BLAW 17: Contracts -- Third Parties' Contract Rights & BLAW 18: Performance and Remedies

Discharge of contractual obligations

A material breach discharges the non-breaching party from his or her obligation under the contract. By mutual agreement. A party may waive right of complete performance. A material intentional alteration of the agreement by one party. Other party should object. Statute of limitations. Discharge by performance- complete performance of duties discharges promisor.

Damages

A party is entitled to recover lost profits in a breach of contract action when: "(1) they are within the contemplation of the parties at the time the contract was made, (2) they are the proximate result of defendant's breach, and (3) they are proven with reasonable certainty."

Novation

A three-way agreement in which the obligor transfers all rights and duties to a third party. A promisee agrees to release the original promisor from its duty or liability in exchange for a new or 3rd party's agreement to assume or take over the the original promisor's duties.

Breach- Must be Material

Anticipatory repudiation Material Breach Partial Breach Substantial Performance Perform to personal satisfaction, taste Time is of the essence Justified expectation/reasonable

Rights and Duties of Assignees

Assignee-The person or party that accepts (receives) the assignment (contractual right). Should promptly notify promisor of assignment. Assignee is entitled to all the rights the assignor had under the contract. Can sue the promisor for non-performance. If promisor has a defense to the contract it had with the assignor (ex: statute of frauds), the defense will also be valid against the assignee. Assignee step into shoes of promisee (assignor) Entitled to all rights, can sue for non-performance, entitled to all defenses Notify promisor of assignment If promisor performs duty/obligation before notice or knowledge of assignment then no further duty to perform If notice given, then promisor liable to perform for assignee.

Assignment

Assignor (Obligee/Promisee)-The person or party that assigns (transfers) a contractual right. Assignee-The person or party that accepts (receives) the assignment (contractual right). Obligor/Promisor: should know that rights were transferred to assignee

Types of Performance

Complete or satisfactory performance. Substantial performance. Performance that falls short of complete performance but which does not deprive the promisee of a material part of the consideration that was bargained for. Material breach. Performance of a party fails to reach the level expected of, and bargained for, by the other party. If some benefit conferred to the party, other party may be able to recover the reasonable value of benefit that was conferred. Anticipatory breach or repudiation. A party indicates an intention not to perform their duty.

Conditions-conditional contracts

Conditions Precedent: A condition that must occur before performance of the contract is required. (Performance excused unless condition occurs) Condition Subsequent: Performance is excused if condition occurs. (If Company A goes out of business, then Company B is no longer obligated to supply materials or equipment). Concurrent Condition: Performance and demand occur at the same time. Conditions can be express or implied. Express --"Accept offer and put $1000 down" Implied--Agreement to clean house, cleaner will be let into house.

Delegation

Delegator (Promisor) & Delegatee Promisee accepts performance by Delegatee

Contractual Rights that are not Assignable = Unenforceable.

Generally, contract that expressly forbids assignment. Assignment contrary to public policy (ex: future wages) If assignment materially alters the promisor's duties Duties cannot be significantly more or different Personal Rights Personal skill, character, judgment a factor Such an assignment would constitute a material change

Third Party Beneficiaries

Intended Beneficiaries Donee beneficiary—Primary purpose of contract was to benefit or gift of the performance to the 3rd party. (Life insurance agreement) -Beneficiary can sue promisor (gift producer) and/or promisee (gift giver) Creditor beneficiary—a non-party (3rd party) receives the benefit when a promise is made to satisfy a legal duty. The creditor beneficiary may have the right to sue on a contract despite not having originally been a party to the contract. This right arises because the 3rd party is the intended beneficiary of the contract. (Car sold, new owner has to finish payments) -Beneficiary can sue promisor (original guy in debt) and/or promisee (person taking on debt) Incidental benefit or beneficiary - no rights.

Remedies

Must prove damages with reasonable certainty Specific Performance - court requires promisor to comply with promise in contract Damages Compensatory-put in position had contract been performed Consequential- foreseeable damages Nominal - $1, $5, evidence a party was wronged but.... Incidental-related to actual or compensatory Liquidated (pre-determined and agreed in contract) Punitive - typically not allowed - require statute

Duty to Mitigate

Parties have an obligation to engage in reasonable damage reducing activities. Some examples: Seek alternative employment Preserve perishables when possible Get new tenant or lessee

Excuses for Nonperformance

Performance prevented (sometimes by promisee) Impossibility— "It cannot be done" Illness/death Intervening illegality Destruction of subject matter Impracticality "...performance as agreed has been made impracticable by the occurrence of a contingency the nonoccurrence of which was a basic assumption on which the contract was made..." Examples Lack of funding? Fire?

Standards of Performance

Personal satisfaction Standard—Personal taste, comfort and judgment A party can reject even if unreasonable. Different standard than utility and/or mechanical fitness. If unclear, courts may apply the less arbitrary "objective reasonable satisfaction" standard. Architect's/Engineer's Certificate Certificate must be issued by architect or engineer before promisee has a duty to pay. No recovery unless level of performance is excused. Time is of the Essence. "Reasonable time" to perform if time not specified. If time not of the essence, party may have to accept late performance.

Typically Assignable

Promises to pay Promises to deliver goods Sell land Contracts not to compete Employment contracts when business sold

Delegation of Duties

Promisor appoints another to perform duties under the contract. Not delegable: Expressly prohibited Against public policy Materially alters the agreement Personal skill, credit, judgment

Delegatee

Same rights and same duties Subject to same challenges and defenses Not all duties are delegable If can be performed fully by many different people - it is delegable (delivery) If duty or obligation depends on personal skill, character, judgment or such, then duty may not be delegated

Assignment of Contracts

Some contract rights and duties can be transferred to a third party. Assignments: Rights transferred under a contract. Delegations: Duties or obligations transferred under a contract.

Injunctions

a judicial order that restrains a person from beginning or continuing an action threatening or invading the legal right of another, or that compels a person to carry out a certain act, e.g., to make restitution to an injured party. limited instances to prevent irreparable injury. Only available if establish likelihood of success on the merits Other remedies insufficient