CHAPTER 16: THIRD PARTIES
TO CONTRACTS
© 2013 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as
permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.
TOPICS COVERED CHAPTER 16:
THIRD PARTIES TO CONTRACTS
A. Assignment of Rights.
B. Delegation of Duties.
C. Third-Party Beneficiary Contracts.
© 2013 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as
permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.
2
ASSIGNMENT OF RIGHTS
 Definition of Assignment – voluntary
transfer to a third party of the rights
arising from a contract so that the
assignor's right to performance is
extinguished.
 Assignor – party making an
assignment. 
© 2013 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as
permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.
3
ASSIGNMENT OF RIGHTS
 Assignee – party to whom contract
rights are assigned.
 Obligor – party owing a duty to the
assignor under the original contract.
 Obligee – party to whom a duty of
performance is owed under a
contract.
© 2013 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as
permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.
4
ASSIGNMENT OF RIGHTS
 Requirements of an Assignment –
include intent but not consideration.
• Revocability of Assignments– if
assignee gives consideration, assignor
may not revoke the assignment without
the assignee's consent.
• SPEELMAN V. PASCAL (1961).
© 2013 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as
permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.
5
ASSIGNMENT OF RIGHTS
 Requirements of an Assignment –
include intent but not consideration.
• Partial Assignments – transfer of a
portion of contractual rights to one or
more assignees.
 Rights That Are Assignable.
© 2013 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as
permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.
6
ASSIGNMENT OF RIGHTS
 Rights That Are Not Assignable.
• Assignments that materially increase the
duty, risk, or burden upon the obligor.
• Assignments of personal rights.
• Assignments expressly forbidden by the
contract.
• REISER V. DAYTON COUNTRY CLUB COMPANY
(1992).
© 2013 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as
permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.
7
ASSIGNMENT OF RIGHTS
 Rights That Are Not Assignable.
• Assignments Prohibited by Law.
 Rights of the Assignee.
• Obtains Rights of Assignor: assignee
stands in the shoes of the assignor.
• Notice.
© 2013 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as
permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.
8
ASSIGNMENT OF RIGHTS
 Implied Warranties of Assignor.
• Implied Warranties of Assignor.
• In absence of express intentions,
assignor implicitly warrants:
• He will do nothing to defeat or impair the
assignment.
• The assigned right actually exists. 
© 2013 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as
permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.
9
ASSIGNMENT OF RIGHTS
 Implied Warranties of Assignor.
• In absence of express intentions,
assignor implicitly warrants:
• Any writing evidencing right that is
delivered or exhibited to assignee.
• Assignor has no knowledge of any fact that
would impair value of assignment.
© 2013 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as
permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.
10
ASSIGNMENT OF RIGHTS
 Express Warranties of Assignor.
• Contractual promise regarding property
or contract rights transferred.
 Successive Assignments of the Same
Right.
• What issues do you see here?
© 2013 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as
permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.
11
DELEGATION OF DUTIES
 Definition of Delegation – transfer to
a third party of a contractual
obligation.
 Delegator – party delegating his duty
to a third party.
 Delegatee – third party to whom the
delegator's duty is delegated. 
© 2013 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as
permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.
12
DELEGATION OF DUTIES
 Obligee – party to whom a duty of
performance is owed by the
delegator and delagatee.
 Non-Delegable Duties.
• Duties that are personal.
• Duties that are expressly nondelegable.

© 2013 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as
permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.
13
DELEGATION OF DUTIES
 Non-Delegable Duties.
• Duties whose delegation is prohibited
by statute or public policy.
• PUBLIC SERVICE COMMISSION OF MARYLAND
V. PANDA BRANDYWINE, L.P. (2003).
© 2013 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as
permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.
14
DELEGATION OF DUTIES
 Duties of the Parties.
• Delegation – delegator is still bound to
perform original obligation.
• Novation – contract, to which the obligee
is a party, substituting a new promisor for
an existing promisor, who is consequently
no longer liable on the original contract
and is not liable as a delegator.
© 2013 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as
permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.
15
THIRD PARTY BENEFICIARY
CONTRACTS
 Definition – a contract in which one
party promises to render a
performance to a third person (the
beneficiary). 
© 2013 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as
permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.
16
THIRD PARTY BENEFICIARY
CONTRACTS
 Intended Beneficiaries – third
parties intended by the two
contracting parties to receive a
benefit from their contract.
• Donee Beneficiary – a third party
intended to receive a benefit from the
contract as a gift. 
© 2013 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as
permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.
17
THIRD PARTY BENEFICIARY
CONTRACTS
 Intended Beneficiaries.
• Creditor Beneficiary – a third person
intended to receive a benefit from the
agreement to satisfy a legal duty owed
to her.
• STINE V. STEWART (2002). 
© 2013 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as
permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.
18
THIRD PARTY BENEFICIARY
CONTRACTS
 Intended Beneficiaries.
• Rights of Intended Beneficiaries – an
intended donee beneficiary may
enforce the contract against the
promisor; an intended creditor
beneficiary may enforce the contract
against either or both the promisor and
the promisee. 
© 2013 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as
permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.
19
THIRD PARTY BENEFICIARY
CONTRACTS
 Intended Beneficiaries.
• Vesting of Rights – if the beneficiary's
rights vest, the promisor and promisee
may not thereafter vary or discharge
these vested rights. 
© 2013 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as
permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.
20
THIRD PARTY BENEFICIARY
CONTRACTS
 Intended Beneficiaries.
• Defenses Against Beneficiary – in an
action by the intended beneficiary of a
third-party contract to enforce the
promise, the promisor may assert any
defense that would be available to her
if the action had been brought by the
promisee.
© 2013 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as
permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.
21
THIRD PARTY BENEFICIARY
CONTRACTS
 Incidental Beneficiary – third party
whom the two parties to the
contract have no intention of
benefiting by their contract and who
acquires no rights under the
contract.
© 2013 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as
permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.
22