Slide 1 : 1 Contracts: Third PartyRights and Discharge Chapter12 BUSINESS LAW TODAY Standard 8th Ed.Roger LeRoy Miller - Institute for University Studies, Arlington, TexasGaylord A. Jentz - University of Texas at Austin, Emeritus
Learning Objectives : 2 Learning Objectives What is the difference between an assignment and a delegation?
What rights can be assigned despite a contract clause expressly prohibiting assignment?
What factors indicate a third party is an intended beneficiary?
How are most contracts discharged?
What is a contractual obligation, and how might a condition affect contractual performance?
Assignments : 3 Assignments Transfer of contractual rights to a 3rd party (assignee).
The assignee has the right to demand performance from the other original party (Obligor) to the contract.
Cannot Assign rights for personal services or when obligor’s performance changes.
Assignment Relationships : 4 Assignment Relationships
Delegations : 5 Delegations Transfer of duties to a 3rd party (Delegatee) by Delegator.
Delegatee owes duty to original party in contract.
Delegator is still liable for performance of duty.
Delegation Relationships : 6 Delegation Relationships
Third Party Beneficiaries : 7 Third Party Beneficiaries 3P Intended Beneficiary (Creditor and Donee) Original parties to K intend at the time of contracting that the contract performance directly benefit a 3rd party. After rights vest, 3P can sue for breach.
3P Incidental Beneficiary. Benefit is unintentional. 3P has no rights.
CASE 12.1 Midwestern Indemnity Co. v. Systems Builders, Inc. (2004).
Third Party Beneficiaries : 8 Third Party Beneficiaries
Contract Discharge : 9 Contract Discharge
Contract Discharge : 10 Contract Discharge Discharge is the full performance of all contractual duties.
Conditions of Performance:
Condition is a possible future event that may or may not happen.
Triggers or terminates performance.
Condition Precedent: prior to performance
Condition Subsequent: follows initial performance.
Concurrent: occur simultaneously.
Contract Discharge : 11 Contract Discharge Discharge by Performance: Complete vs. Substantial Performance
Complete Performance: perfect performance under the contract.
Substantial Performance: technically a minor breach but as long as in good faith, the non-breaching party remains liable to pay.
Satisfaction Contract: performance is conditioned on reasonable satisfaction.
Contract Discharge : 12 Contract Discharge Material Breach
When performance is not substantial.
Innocent party is excused from performance and has the right to sue for damages.
A minor breach may be cured.
CASE 12.2 Kim v. Park (2004).
Anticipatory Repudiation
One party gives notice of refusal to perform.
Innocent party treats AR as material breach.
Contract Discharge : 13 Contract Discharge Discharge by Agreement
Discharge By Mutual Rescission: parties must make another agreement.
Discharge by Novation: new contract with substitution of a third party for one of the original parties.
Accord and Satisfaction: settlement to discharge original contract.
Contract Discharge : 14 Contract Discharge Discharge by Operation of Law
Contract Alteration.
Statutes of Limitations.
Bankruptcy.
Objective Impossibility.
Party’s incapacitation.
Subject matter is destroyed.
Performance becomes illegal.
Commercial impracticability.
CASE 12.3 Facto v. Pantagis (2007).