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Seven General Issues Applicable law, Formation of contracts, Terms of contract, Performance, Remedies for unexcused nonperformance, Excuse of nonperformance, and Third-party problems
Unilateral Contract Results from an offer that expressly requires performance as the only possible method of acceptance.
Bilateral Contract All other offers. Usually offer is silent as to the method of acceptance.
Bilateral Contract, Unless… 1) Reward, prize, contest, 2) offer expressly requires performance for acceptance.
Quasi Contract Equitable remedy, not in contract law. Look for Quasi-contract when result of contract law seems unfair.
Applicable Law Common Law or UCC Article 2
Article 2 Applies to sales of goods.
Mixed deal – involves sale of goods and common law subject matter General Rule: all or nothing, more important part governs.
Exception to Mixed Deal General Rule Contract Divides Payment. Apply UCC to sale of goods part and common law to the rest.
Definition of a Contract A contract is an agreement that is legally enforceable.
Agreement (parts) 1) Initial communication (offer), 2) Termination of Offer, 3) Acceptance
Test that Initial Communication is an Offer. Manifestation of Commitment. The basic test is whether a reasonable person in the position of the offeree would believe that his or her assent creates a contract.
Required terms in sales contract of real estate. Price and Description of Land
Is price term required in Sale of Goods contract. No.
Vague or ambiguous material terms in initial communications. Not an offer, under UCC or common law.
Examples of ambiguous terms. Appropriate, Fair, Reasonable
Requirement Contract B agrees to buy exclusively from S.
Output Contract S agrees to sell exclusively to B
General Rule: Advertisements An advertisement or price quotation is not an Offer.
Exceptions to Advertisement General Rule. 1) Advertisement can be unilateral offer if in the nature of a reward; 2) Advertisement can be an offer if it specifies quantity and expressly indicates who can accept; 3) Price quotation can be an offer if sent in response to an inquiry.
Methods of Termination of an Offer. 1) Lapse of Time; 2) Death of either party; 3) Revocation by Offeror; 4) Rejection by Offeree
Termination of Offer by Lapse of Time. Lapse at time stated or reasonable time. (look for dates given for offer made and acceptance made)
General Rule: Termination of Offer by Death of either party prior to acceptance. Death or incapacity of either party after the offer, but before acceptance, terminates offer.
Exception to Termination of Offer by Death General Rule. Irrevocable Offers.
Termination of Offer by Revocation by Offeror. 1) Unambiguous statement by offeror to offeree of unwillingness or inability to contract, or 2) Unambiguous conduct by offeror indicating an unwillingness or inability to contract that offeree is aware of.
Do multiple offers act as a Revocation of an Offer? No. Multiple Offers are not unambiguous.
When Offers cannot be revoked. Option, UCC Firm Offer, Reliance, Unilateral Contract
Option Offeror promises 1) to not revoke, AND 2) this promise is supported by payment or other consideration. (applies to CL and Art 2)
UCC Firm Offer Rule An offer cannot be revoked for up to three months if 1) offer to buy or sell goods, 2) signed, written promise to keep the offer open, and 3) party is a merchant.
Definition of Merchant Generally, a person in business.
How long a can a Firm Offer keep an Offer open? No longer than 3 months. There is no ceiling on options. If no time period is stated, Ct can set a reasonable time period, but not more than 3 months.
Reliance (in re Revocation of Offer) An offer cannot be revoked if there has been 1) reliance that is 2) reasonably foreseeable and 3) detrimental
Unilateral Contract (in re Revocation of Offer) The start of performance pursuant to an offer to enter into a unilateral contract makes that offer irrevocable for a reasonable time to complete performance.
Methods of Indirect Rejection 1) counteroffer, 2) conditional acceptance, or 3) additional terms. (first two apply to al Ks; third applies only to CL)
Difference between Counteroffer and Bargaining. When bargaining, the response by the Offeree will be in the form of a question, not a declarative sentence.
Result of Conditional Acceptance under CL. Rejects Offer and becomes a counteroffer that can be accepted by conduct.
Result of Conditional Acceptance under Art 2. Rejection of Offer. (remember, look for "express insistence")
Mirror Image Rule Under CL, a response to an offer that adds new terms is treated like a counteroffer rather than an acceptance.
Additional/Different Terms in Acceptance of Offer under Art 2. If response to Offer that adds terms, but does not make the new terms a condition of acceptance (i.e. no express insistence), is treated as an acceptance. The added terms are not a part of the contract, UNLESS both parties are merchants.
Additional/Different Terms in Acceptance of Offer BETWEEN MERCHANTS under Art 2. If additional terms are material or objected to by original offeror, then they do not become part of the contract.
What can Offeror control in re Acceptance? Method of acceptance, time that a distance acceptance is effective, or whether the offeree must give notice that it has accepted by performance.
