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Third-Party Contracts Explained

This document discusses third-party contracts, highlighting the differences between third-party beneficiary contracts, novation, assignment, and delegation. It explains the roles of creditor beneficiaries, incidental beneficiaries, and the technicalities of assignment and delegation, including responsibilities and limitations. Additionally, it outlines types of third-party contracts such as joint, several, and joint and several contracts.

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12 views14 pages

Third-Party Contracts Explained

This document discusses third-party contracts, highlighting the differences between third-party beneficiary contracts, novation, assignment, and delegation. It explains the roles of creditor beneficiaries, incidental beneficiaries, and the technicalities of assignment and delegation, including responsibilities and limitations. Additionally, it outlines types of third-party contracts such as joint, several, and joint and several contracts.

Uploaded by

quynhdths180794
Copyright
© All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as PDF, TXT or read online on Scribd

Unit 7

T H I R D PA RT I E S A N D
C O N T R AC T S
LEARNING OBJECTIVES

• Discuss the difference between a third-party beneficiary


contract and a novation.
• Explain the difference between assignment of a contract
and delegation of duties under it.
• Describe the different types of contracts involving more
than two people.
L I M I TAT I O N O F
C O N T RA C T UA L RE L AT I O NS H I P

• A contract creates both rights and obligations. Normally


who is not a signer of the contract has no right to be
benefited from the contract or any responsibility.
7 . 1 I N V O L V I N G A T H I RD
P A RT Y: C RE D I T O R
B E N E F I C I A RY, A S S I G N M E N T,
D E L E G AT I O N
Creditor beneficiary: promisee owes an
obligation or duty that will be discharged to
the extent that promisor performs promise

Incidental beneficiary: incidentally benefits


promisee
WA YS T O I N VO L V E
T H I RD P A RT I E S 1

• Novation is the termination of a contract and substitution


of a new one with the same terms but with a new party.
WA YS T O
I NVO LV E
T H I RD P A RT I E S
2

Assignment is the
conveyance of rights to a
person not a party.
• Assignor
• Assignee
T E C H NI C A L I T I E S
O F A S S I G NME NT

• Notice – notice need


not be given to other
party in order to
make the assignment
effective as between
the assignor and the
assignee
T E C H NI C A L I T I E S
O F A S S I G NME NT
2

• Many assignees? “First


come first served”
• If a party to a contract
makes more than one
assignment and the
assignees all give notice, the
law gives priority in the
order in which the
assignments were made.
WA YS T O I N VO L V E
T H I RD P A RT I E S 3

• Delegation is the transfer of


duties without transfer of
rights.
• Only when performance is
standardized may one
delegate its performance to
another.
W H AT
C O UL D B E
E A S I LY
D E L E G AT E D

Contracts calling for


the performance
which is standardized,
unskilled work or
labor may in most
instances be delegated
W H AT C A NNOT
B E D E L E G AT E D

• Neither party can delegate the


duties under a contract as readily
(without hesitation) as the rights
can be assigned because a
“ personal” element more
frequently exists in the
performance aspect of a contract.
It would change the obligation
thereof if another performed it.
RE S P O N S I B I L I T I E S
I N D E L E G AT I O N

In all cases of delegation, the


delegating party remains fully liable
under the contract.
Suit may be brought for any breach
of contract even though another
party actually performed.
In such an event, the delegating
party may in turn sue the party
who performed inadequately.
7. 2 T YP E S OF
T H I RD - P A RT Y
C O N T RA C T S

• Joint contracts - obligate


two or more people
together toward
performance
• Several contracts - when
parties agree to perform
the same obligation
• Joint and several contracts -
bind two or more people
jointly and severally

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