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Third Party Rights

Third Party Rights. Chapter 7. Introduction. Only the Parties to a contract have rights and liabilities under the contract. Exceptions: Assignment or Delegation. Third party beneficiary contract. Assignments.

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Third Party Rights

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  1. Third Party Rights Chapter 7

  2. Introduction • Only the Parties to a contract have rights and liabilities under the contract. • Exceptions: Assignment or Delegation. • Third party beneficiary contract

  3. Assignments • Assignment - Transfer of rights in a bilateral contract to a 3rd party. • Original Contract Obligor Obligee/ Assignor Assignee

  4. Assignments Rights cannot be assigned: –If the assignment is contrary to statute. –When a contract is personal in nature. –If the assignment materially changes the rights or duties of the obligor. –If the contract stipulates the right cannot be assigned. •Valid notice must be given to all parties.

  5. Delegation • Contractual duties in a bilateral contract that are delegated to a 3rd party. • Original Contract • Duties Owed After Delegation Obligee Obligor Delegatee

  6. Duties that Cannot be Delegated When special trust has been placed on the obligor. When performance requires personal skill or talents. When performance will vary materially from oblige expectations. When the contract expressly prohibits delegation.

  7. Effect of a Delegation Delegator remains liable. Delegatee liable if delegation contract creates a third party beneficiary relationship in the obligee.

  8. Third Party Beneficiaries • Intended • Original parties to the contract intend at the • time of contracting that the contract • performance directly benefits a third person. • Incidental • Not intended to benefit from contract (Has no rights under the contract)

  9. Types of Intended Beneficiaries Creditor Beneficiaries. (Benefit conveyed to satisfy a debt) and Donee Beneficiaries. (Benefit conveyed as a gift)

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