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Chapter 16 Contracts: Third Party Rights

Chapter 16 Contracts: Third Party Rights . Learning Objectives. What is the difference between an assignment and a delegation? What rights can be assigned despite a contract clause expressly prohibiting assignment? What factors indicate a third party is an intended beneficiary?. Assignments.

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Chapter 16 Contracts: Third Party Rights

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  1. Chapter 16Contracts: Third Party Rights

  2. Learning Objectives • What is the difference between an assignment and a delegation? • What rights can be assigned despite a contract clause expressly prohibiting assignment? • What factors indicate a third party is an intended beneficiary?

  3. Assignments • Transfer of contractual rights to a 3rd party. • 3rd party is called the assignee. • The assignee has the right to demand performance from the other original party (Obligor) to the contract. • Cannot Assign rights for personal services or when obligor’s performance changes.

  4. Delegations • Transfer of duties to a 3rd party (Delegatee) by Delegator. • Delegatee owes duty to original party in contract. • Delegator is still liable for performance of duty.

  5. Intended vs. Incidental Beneficiaries • What factors do courts consider in determining whether a 3rd party is an intended or incidental beneficiary: • Whether performance is rendered directly to 3rd Party? • Whether 3rd Party has right to control details of performance? • Whether 3rd Party is expressly designated as beneficiary under the contract?

  6. Intended Beneficiaries • 3P Intended Beneficiary Original parties to K intend at the time of contracting that the contract performance directly benefit a 3rd party. After rights vest, 3P can sue for breach. • 3P Creditor Beneficiary: Can sue debtor directly. • 3P Donee Beneficiary: gift is enforceable.

  7. When Intended Beneficiary’s Rights Vest • A Third Party Intended Beneficiary has the right to sue. • Her Right to Sue Vests When: • 3rd Party manifests Assent to the contract. • 3rd Party materially alters her position in detrimental reliance of contract. • When conditions for vesting occur.

  8. Incidental Beneficiaries • Third Party Incidental Beneficiaries receives an unintended benefit. • Incidental beneficiary has no right to sue.

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