Deck 12: Third Parties and Contracts

Question 1

Former asbestos companies signed an agreement forming the Center for Claims Resolution (CCR) to administer and resolve asbestos-related claims. The agreement included a formula for calculating the share of liability payments of each member. The CCR negotiated a settlement agreement for nineteen member companies with the law firm of Kelley Ferraro, LLP, resolving 15,000 claims. The settlement was to be paid to Kelley in biannual installments. The agreement stated that "each CCR member shall be liable... only for its individual share." An installment was $1 million short because GAF Corp. disputed CCR's calculation of its share. Kelley sued, alleging the agreement was joint and several so that the other companies had to make up the full installment even if one company were to withhold its contribution. Was the agreement joint and several or merely several?

Answer 1

The agreement is joint and several because under the agreement K and F were supposed to receive periodic payments from CCR irrespective of default of not making payment by a member. The CCR member who have overpaid can recover from the default after the arbitration Settle down any dispute of share-of-payment.
As per the case, it is not possible to determine the individual share of each member because the plaintiffs were not involved in the process of share allocation. Moreover, there is no such information that could determine the liability of the individual member. So, all the members would be jointly responsible.

Question 2

May everyone who benefits by the performance of a contract between others successfully sue for breach or performance of the contract?

Answer 2

No, anyone who gets benefitted by the performance of a contract between him/her and the other can successfully sue for breach or performance of the contract.
This is due to the fact that if a person is only getting benefitted by the way of enactment of a contract, the enactment or suit for the breach will not be effective.

Question 3

New Century Financial Services, Inc. purchased charged-off credit card debt from credit card issuers and attempted to collect the debt from card holders. New Century sued two debtors, Ahlam Oughla and Azeem Zaidi, and claimed that as the assignee of their debt, Oughla and Zaidi owed New Century the amount of the charged-off credit card debt. Oughla and Zaidi argued, among other things, that the assignment of their debt to New Century was invalid, because New Century failed to notify them of the assignment. Was New Century required to give notice of the assignment to the debtors?

Answer 3

Assignment means that one party transfers its right to another party, who was not the part of contract, when contract was entered. Assignor is the person who transfers right and assignee is the party to whom rights are transferred..
Facts: N Inc. was in business of purchasing collecting debt from card holders. N Inc. sued AO and AZ stating that they are assignee of debt due. AO and AZ owed N the amount of charged-off credit debt. AO and AZ argued stating that they were not informed about the assignment given to the company.
Outcome: Once the right has been further assigned, it is the duty of the assignor to notify the original promisor or the party about the assignment made to the assignee. In case of failure to notify, the assignee cannot claim payment from the promisor.
In this case, since AO and AZ were not notified by the card issuers about the debt collection being transferred to N Inc., they were right in refusing to make payments to N Inc.

Question 4

When a novation occurs, who is liable for performance under the contract?

Question 5

Van Cleef Asset Management, Inc. contracted to sublease office space from NCS Healthcare, Inc. for a five year term. After two years, NCS Healthcare directed Van Cleef to mail checks to a different location. Van Cleef complied, but for a thirteen-month period, the checks were never endorsed or deposited by NCS Healthcare. Around this time, NCS Healthcare was acquired by Omnicare, Inc., which contacted Van Cleef to inform them that recent rent payments to NCS Healthcare had not been received. An Omnicare representative directed Van Cleef to send future rent payments to Omnicare for the remaining term of the lease and that "if those payments were made... all obligations of Van Cleef under the sublease would be duly performed and satisfied." Van Cleef sent remaining rent payments to Omnicare and after the sublease terminated, Van Cleef vacated the premises. An affiliate of NCS Healthcare later argued that it was the assignee of rent payments owed to NCS Healthcare under the sublease agreement and sued Van Cleef for the thirteen months worth of rent that it alleged had not been received. Van Cleef argued that the negotiated agreement with Omnicare for the sublease payments was a novation of the original sublease agreement. Who was correct?

Question 6

Why is a right to personal services nonassignable?

Question 7

Ti-Well International Corp. contracted with Quindao First Textile Co. to import corduroy fabric. Wujin Nanxaishu Secant Factory contracted to supply the fabric to Quindao. Wujin delivered the fabric to Ti-Well through Quindao, but Ti-Well did not pay Quindao, which did not pay Wujin. After negotiations, Juntai Li, the sole shareholder, director, officer, and employee of Ti-Well, executed a note agreeing to make payments to Wujin. The note did not mention Ti-Well. Li also signed an agreement stating that Ti-Well and Li would assume responsibility for Quindao's debt to Wujin. When the debt was not paid, Wujin sued Li. Was his obligation joint with Ti-Well's?

Question 8

What is the difference between an assignment of a contract and the delegation of duties under it?

Question 9

Charles Daley slipped on snow and ice while walking on a sidewalk outside Canal Pharmacy. Daley was paralyzed as a result of his injuries. He sued Canal Pharmacy and Eileen Fryer, the pharmacy's landlady, arguing that the parties breached their lease agreement by failing to keep the sidewalks free of snow and ice. Daley claimed that as a customer of Canal Pharmacy, he was a third-party beneficiary of the landlord-tenant lease contract. Was he?

Question 10

In what way does an assignment or transfer modify rights or duties transferred?

Question 11

While not required, why is it a prudent business practice to give the original promisor notice of an assignment?

Question 12

What is it called when one party to a contract transfers the contract in its entirety to another?

Question 13

An ordinance of the City of Miami authorized the city attorney to take any action to collect on municipal liens and to delegate this authority to holders of municipal liens. Joel Israel purchased lien certificates from the city on property on which assessments were outstanding, including on parcel 9, owned by Manuel Ismael. The city attorney assigned to Israel the city's right to take any action to collect on the lien certificates. He followed the legal procedure to foreclose on and sell the property, including notifying Ismael, who did not respond. A foreclosure sale was held. A year and a half later, Ismael asked the court to void the sale, arguing that Israel had no standing to foreclose. If the city had the right to foreclose, did Israel also have that right?

Question 14

If Rich jointly promises to pay $10,000 with Sharon, and Andrew severally promises to pay $10,000, who will have to pay more?

Question 15

What is the rule regarding the ability of a person not a party to a contract to enforce a contract?

Question 16

AutoLife Acquisition Corp. engaged in transactions that left it owing secured creditors about $5.5 million due in two months. It contracted with Kann Capital, Ltd. to seek $9 million in financing and "advise and assist AutoLife in devising and executing a program to secure" the financing. The agreement had an arbitration clause for any controversy arising out the agreement or breach, termination, interpretation, or validity of it. The financing did not materialize, but the secured creditors did not foreclose because the owners of AutoLife and Kann repeatedly represented that financing would soon be obtained. AutoLife went into bankruptcy, and the secured creditors sued Kann. Kann alleged that the creditors were third-party beneficiaries of its contract with AutoLife and therefore that the arbitration clause governed. Were the creditors third-party beneficiaries of the contract between AutoLife and Kann?

Question 17

What is the difference between a creditor beneficiary and a donee beneficiary?