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According to the Contracts and torts Act of the Republic of Serbia a contract operates to confer rights and impose duties only on the parties to the contract and no other parties.

This principle means that third parties have no rights and duties from the contract. This contractual relationship is summed up in the term privaty of contract.

However, Contracts and torts Act of the Republic of Serbia stipulates two exceptions from this general rule. The first of them appears when the original contract provides that rights shall be conferred on a third party. The second of them appears when contractual rights and duties are transferred to a third party at a later date.

THE THIRD-PARTY BENEFICIARY CONTRACTS

The third-party beneficiary contracts appears where party A enters into a valid contract with party B which provides that party B shall render performance for the benefit of party C. Party C is known as third-party beneficiary. According to the Contracts and torts Act of the Republic of Serbia, a third-party beneficiary acquires own and direct right to seek that party B performs the benefit to itself.

Party A which is known as promisee has a right to revoke or change the benefit of third-party beneficiary (party C) until the moment when third party beneficiary give a statement that it accept the benefit. Also, in the event that original contract stipulates that party B which is known as promisor shall render performance for the benefit of third-party beneficiary after the death of promisee (party A), promisee (party A) has a right to revoke the benefit until his death, such as in his testament.

The promisor (party B) has a right to oppose to the third-party beneficiary (party C) all objections which has against promisee (party A) from original contract – for example: fails to perform his obligation, obsolescence of obligation…..

ASSIGNMENT OF CONTRACTS

In this event rights and duties are transferred after the original contract has been signed. According to the Contracts and torts Act of the Republic of Serbia, we have two type of assignment of contracts.

The first one appears when the transferring party (party A) is owed a right by the non-transferring party (party B) and that right transfer via contract to the third party (party C). The party A is known as the obligee and the party B is the obligor. The creditor from original contract can transfer all rights to the third party except for those prohibited by law or related to the creditor`s personality. The contract of assignment is valid without the consent of the obligor (party B) but the transferring party (party A) shall inform his debtor (party B) that the right has been transferred.

The second one appears when the transferring party (party A) is owed a duty by the non-transferring party (party B) and that duty transfer via contract to the third party (party C). The party A is known as the delegator and party C is referred to as the delegate. The Contract of assumption of debts is valid if the consent of creditor from original contract (party B) is provided. The main legal consequence of this contract is that a delegate supstitute the delegator (previous debtor), while such a debtor shall be exepted from the obligation.

For more details about this legal issue you can contact our Law office Belgrade.