Third%20Party%20Rights

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)