Copyright © 2010 South-Western Legal Studies in Business, a part of South-Western Cengage Learning. and the Legal Environment, 10 th edition by Richard A. Mann & Barry S. Roberts Essentials of Business Law and the Legal Environment, 10 th edition by Richard A. Mann & Barry S. Roberts

Copyright © 2010 South-Western Legal Studies in Business, a part of South-Western Cengage Learning. Topics Covered Chapter 16: Third Parties to Contracts A. Assignment of Rights B. Delegation of Duties C. Third-Party Beneficiary Contracts

Copyright © 2010 South-Western Legal Studies in Business, a part of South-Western Cengage Learning. Assignment of Rights n 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. n Assignor – party making an assignment. n Assignee – party to whom contract rights are assigned. n Obligor – party owing a duty to the assignor under the original contract. n Obligee – party to whom a duty of performance is owed under a contract.

Copyright © 2010 South-Western Legal Studies in Business, a part of South-Western Cengage Learning. Assignment of Rights n Requirements of an Assignment – include intent but not consideration. n Revocability of Assignment – if assignee gives consideration, assignor may not revoke the assignment without the assignee's consent. n Partial Assignment – transfer of a portion of contractual rights to one or more assignees. n Successive Assignments –majority rule is that the first assignee in point of time prevails over later assignees; minority rule is that the first assignee to notify the obligor prevails.

Copyright © 2010 South-Western Legal Studies in Business, a part of South-Western Cengage Learning. Assignability n Most contract rights are assignable, except: –assignments that materially increase the duty, risk, or burden upon the obligor –assignments of personal rights –assignments expressly forbidden by the contract –assignments prohibited by law

Copyright © 2010 South-Western Legal Studies in Business, a part of South-Western Cengage Learning. Rights and Defenses n Rights of Assignee – the assignee stands in the shoes of the assignor. n Defenses of Obligor – may be asserted against the assignee. n Notice – is not required but is advisable.

Copyright © 2010 South-Western Legal Studies in Business, a part of South-Western Cengage Learning. Warranty n Implied Warranty – obligation imposed by law upon the assignor of a contract right. n Express Warranty – explicitly made contractual promise regarding contract rights transferred.

Copyright © 2010 South-Western Legal Studies in Business, a part of South-Western Cengage Learning. Delegation of Duties n Definition of Delegation – transfer to a third party of a contractual obligation. n Delegator – party delegating his duty to a third party. n Delegatee – third party to whom the delegator's duty is delegated. n Obligee – party to whom a duty of performance is owed by the delegator and delagatee.

Copyright © 2010 South-Western Legal Studies in Business, a part of South-Western Cengage Learning. Delegability n Most contract duties may be delegated, except: –duties that are personal –duties that are expressly nondelegable –duties whose delegation is prohibited by statute or public policy

Copyright © 2010 South-Western Legal Studies in Business, a part of South-Western Cengage Learning. Duties of Parties n Delegation – delegator is still bound to perform original obligation. n 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.

Copyright © 2010 South-Western Legal Studies in Business, a part of South-Western Cengage Learning. Third-Party Beneficiary Contracts n Definition – a contract in which one party promises to render a performance to a third person (the beneficiary). n Intended Beneficiaries – third parties intended by the two contracting parties to receive a benefit from their contract. n Donee Beneficiary – a third party intended to receive a benefit from the contract as a gift. n Creditor Beneficiary – a third person intended to receive a benefit from the agreement to satisfy a legal duty owed to her.

Copyright © 2010 South-Western Legal Studies in Business, a part of South-Western Cengage Learning. Intended Beneficiaries n 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. n Vesting of Rights – if the beneficiary's rights vest, the promisor and promisee may not thereafter vary or discharge these vested rights.

Copyright © 2010 South-Western Legal Studies in Business, a part of South-Western Cengage Learning. Intended Beneficiaries n 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.

Copyright © 2010 South-Western Legal Studies in Business, a part of South-Western Cengage Learning. Incidental Beneficiaries n 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.