General Rule: Start of Performance in re Acceptance. Start of performance is acceptance. Starting to perform is treated as an implied promise to perform and so there is a bilateral contract.
Exception to Start of Performance General Rule. Start of performance is NOT acceptance of unilateral contract offers. Completion of performance is required.
Mailbox Rule Acceptance is generally effective when mailed. If a rejection is mailed before an acceptance is mailed, then neither is effective until received. Cannot use the mailbox rule to meet an Option deadline.
When S of goods sends the "wrong" goods. General Rule: Acceptance and Breach; Exception: Accommodation (i.e. explanation) creates Counteroffer and no Breach.
Who can accept an Offer? A person 1) who knows about the offer at time she accepts it, and 2) to whom the Offer was made.
Can Offers be assigned? No, but Options can be assigned, unless otherwise provided.
Exception to Promise as Consideration. Illusory Promises.
Exception to Past Consideration not being Consideration. Past consideration was expressly requested by promisor AND expectation of payment by promisee.
General Rule of Pre-existing contractual or statutory duty. Doing what you are already legally obligated to do is not new consideration for a new promise to pay you more to do merely that. Under CL new consideration is required for contract modification.
Exceptions to Pre-Existing Duty General Rule. 1) Addition to or change in performance, 2) Unforeseen difficulty so severe as to excuse performance, 3) Third-Party Promise to Pay.
Pre-Existing Duty General Rule under Art 2. Art 2 does not have a pre-existing legal duty rule. New consideration is NOT required to modify a sale of goods contract. GOOD FAITH is the test for changes to an existing sale of goods contract.
Can part payment be consideration for release of debt? If debt is NOT due and undisputed.
Consideration Substitutes. A written promise to satisfy an obligation for which there is a legal defense is enforceable without consideration, 2) Promissory Estoppel (detrimental reliance)
Elements of Promissory Estoppel. 1) Promise, 2) Reliance that is reasonable, detrimental, and foreseeable AND 3) Enforcement necessary to avoid injustice.
Who lacks Capacity to contract? 1) someone under 18, 2) mental incompetent, 3) intoxicated persons (if other party has reason to know)
Consequences of Incapacity? 1) Right to disaffirm by person without capacity, Implied Affirmation by retaining benefits after capacity is Ratification, and 3) Quasi-contract liability for necessaries.
Proof required to satisfy the Statute of Frauds. (objective proof) Proof of 1) performance, or 2) a writing signed by the defendant.
Purpose of Statute of Frauds. A barrier between a litigant's asserting a contract claim and a tiral on that claim.
Four contracts WITHIN the Statute of Frauds. 1) Suretyship, 2) Service contract not "capable" of being performed within a year from the time of the contract, 3) Transfers of Interest in Real Estate, 4) Sale of Goods for $500 or more
When is suretyship not within SoF? When main purpose of obligation allegedly guaranteed is to benefit the guarantor. (also remember, not promise to pay, but promise to pay if party does not pay).
Exception to Transfers of Interest in Real Estate in re SoF. Lease of one year or less.
Five Rules for Performance as Objective Proof in re SoF. Rule 1. 1) Part performance satisfies the SoF in transfers of Real Estate. Part performance requires any two of the three: i) improvements to the land, ii) payment, and iii) possession.x
Rules 2 and 3 of Five Performance Rules. (SoF – Services Ks) 2) Full performance by either party satisfies the SoF in Services Contracts. 3) Part performance of services contract does NOT satisfy the SoF.
Rule 4 of Five Performance Rules. (SoF) 4) Part performance of a contract for the sale of goods satisfies the SoF, BUT only to the extent of the part performance.
Rule 5 of Five Performance Rules. (SoF) 5) If the K is for the sale of goods that are to be specially manufactured, then the SoF is satisfied as soon as the S makes a substantial beginning, meaning the S has done enough work that it is clear that what she is working on is specially manufactured
Requirements of SoF in re Writing. Al material terms Test. Who (parties), What (promises), and signed (by defendant)
Requirements of SoF in re Writing (Art 2). Indicates that there is a K for the sale of goods and contain the QUANTITY term. Generally, must be signed by the defendant, unless between two merchants where there is a delay in responding.
Written proof of authorization to enter into K for someone else. Rules of law require that the authorization for someone to execute a K for someone else be in writing only if the K to be signed is w/in the SoF (i.e. the authorization must be of equal dignity with the K).
Modifications under CL. Contract provisions requiring that all modifications be in writing are NOT effective.
Modifications under UCC. Contract provisions requiring written modifications are effective UNLESS waived.
