party
3rd rights in Contracts
Contracts often involve a 3rd party
Obligors-who agreed to do something for the other party
Obliges-who agree to receive something
While entering a contract you have rights and duties
The right to receive money can always be assigned
Ex) I have contracted to have my house painted, I live in a split-level house. I assign the
right to have my house painted to a 3rd party who lives in a 4 bedroom house. It becomes
slightly dangerous for a painter to paint at a higher level. And you cant assign the right.
You cant assign a right that is for personal use.
Ex) I have a live in babysitter who agrees to live with us. I attempt to assign her to my
neighbors children who are awful and unpleasant. I cant assign her to that because it is
personal in nature because it is my neighbor under a 3rd party is an assignor and the
person who receives the transfer and is now entitled to enforce the rights is the assignee
Rights that cannot be assigned
Rights that are personal in nature
Rights whose assignment would increase the obligors risk or duties
Rights whose assignment is prohibited by contract
Rights whose assignment is prohibited by law or public policy
The assignee should always give notice to the obligor as soon as possible after receiving the
assignment, because the obligor may satisfy his/her obligations by performing for the
assignor until receiving notice of the assignment from the assignee.
First-assignment-in-time rule- gives the contractual right to the 1st party granted the
assignment
Most states use it
A few states use the English rule which states that the 1st assignee to give notice of
assignment to the obligor is the party with rights to the contract
A delegation occurs when a party to a contract; a delegator transfers her duty to perform to a
3rd part- a delegate- who is not a part of the original contract.
Assignment transfer rights to a contract; delegations transfer duties
Ex) Johann contracts with Teresa to have her deliver machinery to his factory. Teresa then
delegates her duty to Bill, who delivers the machinery to John.
Whereas, after making an assignment the assignor has no right left to the origination
contract, but after making a delegation, the delegator is not relieved of his duty to
perform.
Duties that cannot be delegated
Duties that are personal in nature
Duties for which the delegatees performance will vary significantly from the delegators
Duties in contracts that forbid delegations
Delegation of duties
I contract to build a house for you. The only contract is between you and me. Very often a
contractor will have sub- contracts for people to come do the plumbing etc. can I never
delegate away my responsibilities under my contract. So I got to make sure my sub-
contractors do a good job. I remain on the blame lane throughout regardless if the subcontractor is at fault.
Cant delegate duties that are personal nature
Ex) I hire Aerosmith for my frat party. Well Aerosmith decides to delegate it to someone
who plays a zilphone that means that they have violated the contract. YOU CANT DO
THAT.
rd
3 party rights
Ex) 18 year old daughter wanted a Porsche and the father buys it. He signs a contract and
buys it for a 100,000. So the daughter goes to the dealership and tells them that shes
going to sue them. But she cant because the contract is with the father.
Nudempactim- naked promise (like I promise you Im going to buy you a car, incidental
beneficiary)
The 3rd party beneficiary who is in the strongest legal position is the creditor beneficiary
because he can sue both the person who made the contract on his behalf and the person who
was supposed to perform for him. The donee beneficiary is the second strongest position
because he can sue the person who is supposed to perform the contract for her. The incidental
beneficiary is in the worst legal position because he cannot sue anyone.
Third-party beneficiary- when two parties enter into a contract with the purpose of benefiting
a third party, called the intended beneficiary
Promisor- in a third party beneficiary contract is the party who makes the promise that
benefits the third party. The promise is the party who owes the promisor something in
exchange for the promise made to the third-party beneficiary.
Ex) Marissa contracts with Alex to clean his house. In exchange, Alex will pay
Marissas credit card debt. The credit card company is the third-party beneficiary,
because the contract is created to benefit the company.
Creditor beneficiary- a third party that benefits from a contract in which the promisor
agrees to pay the promisees debt.
Donee beneficiaries- third parties who benefit from a contract in which a promisor agrees
to give a gift to the third party. (most common type of gift is life insurance) The promise
pays premiums on a life insurance plan to have the insurer (the promisor) pay a third
party (the donee beneficiary) on the promisees death.
Vesting of rights- although an intended beneficiary can enforce her rights to a contract,
she cannot do so until her rights to the contract vest, or mature such that she can legally
act on them. Before a third partys rights have vested, the original contracting parties to
the original contract without her permission.
Ex) third party rights in a life insurance policy do not vest until the promisees death.