Class Notes for Third Parties to Contracts | Law And Business I | BUL 3320, Study notes of Business and Labour Law

Download Class Notes for Third Parties to Contracts | Law And Business I | BUL 3320 and more Study notes Business and Labour Law in PDF only on Docsity! Business Law Spring 2004 Chapter 16 Third Parties to Contracts Obligor: a person who owes a duty under a contract Obligee: a person to whom a contractual duty is owed  Ex. Ann promises to sell to Bart a car for which Bart promises to pay $10,000 by monthly installments over the next 3 years. Ann’s right under the contract is to receive money from Bart, whereas Ann’s duty is to deliver the car. Bart’s right is to receive the car; his duty is to pay for it. Assignment of rights: the voluntary transfer to a third party of the rights arising from the contract.  Ex. if Ann were to transfer her right under the contract (the installment payments due from Bart) to Clark for $8,500 in cash, this would constitute a valid assignment of rights. Ann would be the assignor, Clark would be the assignee, and Bart would be the obligor. Pg 299  An effective assignment terminates the assignor’s right to receive performance by the obligor. Delegation of Duties: a transfer to a third party of a contractual obligation.  Ex. if Ann and Doris agree that Doris should deliver the car to Bart, this would constitute a delegation, not an assignment, of duties between Ann and Doris.  Ann would be the delegator  Doris would be the delegatee  Bart would be the oblige Requirements of an Assignment:  must include intent but not consideration  assignment may be oral  UCC imposes a writing requirement on all assignments over $5,000 Revocability of an Assignment: when the assignee gives consideration, the assignor may not revoke the assignment without the assignee’s consent Partial Assignment: transfer of a portion of contractual rights to one or more assignees  Ex. Jack owes Richard $2,500. Richard assigns $1,000 to Mildred. Neither Richard nor Mildred can maintain an action against Jack if Jack objects, unless the other is joined in the proceeding against Jack. Contract Rights not Assignable: o Materially increase the duty, risk, or burden upon the obligor o Personal rights o Expressly forbidden by the contract o Prohibited by law Page 1 of 3 Setoff: a counterclaim arising out of entirely separate matters that the obligor may have against the assignor, as long as they arose before he had notice of the assignment. Pg. 303 Implied warranties: obligation imposed by law upon the assignor of a contract right Express warranty: explicitly made contractual promise regarding contract rights transferred Delegation of Duties: a transfer of a contractual obligation to a third party  Contractual duties are not assignable, but their performance generally may be delegated to a third person.  Ex. A promises to sell B a new car, for which B promises to pay $10,000 by monthly installments over the next 3 years. If A and D agree that D should deliver the car to B, this would not constitute an assignment but would be a delegation of duties between A and D. A would be the delegator, D would be the delegatee, and B would be the obligee.  The contractual are not delegable if: 1. The nature of the duties are personal in that the oblige has a substantial interest in having the delegator perform the contract (ex. teachers, artist) 2. The performance is expressly made nondelegable 3. The delegation is prohibited by statute or public policy Novation: if the delegator desires to be discharged of the duty, she may enter into an agreement by which she obtains the consent of the obligee to substitute a third person (the delegatee) in her place. The delegator is discharged and the third party becomes directly bound on his promise to obligee. Third-Party Beneficiary Contracts: a contract in which a party (the promisor) promises to render a certain performance not to the other party (the promise) but to a third person (the beneficiary) 2 types: 1. Intended beneficiary contracts: is intended by the two parties to the contract (the promisor and promise) to receive a benefit from the performance of their agreement. Court enforces the rights to contract.  Ex. Abbot promises Baldwin to deliver a car to Carson if Baldwin promises to pay $10,000. Carson is the intended beneficiary.  2 types of intended beneficiaries: o Donee beneficiary: a third party intended to receive a benefit from the contract as a gift.  Ex. life insurance policy  May enforce the contract against the promisor o Creditor beneficiary: a third person intended to receive a benefit from the contract to satisfy a legal duty owed to him. Page 2 of 3