Term
What is Privity of Contract?
Exceptions? |
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Definition
only the original parties to a contract have rights and liabilities under the contract
EXceptions:
(1) Assignment or Delegation
(2) third party beneficiary contract |
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Term
| What are assignments and delegations? |
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Definition
when one of the parties in a contract transfers to another party an interest or duty in the contract
assignment: transfer of contractual rights
delegation: transfer of contractual duties |
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Term
| What is the effect of an assignment? |
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Definition
(1) rights of the assignor are extinguished
(2) assignee has a right to demand performance from the obligor; and
(3) assignee's rights are subject to defenses the obligor has against the assignor |
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Term
| Rights that cannot be assigned |
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Definition
(1) when a statute prohibits assignment
(2) when a contract is personal in nature
(3) when assignment materially changes the rights or duties of the obligor
(4) When a contract prohibits assignment |
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Term
| What are assignments that a contract cannot prevent? |
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Definition
(1) a right to receive money
(2) rights in real estate
(3) rights in negotiable instruments
(4) a right to receive damages for breach of a sales contract or for payment of amount owed under it |
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Term
| Notice of assignment: when is an assignment effective? |
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Definition
| assignment is effective immediately, with or without notice. |
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Term
| What happens when the same right is assigned to more than one party? |
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Definition
| in most states, the first assignment in time is the first in right. in some states, assignment is given to the first assignee who gives notice. |
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Term
| What constitutes an obligor's discharge of obligation? |
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Definition
| until an obligor has notice, his obligation can be discharged by performance to the assignor. Once obligor has notice, only performance to the assignee can act as a discharge |
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Term
| Duties that cannot be delegated? |
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Definition
(1) when the duties are personal in nature
(2) when performance by a third party will vary materially from that expected by the oblige
(3) when contract prohibits delegation |
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Term
| What is the effect of a delegation? |
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Definition
| obligee must accept performance from the delegatee, unless the duty is one that cannot be delegated. If delegatee fails to perform, the delegator is liable. |
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Term
| What is the liability of a delegatee? |
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Definition
| If delegatee makes a promise of performance that will directly benefit the obligee, there is an "assumption of duty." breach of this duty makes the delegatee liable to obligee, and obligee can sue both delegatee and delegator. |
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Term
| Assignment of "All Rights" |
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Definition
| a contract that provides in general words for an assignment of all rights ("I Assign the Contract") is both an assignment of rights and delegation of duties. |
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Term
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Definition
| when assignment is made and duties are delegated, the assignor/delegator is relieved of future duties (even if delegatee breaches) when the other contracting party agrees to release the assignor and look only to the assignee/delegatee for performance. |
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Term
| What is a third party beneficiary? |
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Definition
| original parties to the contract intend at the time of contracting to directly benefit a third person. |
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Term
| What is a creditor beneficiary |
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Definition
| one who benefits from a contract in which a promisor promises to pay a debt that the promisee owes to the beneficiary |
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Term
| What is a donee beneficiary? |
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Definition
| one who benefits from a contract made for the express purpose of giving a gift to him or her. |
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Term
| When does an intended beneficiary exist? |
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Definition
(1) when services are rendered to a third party
(2) when third party has right to control details
(3) third party is designated an intended beneficiary under the contract. |
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Term
| When do Third Party Beneficiary Right Vest? |
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Definition
(1) when the 3party materially alters position in reliance on the contract
(2) when the 3party files a suit on the promise, or
(3) when the 3party consents to the promise at request of promisor/promisee |
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Term
| Intended v. Incidental Beneficiary |
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Definition
an incidental beneficiary cannot sue to enforce the contract
(1) Reasonable person test: would a reasonable person in his/her position believe that the promisee intended to give the beneficiary the right to sue to enforce the contract |
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