PRIVITY OF CONTRACT As a general rule, only the parties to a contract – thepromisor and the promisee – owe any duties and enjoy anyrights arising from the contract. Common law recognizesthree exceptions: Assignment (of Rights): A transaction whereby anobligee (the assignor) transfers her rights to somethird party (the assignee). As a consequence, theassignor’s contract rights are extinguished, and theassignee may demand any performance due to theassignor. Delegation (of Duties): A transaction whereby anobligor (the delegator) frees himself from his dutiesby having some third party (the delegatee) performthose duties. Despite his delegation, the delegatorremains liable for his contract duties if the delegateefails to perform. Third-Party Beneficiary Contract: A third party, X,is intended, by the terms of the contract between Yand Z, to benefit from Y’s and Z’s performance of thecontract.Ch. 9: Contracts: Third Party Rights, Discharge, Breach, and Remedies - No. 1Business Law Today: The Essentials (7th ed.)SCOPE OF ASSIGNMENT As a general rule, all contract rights may be assigned,except where:(1) the assignment is prohibited by statute;(2) the contract to be assigned is for personal services,unless all that remains under the contract is a moneypayment for services previously rendered;(3) the assignment would materially increase the risk oralter the duties of the obligor; or(4) the contract specifically forbids assignment. There are exceptions to this exception, namely thecontract may not prevent the assignment of(a) the right to receive money,(b) rights in, or the alienation of, real property,(c) negotiable instruments, orCh. 9: Contracts: Third Party Rights, Discharge, Breach, and Remedies - No. 2Business Law Today: The Essentials (7th ed.)(d) the right to recover damages for breach ofcontract or for payment of an account under theUCC.Ch. 9: Contracts: Third Party Rights, Discharge, Breach, and Remedies - No. 3Business Law Today: The Essentials (7th ed.)SCOPE OF DELEGATION As a general rule, all contract duties may be delegated,except where:(1) the delegator owes the obligee fiduciary duties orother duties arising from a special trust in thedelegator;(2) performance depends on the personal skills or talentsof the delegator (e.g., Roger Clemens cannot delegatehis pitching duties to Annika Sorenstam);(3) performance by the delegatee would vary materiallythe performance expected by the obligee (e.g., SueSmith contracts with Annika Sorenstam to give hergolf lessons; Annika cannot delegate those duties toher caddie, because Sue wanted Annika’s personalperformance); or(4) the contract specifically forbids delegation. If the delegation is enforceable, the obligee must acceptperformance by the delegatee. But, if the delegatee fails to perform adequately, thedelegator remains liable for the delegatee’s breach.Ch. 9: Contracts: Third Party Rights, Discharge, Breach, and Remedies - No. 4Business Law Today: The Essentials (7th ed.)INTENDED BENEFICIARIES Intended Beneficiary: A third party for whose benefit acontract is formed. Creditor Beneficiary: A third party who benefitsfrom a contract in which the promisor promises to paya debt owed by the promisee to the third-partybeneficiary. Donee Beneficiary: A third party for whose benefit acontract was made whereby the promisor promised thepromisee to make a gift to the third-party beneficiary. An intended third-party beneficiary’s rights vest (i.e.,become enforceable), subject to any reservation of rights tothe contracting parties, when one of the following occurs:(1) the third party demonstrates manifest assent to thecontract (e.g., sends a letter acknowledging awarenessof and consent to the contract for her benefit);(2) the third party materially alters her position indetrimental reliance on the contract (e.g., sells herautomobile in anticipation of receiving a newautomobile pursuant to the contract); orCh. 9: Contracts: Third Party Rights, Discharge, Breach, and Remedies - No. 5Business Law Today: The Essentials (7th ed.)(3) some condition for vesting occurs (e.g., an insureddies vesting the policy beneficiary’s rights).Ch. 9: Contracts: Third Party Rights, Discharge, Breach, and Remedies - No. 6Business Law Today: The Essentials (7th ed.)INCIDENTAL BENEFICIARIES Incidental Beneficiary: A third party who benefits fromthe performance of a contract, but whose benefit was notthe reason the contract was formed. Courts generally ask whether a reasonable person wouldbelieve that the promisee intended to confer on the thirdparty(1) the right to bring suit to enforce the contract, and,thereby,(2) the right to benefit from the contract. In so doing, courts consider whether:(1) performance was rendered directly to the third party;(2) the third party has the right to control details of theperformance; and(3) the third party is expressly designated in the contract.Ch. 9: Contracts: Third Party Rights, Discharge, Breach, and Remedies - No. 7Business Law Today: The Essentials (7th ed.)DISCHARGE AND CONDITION Discharge: The termination of a party’s obligations arisingunder a contract. Discharge occurs either when:(1) both parties have fully performed their contractualobligations; or(2) events, conduct of the parties, or operation of lawrelease the parties from their obligations to perform. A party’s obligations to perform under a contract may beeither absolute or conditioned on the occurrence ornonoccurrence of some event. Condition: A contractual qualification, provision, orclause which creates, suspends, or terminates theobligations of one or both parties to the contract,depending on the occurrence or nonoccurrence ofsome event.Ch. 9: Contracts: Third Party Rights, Discharge, Breach, and Remedies - No. 8Business Law Today: The Essentials (7th ed.)CONTRACTUAL PERFORMANCE Discharge by Performance: A contract terminates whenboth parties perform or tender performance of the actsthey have promised. Tender: An unconditional offer to perform anobligation by a person who is ready, willing, and ableto do so.