January 20, 2025 • 10 mins
Welcome back to the Bar Exam Toolbox podcast! This is the first episode of a two-part discussion of third-party rights in contracts. Today we focus on assignments and delegations, starting with the basic definitions and the specific rules governing them, and then applying these concepts to some practical scenarios. Next week, we'll cover third-party beneficiaries.
In this episode, we discuss:
- Overview of assignment and delegation of contractual rights and obligations
- Key terminology used in third-party rights in contracts
- The rules governing assignment and delegation
- Illustrative examples of third-party rights
Resources:
Download the Transcript
(https://barexamtoolbox.com/episode-296-listen-and-learn-third-party-rights-in-contracts-part-1/)
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Thanks for listening!
Alison & Lee
Mark as Played
Transcript
Episode Transcript
Available transcripts are automatically generated. Complete accuracy is not guaranteed.
Lee Burgess (00:02):
Welcome back to the Bar Exam Toolbox podcast.
Today we're kicking off a two- partseries on third-party rights in contracts.
In this first episode, we'll focuson assignments and delegations.
Check back next week forPart 2 in this series.
Your Bar Exam Toolbox hosts are AlisonMonahan and Lee Burgess, that's me.
(00:22):
We're here to demystify the barexam experience, so you can study
effectively, stay sane, and hopefullypass and move on with your life.
We're the co-creators of the Law SchoolToolbox, the Bar Exam Toolbox, and the
career-related website CareerDicta.
Alison also runs TheGirl's Guide to Law School.
If you enjoy the show, please leavea review on your favorite listening
app, and check out our sister podcast,the Law School Toolbox podcast.
(00:43):
If you have any questions, don'thesitate to reach out to us.
You can reach us via the contactform on BarExamToolbox.com,
and we'd love to hear from you.
And with that, let's get started.
We're kicking off a two-part serieson third-party rights in contracts.
(01:05):
In this first episode, we'll focuson assignments and delegations.
These concepts are crucial forunderstanding how contractual
rights and obligations can betransferred to parties who weren't
originally involved in the agreement.
Let's dive in.
Third-party rights are implicated wheneversomeone who is not a party to the original
(01:25):
contract tries to enforce the contract.
These third-party rights generallyinvolve issues of assignments,
delegations, or third-party beneficiaries.
Today we'll cover assignmentsand delegations, and in our next
episode, we'll discuss third-partybeneficiaries and apply these
concepts to some practical scenarios.
Let's start withassignment and delegation.
(01:48):
Assignment and delegationinvolve a decision by a party
to a contract to transfer their
rights and/or obligations
under the contract to a third party.
Specifically, an assignment isthe transfer of a contractual
right - for example, to be paidor to receive goods or services.
A delegation is the transfer ofa contractual obligation - for
(02:10):
example, the obligation to make apayment or provide goods or services.
Note that while these are technicallyseparate concepts, the particular
language of the assignment is veryimportant in determining whether an
assignment is merely a transfer ofrights, or also a delegation of duties.
For example, an assignment that usesbroad language, like assignment of the
(02:32):
contract, will often be interpretedto include a delegation of the
unperformed duties under a contract.
Before we move on to our rules, weshould take a moment to review the
terminology used to describe theparties to an assignment or delegation.
These terms can get a little confusing,because the same parties are called
(02:53):
different things in different contexts.
If you're having a hard time keepingthem straight, you might find it helpful
to draw a quick diagram to illustratethe relationships between the terms.
The party that makes an assignmentis called the obligee under the
original contract, because they are thebeneficiary of the contractual obligation.
The other party to the originalcontract is called the obligor.
(03:16):
When the obligee makes the assignment,they become the assignor of their
right to receive performance.
The party to whom that right isassigned is called the assignee.
A party that makes a delegationis called the obligor under the
original contract, because theyhave the obligation to perform.
(03:39):
As we just discussed, the other partyto the original contract is the obligee.
When the obligor makes thedelegation, they become the
delegator of their obligation.
The party to whom the obligationis delegated is the delegatee, also
sometimes referred to as the delegate.
(04:00):
As you can see, things can geta little confusing because every
contract contains both rights andobligations going in both directions.
As a result, the same party can becalled several different things,
depending on their relationshipto the other parties involved.
Let's try to put these terms incontext with a quick illustration.
