor
    • Promisor can assert any of his own defenses
  • Promisee can sue promisor at law and in equity for specific performance
  • TPB can only sue promisee if TPB is a creditor beneficiary
8
Q

Assignment Definition

A

A transfer of rights to a third party after a contract is formed. Consideration is not required.

9
Q

Common Law Limitations on Assignment

A

Common law bars assignment that substantially change the duties of the obligor.

  • Assignment of payment is not a substantial change
  • Assignment of rights to perfromance is a substantial change
10
Q

Contractual Limitations on Rights of Assignment

A
  • Contract provisions prohibiting assignment
    • Take away the right to assign but not the pwoer to assign
      • I.e. an assignee can still enforece the assignmnet if the was unaware of the provision.
  • Contract provisions invalidating assignmnets
    • Take away both the right and the power to assign
      • I.e. any assignment is invalid and unenforceable.
11
Q

Revocability

Assignment for Considerations

A

Irrevocable

12
Q

Revocability

Gratuitous Assignmnets

A

Revocable, unless:

  1. Death or bankruptcy of assignor
  2. Notice of revocation by assignor
  3. Taking of Perfromance by assignor, or
  4. Later assignmnet to another.
13
Q

Revocability of Assignmeents

Enforcement & Recovery

A
  • An assignee can recover from the obligor
  • An assignor for consideration cannot recover from the obligor
  • Payment by obligor to assignor is effective until obligor knows of the assignment.
14
Q

Delegation Definition

A

Generally, all duties may be delegated, subject to exceptions

  • Obligee must generally accept perfromance for delegee
  • Only duties may be delegated, whereas rights may be transferred to a third-party via assigment
15
Q

Delegation Liability

A

Delegator remains liable for delagee’s perfromance

Obligee may sue delegator for non-perfromance by delegee

Obligee may only sue delegee if the delegee has assumed duties of the entire contract.

16
Q

Delegation Exceptions

A

Duties are non-delegable if:

  1. Duties involve personal judgement and skill
  2. Delegation changes the expectance in a requirement or output contract
  3. A party has placed special trust in the delegator, or
  4. A contractual provision restricts delegation