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CHAPTER 12
THIRD PARTIES AND CONTRACTS
Answers to Learning Objectives
1. In a third party beneficiary contract, the contracting parties intend to benefit a third person,
not a party to the contract. A novation is the release of at least one party from the contract
and substituting another party for that released party. A third party beneficiary contract
retains the original parties and does not release any of them.
Lesson Outline
1. A contract creates both rights and obligations.
2. A third party who is expressly benefited by the performance of a contract may enforce it
against the promisor if benefit to the third party was intended by the contracting parties.
d. The parties may include a provision that prohibits assignment.
6. Duties cannot be delegated as readily as rights may be assigned.
7. As a general rule, no notice of assignment need be given. But unless notice is given to the
original promisor, the assignee may lose rights.
11. A joint contract is one in which two or more persons jointly promise to carry out an
obligation or in which two or more persons are jointly entitled to the performance. A several
contract arises when two or more persons individually agree to perform the same obligation.
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A joint and several contract is one in which two or more persons are bound both jointly and
separately.
Comments on Cases
(p. 122) Since Alqasim was a guest he was a beneficiary of the contract because the parties clearly
intended that guests would benefit from the contract. Alqasim v. Capitol City Hotel
Investors, 989 So.2d 488 (Miss. App)
(p. 124) The court said there was no reason why a successor employer should not be able to
enforce a non-compete clause since it was an incident of the business even if not made so
by express words. J.H. Renarde, Inc. v. Sims, 711 A.2d 410 (N.J.Super.Ch.)
(p. 128) The court stated that this was an undertaking by two or more parties and the presumption
is that such an undertaking is joint. Words of severance must be expressly stated. The
portion of the agreement National Union claimed Trailmobile was responsible for was not
identified in the agreement. The amount National wanted Trailmobile to pay was never
even discussed. There was simply nothing to indicate a several agreement. Schubert v.
Trailmobile Trailer, LLC, 111 S.W.3d 897 (Mo. App.)
Answers to Questions
(Page 129)
1. A third person who expressly benefited by the performance of a contract may enforce it
against the promisor if the contracting parties intended benefit to the third party.
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3. No, if a person merely incidentally benefits by the performance of a contract, suit for breach
or performance will not be successful.
4. When a novation occurs, the original obligor drops out of the contract and the new party takes the
original obligor’s place and is alone liable for the performance.
Answers to Case Problems
(Page 129)
1. No. In this case the creditors would have to be creditor beneficiaries. The court pointed out
that these creditors could not be third party creditor beneficiaries unless Kann’s performance
of the contract would have discharged some legal duty owed the creditors by AutoLife. But
Kann’s performance of the contract would not have discharged AutoLife’s obligation because
Kann did not contract to pay the creditors any money at all. Epitech, Inc. v. Kann, 2012 WL
4. Yes. Even though Connally/Compton had delegated the lowering of the casket to Wilbert,
the delegation did not removed Connally/Compton’s liability under its contract to handle the
funeral arrangements. Gilmore v. SCI Texas Funeral Services, Inc., 234 S.W.3d 251
(Tex.App.)
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by the original lease between Pritchett and him. Pritchett v. Afzal, 666 S.E.2d 641
(Ga.App.)
6. Yes. The court pointed out that the rule is that when two or more persons assume an
obligation as Ti-Well and Li did they do so jointly. Express words of severance are