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Unformatted text preview: ailable in the event there is a breach of contract. 6.1 Third Parties W hen considering the role of third parties, we must initially determine if we are
focusing on the rights or responsibilities of the contract. If the focus is on the
rights or benefits, the ways in which a third party might acquire those are if
the outsider is an intended third-party beneficiary or if there has been an assignment
of the contract by one of the original contracting parties. An assignment is the transfer
of benefits or rights under a contract to a third party. If instead the focus is on whether
a third party has a duty to perform on the contract, the issue is whether one of the contracting parties has delegated to the outsider.
If, for example, John agrees to paint Mary’s house for $1,000, Mary’s rights under the
contract would include having her house painted (in a reasonable manner), and John’s
rights under the contract would include being paid $1,000 for his labor. If John had, under
the original terms of the contract, specified that he wished Mary to pay the $1,000 to Julio,
Julio would be an intended third-party beneficiary. Mary would legally be obligated to
pay him, and if she did not, it is Julio who would have the right to sue for breach.
If, on the other hand, John and Mary make that same contract, and two weeks later John
transfers the right to the money to Julio, this is an assignment. Again, Mary is obligated to
pay Julio, and if she fails, Julio has the right to sue her, not John. It is important to remember that an assignment is only the transfer of a right, not a duty. In other words, John still
has to paint Mary’s house.
If John gets Melissa to paint Mary’s house instead of doing it himself, that is a delegation
of the contract (see Figure 6.1). rog80328_06_c06_111-133.indd 112 10/26/12 5:37 PM CHAPTER 6 Section 6.1 Third Parties Figure 6.1: Delegation of contractual duty
John and Mary are the original contracting parties. John can delegate the contractual duty to M...
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This test prep was uploaded on 04/09/2014 for the course BUS 311 taught by Professor Parker during the Spring '10 term at Ashford University.
- Spring '10
- Business Law