Third-Party Rights
Three ways an outsider touches a contract: it was made for them (beneficiary), a right was handed to them (assignment), or a duty was handed off (delegation). Each has one make-or-break question.
Third-party beneficiaries
Can the outsider sue?
Did the contracting parties intend to benefit this person?
Incidental beneficiary—no rights, ever. Benefiting in fact isn't enough.
Have the beneficiary's rights vested?
The original parties may still modify or rescind freely.
The beneficiary can enforce
Against the promisor—and a creditor beneficiary may also sue the promisee on the old debt.
Intended vs. incidental: was performance to run to the third party—are they named, does payment satisfy a debt to them (creditor beneficiary), or was it a gift (donee beneficiary)? Vesting: rights vest when the beneficiary (1) assents at a party's request, (2) sues, or (3) materially relies. Before vesting, the deal can change under them.
Rosa hires Liv to build a patio and directs the $5,000 fee to Noodle, to pay off Rosa's old debt—Noodle is a creditor beneficiary. Once Noodle relies (cancels his collection suit), his rights vest; Rosa and Liv can no longer reroute the money. The coffee cart next door that hoped patio traffic would boost sales? Incidental—no claim when the patio dies.
Defenses travel: the promisor may raise against the beneficiary any defense arising from the contract itself (failure of consideration, the promisee's breach)—the beneficiary stands in no better shoes.
Assignment of rights
A present transfer of a contract right—no consideration or writing needed (though a gratuitous assignment is revocable; one for value is not). After notice, the obligor must pay the assignee; paying the assignor no longer counts. The assignee takes subject to all defenses the obligor had against the assignor.
| Assignable? | Rule |
|---|---|
| Most rights | Yes—including rights to payment, freely |
| Material change | No—if it substantially alters the obligor's duty or risk (personal-service “rights” to a particular person, requirements contracts that would explode) |
| Anti-assignment clause | “Assignments prohibited” → assignment still works, assignor just breaches; “assignments void” → no power to assign at all |
| Multiple assignments | Gratuitous: last in time wins. For value: first in time—unless a later BFP assignee gets payment or judgment first without notice |
Liv assigns her right to Rosa's $5,000 patio payment to Lana for value and Lana notifies Rosa. Rosa pays Liv anyway—Rosa still owes Lana. And any defense Rosa had against Liv (the patio leaks) works against Lana too.
Delegation of duties
Duties may be delegated—but the delegator remains liable unless the obligee agrees to a novation (releasing the original party and substituting the new one). The delegatee is liable to the obligee only if they received consideration for assuming the duty (making the obligee a third-party beneficiary of the delegation).
Nondelegable: duties involving personal skill, taste, or judgment (the portrait painter, the surgeon); duties where the obligee placed special trust in the delegator; and anything the contract forbids delegating. Note the asymmetry: a clause barring assignment of “the contract” is read to bar delegation—the more likely concern.
Rosa hires Liv, a celebrated muralist, to paint the café wall. Liv sends Noodle instead—nondelegable, Rosa may refuse. But Liv's crew can pour the patio concrete: routine work delegates fine, and if it cracks, Rosa can still sue Liv—delegation never releases the delegator.
Where the points are
The traps examiners actually set.
- Most tested
- Intended vs. incidental beneficiaries; vesting cutting off modification; payment to the assignor after notice; the delegator's continuing liability absent novation.
- Classic traps
- An incidental beneficiary suing (never); “prohibited” vs. “void” anti-assignment clauses; assuming delegation releases the delegator; a donee beneficiary suing the promisee (nothing owed); forgetting the assignee takes subject to defenses.
Keep going: Assignment & TPB MEE guide Contracts Attack Sequences Formation deep dive