Contract Law: Third Party Contracts

Third (3rd) Parties Involved in Contracts

Third party beneficiary contract Traditional (primarily for third party benefit) No incidental beneficiaries Creditor Donee Restatement-“Beneficiary’s right effectuates the Intent of the parties” Unenforceable until rights best by reliance, suit, or assent or when contract says it vests Once vested, beneficiary may sue promisor for damages or specific performance Creditor beneficiary may also sue promise Alternative Sec. 90 Promise may also sue promisor Beneficiary rights subject to any defenses or claims of promissory v. promisee.

Assignment & Delegation

Assignment:

All rights assignable (assignor loses right entirely) EXCEPT: materially alters obligor’s duty, risk or where Contract doesn’t exist yet Revocation Gratuitous OK if notice of revocation, death of assignor, subsequent assignment, etc. Irrevocable where reliance, writing or symbol Non-gratuitous not generally revocable- except fraud, etc. Once he gets notice of assignment, obligor can only perform to assignee Modification of contract-OK under UCC good faith Obligator has all defenses against assignee that he has against assignor (up until notice)

Delegation:

Is the contract performable? Conditions Express Constructive Order of performance Preference for simultaneous UNLESS: (Restatement 234(1)) Contracts says Otherwise Obvious time order issues may arise e.g. One performance ` takes time and the other doesn’t But periodic Payments-alternating conditions Good faith Prevention Hindrance Failure to cooperate Others

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