(04:21):
Let's say Painter and Homeowner enterinto a contract in which Painter agrees
to paint Homeowner's house for $5,000.
With respect to the obligation topaint Homeowner's house, Painter is the
obligor and Homeowner is the obligee.
But with respect to the obligationto pay $5,000, Homeowner is the
(04:42):
obligor and Painter is the obligee.
Now, let's say that Homeownerassigns his right to have his
house painted to Neighbor.
In that case, Homeownerbecomes the assignor and
Neighbor becomes the assignee.
If, however, instead of assigning hisright to painting services, Homeowner
(05:02):
delegates his obligation to pay $5,000,Homeowner then becomes the delegator
and Neighbor becomes the delegatee.
And yes, if Homeowner both assigns hisrights and delegates his obligations
to Neighbor, then Homeowner is both anassignor and delegator, and Neighbor
(05:24):
is both an assignee and delegatee.
The same would apply to the painter'srights and duties if he were to assign or
delegate to a subcontractor, for example.
Okay, let's move on to ourrules, starting with assignment.
Here's the general rule (05:39):
Rights and benefits under a contract may be
transferred to a third party if, [1]the assignor manifests his intent
to transfer the rights; and [2] theassignee assents to the assignment.
Consideration is notrequired for an assignment.
But if consideration is provided,the assignment becomes irrevocable.
(06:02):
Gratuitous assignments may subsequentlybe revoked, unless an exception applies.
We won't go into those exceptions today.
An assignment is valid unless, [a]it materially alters what is expected
under the contract; [b] it isprohibited by law or public policy;
or [c] it is precluded by contract.
(06:23):
B and C are pretty straightforward,but what does it mean for an
assignment to materially alter whatis expected under the contract?
Well, that could occur when theassignment, [a] materially changes the
duty of the obligor; [b] materiallyincreases the burden or risk imposed on
the obligor; [c] materially impairs theobligor's chance of obtaining return
(06:45):
performance; or [d] materially reducesthe value of the return performance.
To illustrate, let's revisit ourearlier example of the contract
between Homeowner and Painter.
Let's assume Homeowner livesin a community of identical
houses in identical condition.
If Homeowners assigns his right tohave his house painted to his next-door
(07:06):
neighbor, the assignment will likely bevalid, because it does not materially
alter what is expected under the contract.
There is no additional burden onPainter, because the neighbor's house
is the exact same size in the exactsame condition, and essentially in the
same location as Homeowner's house.
Now let's assume instead that Homeownerassigns his right to have his house
(07:28):
painted to his friend that lives 50miles farther away from Painter, in
a dilapidated house that is twicethe size of Homeowner's house.
Under these facts, the assignment willlikely be invalid, because it materially
increases the burden on the painter.
Painter will have to travel agreater distance to paint a larger
(07:48):
house that is in worse condition.
Now that we've covered how to make avalid assignment, let's go over the
rights of the assignor and assignee.
An assignee may sue theobligor for non-performance.
Any defense to enforcement that couldbe used against the assignor may
also be used against the assignee.
(08:09):
That basically means that afterthe assignment, the assignee steps
into the shoes of the assignor whenseeking to enforce the contract.
An assignee may also sue the assignorfor wrongful revocation of an assignment
or for breach of an implied warranty.
Alright, that's it forour assignment rules.
Let's move on to the rules for delegation.
(08:32):
All contracted duties are delegableunless, [a] the contract prohibits
delegations or assignments; [b] thedelegation is against public policy;
[c] the contract is for personalservices that calls for the exercise
of personal skill or discretion;or [d] the delegation materially
alters the expectancy of the obligee.
(08:54):
Generally, the obligor remains liablefor non-performance of the contract,
unless all the parties agree otherwise.
And that brings us to the end of ourdiscussion on assignments and delegations.
We've covered a lot of ground today,from the basic definitions to the
specific rules governing theseimportant concepts in contract law.
(09:15):
In our next episode, we'llexplore third-party beneficiaries
and apply all these conceptsto some practical scenarios.
We'll see how these rules play out inreal world situations, which will help
you tackle similar questions on an exam.
Thank you for listeningto Part 1 of our series on
third-party rights and contracts.
Be sure to join us for Part2, where we'll complete our
(09:37):
exploration of this important topic.
