Chapter 16 Contracts: Third Party Rights

What is the difference between an assignment and a delegation? 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 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.

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.

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?

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.

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.

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