Exam 16: Third Parties to Contracts

A contract in which a party (the promisor) promises to render a certain performance not to the other party (the promisee) but to a third person (the beneficiary) is called a third-party beneficiary contract.

Which of the following is NOT true concerning the requirements for an effective assignment?

The privilege to play tennis and socialize at the Capital City Country Club (CCCC) is obtained through application, references, resumes, and fees. Steven and Chanel want to assign the remaining 4 years of their 5-year membership to Charles and Prissy so that Steven and Chanel may join the posh Silver Hawk Tennis and Polo Club. CCCC sues to enjoin Steven and Chanel from assigning their membership. CCCC will most probably:

The State Opera Company has a contract with a famous tenor to perform in its production of La Boheme . If the tenor chooses, he may delegate his duties under the contract to an equally well-known tenor.

Unless otherwise provided by statute, an assignment may be made orally.

When contract terms prohibiting the assignment of rights exist, most courts will:

In some states, the vesting of a third party's rights occurs only when the third party learns of the contract and assents to it.

A partial assignment is a transfer of a portion of the contractual rights to one or more assignees.

Third party rights in contracts can arise by assignment of rights, delegation of duties, or in third party beneficiary contracts.

Donee beneficiaries and incidental beneficiaries are called intended beneficiaries.

Harold hired Blake Painters to paint his house. Blake decides he has too many jobs and delegates the duties to the Andrews Company. If Andrews does a poor job, and drips paint on Harold's flowers and windows, Harold:

Barbara owes Arthur $2,000. On July 1, Arthur assigns the right to the $2,000 to Caleb. Thereafter, on July 15, Arthur assigns the same right to David, who in good faith gives value for it and knows nothing about the first assignee. In this case:

Consideration must be received for an assignment to be effective.

Sandra purchases a life insurance policy naming her husband as beneficiary. His rights as a donee beneficiary vest at the time she purchases the policy, even though the policy permits her to cancel the policy or change beneficiaries.

The general rule is that an assignee stands in the shoes of the assignor. He acquires the rights of the assignor but acquires no new or additional rights.

a. What is a third party beneficiary? b. Distinguish between the following types of third party beneficiaries: creditor beneficiary; donee beneficiary; intended beneficiary, incidental beneficiary. Can all third parties that benefit from a contract sue to enforce rights under the contract? Explain.

The court in Public Service Commission of Maryland v. Panda-Brandywine, L.P.:

Darrell owns a parcel of land that is encumbered by a mortgage held by the First National Bank. Darrell agrees to sell the land to Paul for $50,000. Darrell and Paul together go to the First National Bank to discuss the sale and purchase with the banker. Darrell, Paul, and the banker sign an agreement stating that Paul will assume the mortgage and that Darrell will be discharged from all further liability on the mortgage. In this case:

Courts will enforce contracts for the benefit of all but which of the following?

In a third-party beneficiary contract, the third party's rights arise at the time the contract is formed.