Illegal subject matter vs Illegal purpose If the subject matter is illegal, the agreement is NOT enforceable. If the subject matter is legal, the agreement is enforceable IF the plaintiff did not have reason to know of
Public Policy reasons for not enforcing an Agreement. Cts can refuse to enforce an Agreement b/c of Public Policy. e.g. Exculpatory Agreement that exempts intentional or reckless conduct from liability; or a Covenant not to compete w/o a reasonable need or reasonable time and place limits.
Misrepresentation 1) A statement of FACT before the K, 2) by one of the contracting parties or her agent, 3) that is FALSE, and 4) Induces the K. No wrongdoing required for MATERIAL misrepresentations.
Nondisclosure Generally, a person making a K has NO duty to disclose what she knows.
Elements of Economic Duress a) "bad guy" – Improper threat that is usually a threat to breach an existing contract, AND b) "vulnerable guy" – No reasonable alternative.
Undue Influence 1) Special relationship between the parties, AND 2) Improper persuasion of the weaker by the stronger.
Two basic Tests of Unconscionability. 1) Unfair surprise (procedural) and 2) Oppressive terms (substantive) are tested, as of the time the agreement was made, by the Ct.
Ambiguity in words of Agreement (in re Enforceability) No K if 1) parties use a MATERIAL term that is open to at least two reasonable interpretations, and 2) each party attaches DIFFERENT meaning, and 3) neither party knows or has reason to know the term is open to at least two reasonable interpretations.
Mutual Mistake Relief for mutual mistake ONLY if both parties are mistaken (not just uncertain) about existing facts. No relief for mistake IF the person seeking relief bears the RISK OF THE MISTAKE.
Unilateral Mistake of Material Fact There will be relief for situations in which the other party had reason to know of the mistake (i.e. palpable mistake).
Policy of the Parol Evidence Rule The underlying premise is that the final written version of a deal replaces earlier agreements, negotiations, and conversations.
Integration Written Agreement that ct finds is in the final agreement, triggers the parol evidence rule.
Partial Integration Written and final, but NOT complete.
Complete Integration Written and final and complete.
Merger Clause Contract clause such as, "This is the complete and final agreement." (Persuasive, but NOT conclusive)
Parol Evidence Words of party (or parties), before integration, oral or written.
General Rule: Parol Evidence Evidence of earlier agreements cannot be considered for the purpose of contradicting the terms in the written contract.
Mistake in Integration (i.e. Clerical Mistake) A ct may consider evidence of such terms for the limited purpose of determining whether there was a mistake in integration (i.e. a mistake in reducing the agreement to writing).
Defenses (i.e. getting out of a written deal) The Parol Evidence Rule does not prevent a ct from considering evidence of earlier words of the parties for the limited purpose of determining whether there is a defense to the enforcement of the agreement, such as misrepresentation, fraud, or duress.
Ambiguity (i.e. Explaining Term in the Written Deal) The Parol Evidence Rule does not prevent a ct from considering evidence of earlier agreements to resolve ambiguities in the written contract.
Adding to the Written Deal. Parol Evidence Rule prevents ct from considering evidence of earlier agreements as a source of consistent, additional terms UNLESS ct finds 1) the written agreement was Partial Integration, or 2) additional terms would ordinarily be in separate agreement.
Four Exceptions to Parol Evidence General Rule. 1) Mistake in Integration, 2) Defenses, 3) Ambiguity, 4) Partial Integration or additional terms ordinarily in separate agreement
Three forms of Conduct as a source of K terms. 1) course of performance, 2) course of dealing, 3) custom and and usage
Course of Performance Same people, Same K. EXAMPLE: S contracts to sell 1k chickens/mo to B for 12 mos. The 1st three shipments are boiling hens, and B does not complain.
Course of Dealing Same people, Different but similar K. EXAMPLE: S contracts to sell 1k chickens/mo to B for 12 mos. Under prior chicken Ks, S sent B boiling hens, and B complained.
Custom and Usage Different but similar people, different but similar K. EXAMPLE: S contracts to sell 1k chickens/mo to B for 12 mos. It is customary in the chicken industry to use the word "chicken" when the deal covers chickens up to 6 lbs including boiling hens.
Shipment Contracts S completes its delivery obligation when it 1) gets the goods to a common carrier, and 2) makes reasonable arrangements for delivery, and 3) notifies the B. S completes its delivery obligation BEFORE delivery is completed.
Destination Contracts S does NOT complete its delivery obligation until the goods arrive at the destination.
Risk of Loss Arises where 1) after the K has been formed, but before the B receives the goods, 2) the goods are damaged or destroyed, and 3) neither the B nor the S is to blame.
Four Risk of Loss Rules 1) Agreement, 2) Breach, 3) Common Carrier Delivery, 4) Catch-All (Order of the Rules matters!)
Risk of Loss: Breach Breaching party is liable for any uninsured loss even though breach is unrelated to problem.
