Transcript Chapter 8 Contracts: Third Party Rights, Discharge, Breach and Remedies Learning Objectives What is the difference between an assignment and a delegation? What factors indicate a.

Chapter 8
Contracts: Third Party Rights,
Discharge, Breach and
Remedies
Learning Objectives
What is the difference between an
assignment and a delegation?
What factors indicate a third party is an
intended beneficiary?
How are most contracts discharged?
What is a condition and how does a
condition affect contractual performance?
Assignments
Transfer of contractual
rights to a 3rd party.
3rd party is called the
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.
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.
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.
Contract Discharge
 Discharge is the full performance of all
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
 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 nonbreaching party remains liable to pay.
 Satisfaction Contract: performance is
conditioned on reasonable satisfaction.
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.
 Anticipatory Repudiation
 One party gives notice of refusal to perform.
 Innocent party treats AR as material breach.
Contract Discharge
Discharge by Agreement
Discharge By Rescission: both 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
 Discharge by Operation of Law
Contract Alteration
Statutes of Limitations
Bankruptcy
Objective Impossibility of Performance
• Party’s incapacitated,
• Subject matter is destroyed,
• Performance becomes illegal, or
• Commercially impracticable.
Damages
Compensatory Damages
Compensates injured party (Plaintiff)
Plaintiff must prove actual damages
caused by breach. Amount:
• Generally: difference between Defendant’s
promised performance and actual.
• Sale of Goods: difference between the
contract price and market.
Damages
Consequential (Special) Damages
Foreseeable damages that result from
breach of contract.
Caused by other than breach of contract.
Punitive (Exemplary) Damages
Deter wrongdoer; set example.
Nominal Damages
Damages
 Mitigation of Damages
 Injured party has a legal duty to mitigate
damages.
 Liquidated Damages vs. Penalties
 Liquidated: fixed, certain dollar amount
agreed to by parties, paid in the event of
breach. LD’s are enforceable.
 Penalty: designed to penalize a party.
Generally not enforceable.
Equitable Remedies
 Rescission: cancel or undo a contract.
 Available for fraud, mistake, duress and failure of
consideration.
 Restitution: recapture the benefit conferred on
the defendant that has unjustly enriched her.
 Parties must return goods, property or money.
 Specific Performance
 Reformation: court re-writes the contract to
reflect parties’ true intentions.
Equitable Remedies
 Recovery based on Quasi-Contract.
Plaintiff must show:
 Benefit was conferred on the other party.
 Party conferring benefit expected to be paid.
 Party seeking recovery did not volunteer.
 Retaining benefit without payment would be
unjust enrichment.
 Election of Remedies