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MGMT 212
Third Party Rights (Ch 16.)
17
Management
Undergraduate 2
06/23/2009

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Term
Rule of Privity of Contract
Definition
Only the parties to a contract have rights and duties in that contract.
Term
Assignment
Definition
A party to a contract (assignor) assigns his rights under the contract to a third party (assignee). // An assignee takes only those rights that the assignor originally had (the original contract doesn't change). An assignee takes the claim subject to all defenses against the assignor. // No consideration necessary!
Term
Rights that can't be Assigned
Definition
1.) When a statute expressly prohibits an assignment. 2.) The right to receive personal or confidential services may not be assigned w/o consent of the obligor. 3.) A contract right can't be assigned if the assignment will materially increase or alter the risk of the obligor. 4.) Reasonable contractual prohibitions (antiassignment clauses).
Term
Anti-assignment Clause
Definition
Restrictions on the power to assign contract rights operate only against the parties; these restrictions are not effective to prevent assignment by law (death or bankruptcy). There are exceptions to the enforceability of anti-assignment clauses.
Term
Notice of the Assignment
Definition
Although it is NOT necessary to give notice of assignment to an obligor, it is wise to do so. // If notice of an assignment isn't given, the obligor may render his or her performance to the assignor.
Term
Delegation of Duties
Definition
A party to a contract may transfer his contractual obligation to perform an act. // Delegation doesn't relieve delegator of the obligation to perform in the event that the delegatee fails to perform. Obligee must accept performance from the delegatee unless the duty is one that cannot be delegated.
Term
Form required for Delegation
Definition
No special form required. An intention to make the delegation is all that is necessary.
Term
Form required for Assignment
Definition
No special form, only the types required by Statutes of Fraud must be in writing.
Term
Duties that can't be Delegated
Definition
1.) Personal duties that depend upon the skill or talents of the obligor (w/o consent of other party). 2.) When special trust has been placed in the obligor. 3.) When performance by a third party will materially vary from the performance expected by the obligee. 4.) When the contract expressly prohibits delegation.
Term
Liability of the Delegatee
Definition
Obligee may 1.) hold the delegatee liable if the delegatee has made a promise of performance that will directly benefit the obligee. There has been an "assumption of duty." 2.) Hold the delegator liable.
Term
Assignment of "All Rights"
Definition
This means an assignment and delegation of all rights and duties. Otherwise, be more specific.
Term
Third Party Beneficiary (3PB) Contract
Definition
The 3PB is a stranger to the contractual relationship of the parties to a contract. The third party beneficiary makes NO promise and gives NO consideration to the promisor who is to render performance. There must be INTENTION of the parties to the contract to confer a benefit upon the 3PB.
Term
Intended Beneficiaries
Definition
An intended beneficiary has rights and therefore may enforce contractual promises, even though not a party to the contract. // 1.) Creditor beneficiary. 2.) Donee beneficiary.
Term
Creditor Beneficiary
Definition
Promisor promises to pay a debt that promisee owes to a third party. The creditor beneficiary can enforce the promisor's promise.
Term
Donee Beneficiary
Definition
A contract is made for the express purpose of giving a gift to a third party. The donee beneficiary can enforce the promisee's promise.
Term
When the Rights of a 3P Vest
Definition
An intended beneficiary has a legal right to enforce the contract against the promisor after the beneficiary's rights vest. The 3PB's rights vest so that the original contracting parties cannot modify, alter, change, rescind, or terminate the contract when the beneficiary: 1.) demonstrates manifest assent to the contract; or 2.) materially changes his or her position in detrimental reliance on the contract. // If the parties to the contract expressly reserve the right to cancel, rescind, or modify the contract, the intended 3PB is subject to any change, rescission, or cancellation.
Term
Incidental Beneficiary
Definition
Incidental beneficiaries have no standing to enforce a contract. Was this party expressly designated as a beneficiary of a contract?
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