The main contents of the chapter consist of the following: What is an assignment? What are the rights and duties of an assignor? What are the rights and duties of an assignee? What is a third-party beneficiary contract? What are the differences among donee beneficiaries, creditor beneficiaries, and incidental beneficiaries?
Chapter 19 ThirdParty Rights to Contracts Copyright © 2015 McGrawHill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGrawHill Education Obligor and Obligee (Definitions): Obligor: Contractual party who owes duty to other party in privity of contract Obligee: Contractual party owed duty from other party in privity of contract 192 Assignment (Definitions): Assignment: Transfer of rights under a contract to a third party Assignor: Party to contract who transfers his/her rights to a third party Assignee: Party (not in privity of contract) who receives transfer of rights to a contract 193 Contractual Rights That Cannot Be Assigned Rights that are personal in nature Rights that would increase obligor’s risks/duties Rights in a contract that, by its terms, expressly forbids assignments Rights whose assignment prohibited by law/public policy 194 Delegation (Definitions): Delegation: Transfer of duty under a contract to a third party Delegator: Party to a contract who transfers his/her duty to a third party Delegatee: Party (not in privity of contract) who receives transfer of duty to a contract 195 Contractual Duties That Cannot Be Assigned Duties personal in nature Duties resulting in performance substantially different from that which obligee originally contracted (i.e., delegatee’s performance will vary significantly from delegator’s) Duties in a contract that expressly forbids delegation 196 Third Party Beneficiary Contracts (Definitions): Intended Beneficiary: Third party to contract whom contracting parties intended to benefit directly from contract. Intended beneficiaries can sue to enforce contract obligations Promisor: Party to contract who made promise that benefits third party Promisee: Party to contract who owes something to promisor in exchange for promise made to thirdparty beneficiary Creditor beneficiary. Third party who benefits from contract in which promisor agrees to pay promisee’s debt Donee beneficiary: Third party who benefits from contract in which promisor agrees to give a gift to third party Vesting: Maturing of rights, such that a party can legally act on the rights Incidental Beneficiary: Third party who unintentionally gains benefit from contract between other parties. Contracting parties do not intend to benefit incidental beneficiary. Incidental beneficiaries cannot sue to enforce contract obligations 197 Creditor Versus Donee Beneficiaries Creditor Beneficiary Donee Beneficiary Contractual performance fulfills obligation to third party Contractual performance gives a gift to third party Enforcement of rights Beneficiary can enforce rights to contract if contract valid and rights have vested Beneficiary has limited ability to enforce contract (depending on jurisdiction) Beneficiary can enforce rights against promisor Beneficiary can enforce rights against promisor or promisee 198 Intended Versus Incidental Beneficiaries Intended Beneficiary Incidental Beneficiary Contracting parties intended to benefit third party with their contract Contracting parties did not intend to benefit third party with contract Beneficiary has right to enforce contract Beneficiary does not have right to enforce contract Beneficiary benefits from direct reception of contractual performance Beneficiary benefits from indirect circumstances created by contractual performance 199 ... Assignment: Transfer of rights under a contract to a third party Assignor: Party to contract who transfers his/her rights to a third party Assignee: Party (not in privity of contract) who receives transfer of rights to a contract... Contractual performance fulfills obligation to third party Contractual performance gives a gift to third party Enforcement of rights Beneficiary can enforce rights to contract if contract valid and rights have vested... Promisee: Party to contract who owes something to promisor in exchange for promise made to thirdparty beneficiary Creditor beneficiary. Third party who benefits from contract in which promisor agrees to pay