Third party rights, assignment, delegation

Question 1

Third party beneficiaries in general - 2 types 2 subtypes

Answer 1

Some contracts promise performance that will benefit some third party

Intended beneficiaries - often named in contract
INTENDED BENEFICIARIES HAVE STANDING to sue PROMISOR only (can still sue anyone under preexisting obligations - esp creditor)
- creditor beneficiaries: promisee wants promisor to satisfy obligation owed to creditor
- donee beneficiaries: promisee wants to gift promisor’s performance to donee

Incidental beneficiaries - would see benefit practically, but are not intended beneficiaries
e.g. residents in neighborhood around school mural
NO STANDING TO SUE

Any defenses against the promisor also apply to 3PB suits, except ones arising out of separate transactions with promisee (setoff etc)

Question 2

Vesting third-party interests (4 ways)

Answer 2

Once third party’s rights have VESTED, parties of the contract can’t modify/rescind anymore. Ways to vest:

• 3PB actually sues
• 3PB changes position in justifiable reliance
• 3PB manifests assent to the contract at request of a party
• express contract term vests interest

Question 3

Assignment of rights

Answer 3

Assignment is transfer of the right to receive a contract performance
To assign, must manifest intention to make present transfer of existing right
All rights generally assignable, EXCEPT:
- when assignment would materially change duties of other party
- when obligor has personal interest in who receives performance
- violation of law or public policy
- when prohibited by contract (however, usually treated as nonmaterial breach, unless says
assignments “ARE VOID”)

Question 4

Assignment for value vs gratuitous

Answer 4

Assignment for value: valid against obligor, and irrevocable by assignor

Gratuitous: still valid against obligor, who cannot claim lack of consideration. However, revocable til executed (intent + actual/symbolic delivery)

Question 5

Rights and obligations post assignment

Answer 5

Assignee gets whatever rights assignor had, subject to any defenses applicable against assignor

Payment to assignor is a defense unless obligor already notified that payments now due to assignee instead