A third party who provides no consideration for the benefits received and who owes the contracting parties no legal duty is known as a donee beneficiary. However, the contracting parties owe the donee beneficiary the act promised; if it is not forthcoming, the donee beneficiary may bring suit. The consideration that supports this type of agreement is the consideration exchanged by the parties in privity to the contract.
An individual named as the beneficiary of an insurance policy is usually considered a donee beneficiary. The beneficiary does not have to furnish the insured with consideration to enforce payment of the policy. In some cases, an insurance beneficiary may also be a creditor beneficiary. This situation occurs in consumer or mortgage loans when the creditor requires the debtor to furnish a life-term insurance policy naming the creditor as the beneficiary. The policy will pay the debt if the debtor dies before the loan has been repaid.
An incidental beneficiary is an outside party for whose benefit a contract was not made but who would substantially benefit if the agreement were performed according to its terms and conditions. An incidental beneficiary, in contrast to an intended beneficiary, has no legal grounds for enforcing the contract made by those in privity of contract.
When people enter into contracts, they receive rights and they incur duties that may be transferred to others. An assignment is a transfer of a contract right. A delegation is a transfer of a contract duty.
Three parties are associated with any assignment. Two of the parties are the ones who entered the original agreement. The party who assigns rights or delegates duties is the assignor. The outside third party to whom the assignment is made is the assignee. The remaining party to the original agreement is the obligor.
Consideration is not required in the creation of an assignment. When there is no supporting consideration, however, the assignor may repudiate the assignment at any time prior to its execution.
To be valid, an assignment must follow certain accepted procedures designed to protect all of the parties. Form of assignment, notice of assignment, and the rights of parties in successive or subsequent assignments must conform to practices established by case law and statutes.
An assignment is valid at the time it is made. As a mean of protection against subsequent assignments, the assignee should give