If you enjoyed this episode of theBar Exam Toolbox podcast, please
take a second to leave a review andrating on your favorite listening app.
We'd really appreciate it.
And be sure to subscribeso you don't miss anything.
If you have any questions or comments,please don't hesitate to reach out to
myself or Alison at lee@barexamtoolbox.comor alison@barexamtoolbox.com.
(10:00):
Or you can always contactus via our website contact
form at BarExamToolbox.com.
Thanks for listening, and we'll talk soon!
Welcome back to the Bar Exam Toolbox podcast.
Today we're kicking off a two- partseries on third-party rights in contracts.
In this first episode, we'll focuson assignments and delegations.
Check back next week forPart 2 in this series.
Your Bar Exam Toolbox hosts are AlisonMonahan and Lee Burgess, that's me.
(00:22):
We're here to demystify the barexam experience, so you can study
effectively, stay sane, and hopefullypass and move on with your life.
We're the co-creators of the Law SchoolToolbox, the Bar Exam Toolbox, and the
career-related website CareerDicta.
Alison also runs TheGirl's Guide to Law School.
If you enjoy the show, please leavea review on your favorite listening
app, and check out our sister podcast,the Law School Toolbox podcast.
(00:43):
If you have any questions, don'thesitate to reach out to us.
You can reach us via the contactform on BarExamToolbox.com,
and we'd love to hear from you.
And with that, let's get started.
We're kicking off a two-part serieson third-party rights in contracts.
(01:05):
In this first episode, we'll focuson assignments and delegations.
These concepts are crucial forunderstanding how contractual
rights and obligations can betransferred to parties who weren't
originally involved in the agreement.
Let's dive in.
Third-party rights are implicated wheneversomeone who is not a party to the original
(01:25):
contract tries to enforce the contract.
These third-party rights generallyinvolve issues of assignments,
delegations, or third-party beneficiaries.
Today we'll cover assignmentsand delegations, and in our next
episode, we'll discuss third-partybeneficiaries and apply these
concepts to some practical scenarios.
Let's start withassignment and delegation.
(01:48):
Assignment and delegationinvolve a decision by a party
to a contract to transfer their
rights and/or obligations
under the contract to a third party.
Specifically, an assignment isthe transfer of a contractual
right - for example, to be paidor to receive goods or services.
A delegation is the transfer ofa contractual obligation - for
(02:10):
example, the obligation to make apayment or provide goods or services.
Note that while these are technicallyseparate concepts, the particular
language of the assignment is veryimportant in determining whether an
assignment is merely a transfer ofrights, or also a delegation of duties.
For example, an assignment that usesbroad language, like assignment of the
(02:32):
contract, will often be interpretedto include a delegation of the
unperformed duties under a contract.
Before we move on to our rules, weshould take a moment to review the
terminology used to describe theparties to an assignment or delegation.
These terms can get a little confusing,because the same parties are called
(02:53):
different things in different contexts.
If you're having a hard time keepingthem straight, you might find it helpful
to draw a quick diagram to illustratethe relationships between the terms.
The party that makes an assignmentis called the obligee under the
original contract, because they are thebeneficiary of the contractual obligation.
The other party to the originalcontract is called the obligor.
(03:16):
When the obligee makes the assignment,they become the assignor of their
right to receive performance.
The party to whom that right isassigned is called the assignee.
A party that makes a delegationis called the obligor under the
original contract, because theyhave the obligation to perform.
(03:39):
As we just discussed, the other partyto the original contract is the obligee.
When the obligor makes thedelegation, they become the
delegator of their obligation.
The party to whom the obligationis delegated is the delegatee, also
sometimes referred to as the delegate.
(04:00):
As you can see, things can geta little confusing because every
contract contains both rights andobligations going in both directions.
As a result, the same party can becalled several different things,
depending on their relationshipto the other parties involved.
Let's try to put these terms incontext with a quick illustration.
(04:21):
Let's say Painter and Homeowner enterinto a contract in which Painter agrees
to paint Homeowner's house for $5,000.
With respect to the obligation topaint Homeowner's house, Painter is the
obligor and Homeowner is the obligee.
But with respect to the obligationto pay $5,000, Homeowner is the
(04:42):
obligor and Painter is the obligee.
Now, let's say that Homeownerassigns his right to have his
house painted to Neighbor.
