Book Opener

is termed privity of contract . It determines who can sue whom overa question of performance required by a contract. Usually the partiesto a contract have standing to sue.Example 9. In The Opening Scene, Micha does not succeed inconvincing Viktor to sue Mr. Olsen for back pay and damages.Could Micha go ahead and sue Mr. Olsen himself? No, becausehe was not a party to the original contract between Viktor andMr. Olsen. Micha might argue that he would have received somebenefit under contract if his friend were to win a lawsuit againstMr. Olsen, but this would be only an incidental benefit. Micha hasno reasonable standing to bring suit.A third person may sometimes enforce a contract when it is madespecifically for that person’s benefit. A person who is not a party to acontract but still benefits from the contract is called a third-partybeneficiary .Example 10. Uncle Leo bought a life insurance policy that namedhis nephew, Andrew Wollack, as beneficiary. When Uncle Leodied, the insurance company refused to pay off on the policy,claiming that Uncle Leo had not disclosed to them that he hadcancer. Andrew said that his uncle did not know he had the illnesswhen he took out the policy. Because Andrew was anintended third-party beneficiary of the life insurance contract,he has standing to bring suit against the insurance company.Reviewing What You Learned1. What is an assignment?2. What contractual rights can be assigned?3. What is a delegation?4. What is a novation?5. What is privity of contract?Critical Thinking ActivityThird Parties Why does the law grant thirdpartybeneficiaries standing to bring lawsuits?Legal Skills in ActionPrivity of Contract Your brother is the generalmanager of a restaurant in Capital City. He hasjust learned that the Brotherhood of InternationalElectronic Workers (BIEW) has canceledits plans to hold its annual convention inCapital City. This cancellation will cause yourbrother’s restaurant to lose an enormousamount of money. He has decided to bring alawsuit against the BIEW. Discuss with severalof your classmates whether your brother hasstanding to bring a lawsuit against the BIEW.Chapter 12: Transfer of Contracts and Remedies for Breach 249