© 2013 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use. C HAPTER 16: T HIRD P ARTIES TO C ONTRACTS

© 2013 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use. A. Assignment of Rights. B. Delegation of Duties. C. Third-Party Beneficiary Contracts. T OPICS C OVERED C HAPTER 16: T HIRD P ARTIES TO C ONTRACTS 2

© 2013 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use. A SSIGNMENT OF R IGHTS  Definition of Assignment – voluntary transfer to a third party of the rights arising from a contract so that the assignor's right to performance is extinguished.  Assignor – party making an assignment.  3

© 2013 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use. A SSIGNMENT OF R IGHTS  Assignee – party to whom contract rights are assigned.  Obligor – party owing a duty to the assignor under the original contract.  Obligee – party to whom a duty of performance is owed under a contract. 4

© 2013 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use. A SSIGNMENT OF R IGHTS  Requirements of an Assignment – include intent but not consideration. Revocability of Assignments– if assignee gives consideration, assignor may not revoke the assignment without the assignee's consent. S PEELMAN V. P ASCAL (1961). S PEELMAN V. P ASCAL (1961). 5

© 2013 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use. A SSIGNMENT OF R IGHTS  Requirements of an Assignment – include intent but not consideration. Partial Assignments – transfer of a portion of contractual rights to one or more assignees.  Rights That Are Assignable. 6

© 2013 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use. A SSIGNMENT OF R IGHTS  Rights That Are Not Assignable. Assignments that materially increase the duty, risk, or burden upon the obligor. Assignments of personal rights. Assignments expressly forbidden by the contract. R EISER V. D AYTON C OUNTRY C LUB C OMPANY (1992). R EISER V. D AYTON C OUNTRY C LUB C OMPANY (1992). 7

© 2013 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use. A SSIGNMENT OF R IGHTS  Rights That Are Not Assignable. Assignments Prohibited by Law.  Rights of the Assignee. Obtains Rights of Assignor: assignee stands in the shoes of the assignor. Notice. 8

© 2013 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use. A SSIGNMENT OF R IGHTS  Implied Warranties of Assignor. Implied Warranties of Assignor. In absence of express intentions, assignor implicitly warrants: He will do nothing to defeat or impair the assignment. The assigned right actually exists.  9

© 2013 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use. A SSIGNMENT OF R IGHTS  Implied Warranties of Assignor. In absence of express intentions, assignor implicitly warrants: Any writing evidencing right that is delivered or exhibited to assignee. Assignor has no knowledge of any fact that would impair value of assignment. 10

© 2013 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use. A SSIGNMENT OF R IGHTS  Express Warranties of Assignor. Contractual promise regarding property or contract rights transferred.  Successive Assignments of the Same Right. What issues do you see here? 11

© 2013 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use. D ELEGATION OF D UTIES  Definition of Delegation – transfer to a third party of a contractual obligation.  Delegator – party delegating his duty to a third party.  Delegatee – third party to whom the delegator's duty is delegated.  12

© 2013 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use. D ELEGATION OF D UTIES  Obligee – party to whom a duty of performance is owed by the delegator and delagatee.  Non-Delegable Duties. Duties that are personal. Duties that are expressly nondelegable.  13

© 2013 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use. D ELEGATION OF D UTIES  Non-Delegable Duties. Duties whose delegation is prohibited by statute or public policy. P UBLIC S ERVICE C OMMISSION OF M ARYLAND V. P ANDA B RANDYWINE, L.P. (2003). P UBLIC S ERVICE C OMMISSION OF M ARYLAND V. P ANDA B RANDYWINE, L.P. (2003). 14

© 2013 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use. D ELEGATION OF D UTIES  Duties of the Parties. Delegation – delegator is still bound to perform original obligation. Novation – contract, to which the obligee is a party, substituting a new promisor for an existing promisor, who is consequently no longer liable on the original contract and is not liable as a delegator. 15

© 2013 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use. T HIRD P ARTY B ENEFICIARY C ONTRACTS  Definition – a contract in which one party promises to render a performance to a third person (the beneficiary).  16

© 2013 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use. T HIRD P ARTY B ENEFICIARY C ONTRACTS  Intended Beneficiaries – third parties intended by the two contracting parties to receive a benefit from their contract. Donee Beneficiary – a third party intended to receive a benefit from the contract as a gift.  17

© 2013 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use. T HIRD P ARTY B ENEFICIARY C ONTRACTS  Intended Beneficiaries. Creditor Beneficiary – a third person intended to receive a benefit from the agreement to satisfy a legal duty owed to her. S TINE V. S TEWART (2002).  S TINE V. S TEWART (2002).  18

© 2013 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use. T HIRD P ARTY B ENEFICIARY C ONTRACTS  Intended Beneficiaries. Rights of Intended Beneficiaries – an intended donee beneficiary may enforce the contract against the promisor; an intended creditor beneficiary may enforce the contract against either or both the promisor and the promisee.  19

© 2013 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use. T HIRD P ARTY B ENEFICIARY C ONTRACTS  Intended Beneficiaries. Vesting of Rights – if the beneficiary's rights vest, the promisor and promisee may not thereafter vary or discharge these vested rights.  20

© 2013 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use. T HIRD P ARTY B ENEFICIARY C ONTRACTS  Intended Beneficiaries. Defenses Against Beneficiary – in an action by the intended beneficiary of a third-party contract to enforce the promise, the promisor may assert any defense that would be available to her if the action had been brought by the promisee. 21

© 2013 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use. T HIRD P ARTY B ENEFICIARY C ONTRACTS  Incidental Beneficiary –  Incidental Beneficiary – third party whom the two parties to the contract have no intention of benefiting by their contract and who acquires no rights under the contract. 22