Day 6: The Outsiders — Third-Party Beneficiaries, Assignments, and Delegations

Welcome Back to Law School

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Welcome back to Law School. We have spent the last five days looking at the “Core Duo”—the two parties who looked each other in the eye and shook hands. But contracts rarely exist in a vacuum. In the modern economy, rights are sold like commodities, work is outsourced to subcontractors, and parents sign contracts specifically to benefit their children.

Today, we study the “Outsiders.” We are looking at how a person who never signed the contract can end up with the right to sue or the duty to perform. We will tackle the three pillars of third-party law: Third-Party Beneficiaries, Assignments of Rights, and Delegations of Duties.

Third-Party BeneficiaryCreated at formation for an intended outsider.

AssignmentAfter formation, a right to receive is transferred.

DelegationAfter formation, a duty to perform is transferred.

VestingTPB rights lock in after assent, suit, or reliance.

NovationOnly express release lets the original duty-holder escape liability.

I. Third-Party Beneficiaries

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A Third-Party Beneficiary situation occurs at the moment of formation. When A and B make a deal, they explicitly intend for the benefits to go to C.

1. Intended vs. Incidental Beneficiaries

This is the most critical distinction in this module. Only Intended Beneficiaries have legal rights.

Intended Beneficiary: The parties specifically named or identified the third party as the recipient of the performance.

Example: I pay a life insurance company, Party A, monthly premiums so that they will pay my wife, Party C, when I die. My wife is an Intended Beneficiary.

Incidental Beneficiary: Someone who happens to benefit from the contract, but that wasn't the “main point” of the deal.

Example: I hire a world-famous architect to build a stunning mansion on my lot. This will significantly increase the property value of my neighbor's house. My neighbor is an Incidental Beneficiary. If I cancel the contract, the neighbor cannot sue me.

2. Donee vs. Creditor Beneficiaries

Within the “Intended” category, there are two sub-types:

Creditor Beneficiary: The promisee, the person who set up the deal, owes a debt to the third party, and they are using this contract to pay it off.

Donee Beneficiary: The promisee intends to give a gift to the third party. This is the most common type.

3. When Do Rights Vest?

Can the original parties change their mind and cut the third party out? Only until the rights vest.

Rights vest when:

The third party manifests assent to the promise, meaning says “I accept.”
The third party brings a lawsuit to enforce the promise.
The third party materially changes their position in justifiable reliance on the promise.

Rule: Once rights vest, the original parties cannot cancel or modify the contract without the third party's consent.

Third-Party Beneficiary Classifier

Select the beneficiary situation

This is an intended beneficiary because the contract specifically identifies the third party as the recipient of performance.

Vesting Checker

Select what the third party has done

Rights have not vested yet, so the original parties may still modify or cancel the contract.

II. Assignment of Rights

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An assignment occurs after the contract is formed. Party A has a right to receive something from Party B. Party A then assigns, meaning transfers, that right to Party C.

1. The Basics

Assignor: The person who transfers the right.

Assignee: The person who receives the right.

Obligor: The person who has the duty to perform, meaning the one who now has to pay or work for the new person.

2. What Can Be Assigned?

Generally, all contract rights are assignable unless:

The assignment materially changes the obligor's duty or risk, such as assigning a personal service contract like a famous painter's work.
The contract has a valid non-assignment clause.

UCC Note: Under the UCC, even if a contract says “No Assignments,” you can almost always still assign the right to receive money.

3. Gratuitous vs. Paid Assignments

Paid Assignments, for consideration: These are irrevocable. Once you sell the right to a debt, you can't take it back.

Gratuitous Assignments, gifts: These are generally revocable unless the assignee has already collected or relied on it.

4. “Last in Time” vs. “First in Time”

What if a dishonest person assigns the same right to two different people?

Paid Assignments: The first assignee for consideration wins.

Gratuitous Assignments: The last assignee wins because the last gift revokes the previous ones.

Assignment Classifier

Select the assignment issue

This is an assignment of rights: the assignee receives the right to collect or receive performance.

Priority Rule Tool

Two assignees claim the same right. Which rule applies?

Paid assignments: the first assignee for consideration wins.

III. Delegation of Duties

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Delegation is the opposite of assignment. Instead of giving away your “prize,” meaning rights, you are giving away your “homework,” meaning duties.