In that case, Homeownerbecomes the assignor and
Neighbor becomes the assignee.
If, however, instead of assigning hisright to painting services, Homeowner
(05:02):
delegates his obligation to pay $5,000,Homeowner then becomes the delegator
and Neighbor becomes the delegatee.
And yes, if Homeowner both assigns hisrights and delegates his obligations
to Neighbor, then Homeowner is both anassignor and delegator, and Neighbor
(05:24):
is both an assignee and delegatee.
The same would apply to the painter'srights and duties if he were to assign or
delegate to a subcontractor, for example.
Okay, let's move on to ourrules, starting with assignment.
Here's the general rule (05:39):
Rights and benefits under a contract may be
transferred to a third party if, [1]the assignor manifests his intent
to transfer the rights; and [2] theassignee assents to the assignment.
Consideration is notrequired for an assignment.
But if consideration is provided,the assignment becomes irrevocable.
(06:02):
Gratuitous assignments may subsequentlybe revoked, unless an exception applies.
We won't go into those exceptions today.
An assignment is valid unless, [a]it materially alters what is expected
under the contract; [b] it isprohibited by law or public policy;
or [c] it is precluded by contract.
(06:23):
B and C are pretty straightforward,but what does it mean for an
assignment to materially alter whatis expected under the contract?
Well, that could occur when theassignment, [a] materially changes the
duty of the obligor; [b] materiallyincreases the burden or risk imposed on
the obligor; [c] materially impairs theobligor's chance of obtaining return
(06:45):
performance; or [d] materially reducesthe value of the return performance.
To illustrate, let's revisit ourearlier example of the contract
between Homeowner and Painter.
Let's assume Homeowner livesin a community of identical
houses in identical condition.
If Homeowners assigns his right tohave his house painted to his next-door
(07:06):
neighbor, the assignment will likely bevalid, because it does not materially
alter what is expected under the contract.
There is no additional burden onPainter, because the neighbor's house
is the exact same size in the exactsame condition, and essentially in the
same location as Homeowner's house.
Now let's assume instead that Homeownerassigns his right to have his house
(07:28):
painted to his friend that lives 50miles farther away from Painter, in
a dilapidated house that is twicethe size of Homeowner's house.
Under these facts, the assignment willlikely be invalid, because it materially
increases the burden on the painter.
Painter will have to travel agreater distance to paint a larger
(07:48):
house that is in worse condition.
Now that we've covered how to make avalid assignment, let's go over the
rights of the assignor and assignee.
An assignee may sue theobligor for non-performance.
Any defense to enforcement that couldbe used against the assignor may
also be used against the assignee.
(08:09):
That basically means that afterthe assignment, the assignee steps
into the shoes of the assignor whenseeking to enforce the contract.
An assignee may also sue the assignorfor wrongful revocation of an assignment
or for breach of an implied warranty.
Alright, that's it forour assignment rules.
Let's move on to the rules for delegation.
(08:32):
All contracted duties are delegableunless, [a] the contract prohibits
delegations or assignments; [b] thedelegation is against public policy;
[c] the contract is for personalservices that calls for the exercise
of personal skill or discretion;or [d] the delegation materially
alters the expectancy of the obligee.
(08:54):
Generally, the obligor remains liablefor non-performance of the contract,
unless all the parties agree otherwise.
And that brings us to the end of ourdiscussion on assignments and delegations.
We've covered a lot of ground today,from the basic definitions to the
specific rules governing theseimportant concepts in contract law.
(09:15):
In our next episode, we'llexplore third-party beneficiaries
and apply all these conceptsto some practical scenarios.
We'll see how these rules play out inreal world situations, which will help
you tackle similar questions on an exam.
Thank you for listeningto Part 1 of our series on
third-party rights and contracts.
Be sure to join us for Part2, where we'll complete our
(09:37):
exploration of this important topic.
If you enjoyed this episode of theBar Exam Toolbox podcast, please
take a second to leave a review andrating on your favorite listening app.
We'd really appreciate it.
And be sure to subscribeso you don't miss anything.
If you have any questions or comments,please don't hesitate to reach out to
myself or Alison at lee@barexamtoolbox.comor alison@barexamtoolbox.com.
(10:00):
Or you can always contactus via our website contact
form at BarExamToolbox.com.
Thanks for listening, and we'll talk soon!
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