CHAPTER 19

Assignment, Delegation, and Third-Party Beneficiaries

§19.1 INTRODUCTION

During the entire course of this book, it has been emphasized that contract is a consensual relationship created by agreement between the parties. In dealing with the enforcement of contracts, it has been taken for granted that contractual rights and duties arise only between the parties and that the power of enforcement resides in each against the other. In the great majority of contracts, this assumption is accurate. A person who is not a party to a contract cannot be bound by it and acquires no rights under it. However, this chapter deals with two situations in which this rule is qualified. Although these situations have in common the fact that a nonparty to the contract obtains the right to enforce a promise under it, they are otherwise quite distinct and are based on very different premises:

  A contract may create rights in a third party when the parties to the contract expressly or impliedly agree, at the time of making it, that the performance of one of them will be rendered to or for the benefit of a person who is not a party to the contract, and that the nonparty will have the right to enforce that commitment. The creation of the third-party rights is contemplated by the parties and occurs at the time of contract formation.

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