1. The General Rule

Most duties can be delegated. However, you cannot delegate duties that involve personal skill, judgment, or reputation.

Example: If you hire Adele to sing at your wedding, she cannot delegate that duty to her cousin. If you hire a generic “Wedding Singer LLC,” they can delegate the job to any of their qualified employees.

2. The Liability Trap

This is a high-yield Bar Exam point: Delegation does not relieve the delegator of liability.

If I delegate my duty to paint your house to Jim, and Jim does a terrible job, I am still liable to you for the breach. You can sue me, and you can sue Jim, since he is now a “promisor” to perform.

The Only Escape: Novation. A novation is a new contract where the obligee expressly agrees to release me and substitute Jim as the only responsible party.

Delegation Classifier

Select the delegation scenario

Mechanical or commercial tasks are generally delegable.

IV. Comparing the Three

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This comparison chart separates the three “outsider” doctrines by timing, what is moved, original-party liability, and whether the outsider can sue.

Feature	Third-Party Beneficiary	Assignment	Delegation
When created?	At formation	After formation	After formation
What is moved?	The Benefit	The Right to Receive	The Duty to Perform
Original Party Liable?	Yes	No, usually	Yes, unless Novation
Outsider can sue?	Yes, if Intended	Yes	Yes

Outsider Doctrine Identifier

Select the doctrinal clue

Created at formation for a named or identified outsider: Third-Party Beneficiary.

V. Summary Checklist for Day 6

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Was the person there at the start? If yes, it's a Third-Party Beneficiary. If no, it's an Assignment or Delegation.
Are they Intended or Incidental? If the contract doesn't name them or focus on them, they have no rights.
Did the rights vest? Has the TPB sued or relied on the deal yet?
Is it a Personal Service? If the work requires “special sauce,” meaning fame or unique skill, it cannot be delegated.
Is there a Novation? Did the person being “left behind” explicitly agree to let the original party off the hook?

TPB = at formation Assignment = right to receive Delegation = duty to perform Intended beneficiaries can sue Incidental beneficiaries cannot sue Personal services usually cannot be delegated Delegator remains liable unless novation

The Law School Challenge

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John contracts with a Printer to produce 5,000 course booklets for $10,000.

Two weeks later, John assigns the right to receive the booklets to a local University.
Simultaneously, the Printer delegates the duty to print the books to “Quick-Print Shops.”
Quick-Print Shops uses the wrong ink, and the booklets are unreadable.

Can the University sue the Printer? YES. As the Assignee, the University “stands in the shoes” of John and has all his rights.
Can the University sue Quick-Print Shops? YES. When a party accepts a delegation of a duty for consideration, they become liable to the original “intended beneficiary,” the University.
Is John still liable to the Printer for the $10,000? YES. Unless there was a novation, the original parties remain liable for their end of the bargain.
Could the Printer have delegated this duty? YES. Printing booklets is a mechanical or commercial task, not a “personal service” like painting a portrait.

Challenge Analyzer

Select the issue

Yes. The University stands in John’s shoes as assignee and can sue the Printer.

We have reached the end of the technical lectures. Day 7 will be our Grand Finale: A comprehensive review of the entire lifecycle of a contract, from the first “Hello,” meaning Offer, to the final “Check,” meaning Remedies.

Interactive Study Tools

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Flashcard Console

Tap the card to flip between prompt and answer.

When is a Third-Party Beneficiary created?

Checkpoint Quiz

Which doctrine transfers the right to receive performance after the contract has already been formed?

Select an answer.

Issue Spotter Scratchpad

Save session notes while reviewing. Notes stay in this browser session.

No saved notes yet.

One-Screen Day 6 Attack Framework

For any outsider problem, start with timing. If the outsider was identified when the contract was formed, analyze Third-Party Beneficiary doctrine and separate intended from incidental beneficiaries. If the outsider appears after formation, ask whether a right or duty moved. A transfer of the right to receive is an assignment; a transfer of the duty to perform is a delegation. For assignments, identify assignor, assignee, and obligor, then test non-assignment clauses, material change in duty or risk, paid versus gratuitous assignment, and priority. For delegations, ask whether the duty involves personal skill, judgment, or reputation. Finally, remember the liability trap: delegation does not release the delegator unless there is a novation.