Fundamentals of Business Law
Summarized Cases, 8th Ed., and Excerpted Cases, 2nd Ed.
ROGER LeROY MILLER Institute for University Studies Arlington, Texas
GAYLORD A. JENTZ Herbert D. Kelleher Emeritus Professor in Business Law University of Texas at Austin
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 that a third party is an intended beneficiary? • How are most contracts discharged? • What is a contractual condition, and how might a condition affect contractual obligations? Copyright © 2010 South-Western
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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 CASE 11.1 Graham School and Dance when obligor’s Foundation, Inc. v. Martha Graham performance changes. Center of Contemporary Dance, Inc. (2nd Circuit, 2004). Copyright © 2010 South-Western
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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.
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“Assignment of All Rights”
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Third Party Beneficiaries • 3P Intended Beneficiaries (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 Beneficiaries. Benefit is unintentional. 3P has no rights. • CASE 11.2 Revels v. Miss America Organization (North Carolina, 2007). Copyright © 2010 South-Western
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Third Party Beneficiaries
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Contract Discharge • Conditions to 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.
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Contract Discharge
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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. Copyright © 2010 South-Western
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Discharge by Performance • Material Breach of Contract. – 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. Copyright © 2010 South-Western
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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.
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Discharge by Operation of Law • • • •
Contract Alteration. Statutes of Limitations. Bankruptcy. Impossibility of Performance (Objective). – Party’s incapacitation. – Subject matter is destroyed. – Performance becomes illegal. – Commercially impracticable.
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Discharge by Operation of Law • Temporary Impossibility. – Suspends performance until the impossibility ceases.
• Commercial Impracticability. – Performance may be excused when it becomes extremely more difficult or expensive than originally contemplated. – CASE 11.3 Facto v. Pantagis (New Jersey, 2007). Copyright © 2010 South-Western
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