MGMT 402 - Exam #2 - Ch 12 - Short

What is an incidental beneficiary?

A third party who benefits as a side effect of a contract and cannot enforce it merely because of that benefit. Example: A restaurant expects more customers from a nearby stadium.

What is an intended beneficiary?

A third party the agreement deliberately benefits, who can enforce the benefit once their rights vest. Example: A land-sale contract specifically grants access to a local library.

What does it mean for an intended beneficiary's rights to vest?

The rights become established and generally cannot be removed without the beneficiary's agreement. Your professor emphasizes the beneficiary learning about and accepting the promised benefit.

How do contractual rights differ from duties?

Rights are what you receive; duties are what you must do. Example: A bicycle buyer has the right to receive the bike and the duty to pay.

What is an assignment of rights?

A transfer of an existing contractual right to another person; rights are generally assignable unless restricted. Example: A seller transfers the right to receive a $100 payment to a friend.

Who are the assignor, assignee, and obligor?

The assignor transfers the right, the assignee receives it, and the obligor owes the performance.

What notice rule does your professor emphasize for assignment?

Notify the person owing performance so they know whom to pay or perform for; without notice, performance to the original party may discharge the obligation.

How much of a contractual right can be assigned?

All or part, but never more than the assignor possesses. The assignor loses the portion transferred.

What is an anti-assignment clause?

A contract provision restricting assignment, sometimes allowing it only with the other party's consent.

Why may personal-service rights be unassignable?

The service provider may have an important interest in whom they serve. Example: Transferring your right to a haircut to another client may require the stylist's consent.

When does material alteration prevent assignment?

When the transfer substantially changes the other party's duties, burden, or risk. Example: Transferring ongoing insurance coverage to someone with a different risk profile.

What is the restriction on assigning future rights?

A merely possible right under a contract not yet made cannot ordinarily be assigned under the lecture's rule. An existing contractual right payable later is different.

What are successive assignments?

Attempts to assign the same contractual right to multiple people at different times, creating competing claims.

What is the American rule for successive assignments?

The first assignee generally has priority. Memory aid: American = first assigned.

What is the British or English rule for successive assignments?

The qualifying assignee who first notifies the obligor generally has priority, subject to applicable requirements. Memory aid: British = first notice.

What is delegation of duties?

Arranging for someone else to perform your contractual obligation; duties are generally delegable unless restricted. Example: A buyer arranges for a friend to pay the car seller.

Does delegation require notice, and does it release the original party?

Notice is not always required, but the original party generally remains liable if the substitute fails to perform.

What is an anti-delegation clause?

A contract provision restricting substitute performance, sometimes allowing delegation only with the other party's consent.

Why may personal-service duties be nondelegable?

The agreement depends on a particular person's skill or identity. Example: An artist hired to paint a portrait cannot simply substitute another painter without consent.

How can special trust prevent delegation?

The other party specifically relies on the original person's judgment or reliability. Example: A client selects a particular financial adviser because of personal confidence in their judgment.

When does material alteration prevent delegation?

When substituting another performer would substantially change the agreed performance or bargain.

What is a novation?

An agreed replacement of an original party in which the replacement takes over the relevant rights and duties and the original party is fully released; all three parties agree.

How does novation differ from ordinary delegation?

Delegation leaves the original party liable; novation releases that party from the replaced obligations.