Risk of Loss: Common Carrier Delivery Risk of Loss shifts from seller to buyer at the time the seller completes its delivery obligations.
Risk of Loss: Catch-All (no agreement, no breach, no delivery by a carrier) Risk of Loss shifts from a merchant-seller to the buyer on the buyer's RECEIPT of the goods; Risk o Loss shifts from a non-merchant-seller when he/she TENDERS the goods.
Warranties of Quality Express, Implied Warranty of Merchantability, Implied Warranty of Fitness for a Particular Purpose
Express Warranties Words that promise, describe, or state facts; or samples or models (as opposed to opinions).
Implied Warranty of Merchantability When any person buys any goods from any merchant, a term is automatically added to the K by operation of law – that the goods are fit for the ORDINARY PURPOSE for which such goods are used.
"Merchant" in re Implied Warranty of Merchantability Person who deals in goods of that kind (only here).
Implied Warranty of Fitness for a particular Purpose B has particular purpose; B is relying on S to select suitable goods; S has reason to know of purpose and reliance. Warranty that goods are fit for that particular purpose. (If Q tells why B is buying something, it's a warranty of fitness Q)
Limitations on Warranty Liability (Defenses) 1) SoL, 2) Privity, 3) B's examination of the goods, 4) Disclaimer, 5) Limitation of Remedies
Statute of Limitations (in re Warranties) There is a four-year statute of limitations, and generally the statute starts running on possible warranty actions when the tender of delivery is made, NOT when the buyer learns that the product is defective.
Privity (in re Warranties) Privity of contract means that the plaintiff contracted with the defendant. If the plaintiff did not buy the goods from the defendant, there is a possible lack of privity issue.
Buyer's Examination of the Goods (in re Warranties) There are NO implied warranties as to defects which would be obvious on examination.
Disclaimer (e.g. "there are no warranties") a) Express Warranties generally CANNOT be disclaimed. b) Implied Warranties CAN be disclaimed in either of the following ways: 1) CONSPICUOUS language of disclaimer, mentioning merchantability, or 2) "as is" or "with all faults"
Limitations of Remedies (in re Warranties) Does NOT eliminate warranties, but limits or sets recovery for breach of warranty. a) Can apply to Express Warranties. b) General test: Unconscionability. c) Prima facie unconscionable, breach of warranty on consumer goods causes personal injury.
Perfect Tender 1) only applies to sale of goods, 2) goods and delivery MUST conform to K terms, 3) less than perfect tender generally gives B option of rejection, so long as B acts in good faith.
Rejection of Goods a) IF S does not meet perfect tender, B has option to keep goods and sue or Reject all or any commercial unit and sue for dmgs. b) B must take reasonable care of rejected goods and not continue to use them.
Limits on Rejection of Goods Cure, Installment Ks, and Acceptance
Cure If time for performance has NOT yet expired, S can Cure. S has option of curing even after K delivery date, if S has reasonable grounds to believe goods would be acceptable (look for prior deals).
Installment Contracts Requires/Authorizes 1) delivery of goods in separate lots 2) to be separately accepted. B has rt to reject an installment ONLY where there is a SUBSTANTIAL IMPAIRMENT in that installment that can't be cured.
Payment and Acceptance Payment w/o Opportunity for Inspection is NOT Acceptance.
Failing to Reject. Failure to reject after the B had reasonable time to reject is Acceptance.
Retention as Acceptance. Implied Acceptance, if B does not complain/object.
Requirements for Revocation of Acceptance 1) Nonconformity substantially impairs the value of the goods, 2) excusable ignorance of grounds for revocation OR reasonable reliance on S's assurance of satisfaction, AND 3) revocation w/in a reasonable time after discovery of nonconformity.
Non-Monetary Remedies for Unexcused Non-Performance 1) Specific Performance/Injunction, 2) S's Reclamation from insolvent B of goods, 3) Entrustment
Specific Performance Applies in K for sale of Real Estate or Sale of "unique" goods; does NOT apply in K for Services.
Seller's Reclamation from an Insolvent Buyer of Goods 1) Buyer must have been insolvent at time that it received the goods, 2) the S demands return of goods w/in 10 days of receipt (reasonable time if, b/f delivery, B rep'd solvency), AND 3) B still has goods at time of demand.
Compensatory Monetary Damages Expectation, Incidental, Consequential, Avoidable, Certainty, Reliance, Liquidated
Expectation Damages People who K expect that the other person will not breach. 1) dollar value of perf w/o breach, 2) dollar value of perf w/ breach, and 3) compare the two.
Sample Essay Answer in re Contract Damages The purpose of contract damages is to COMPENSATE the plaintiff. The various money damaging Rules compensate the plaintiff by giving EXPECTATION. This means the goal is to put plaintiff in the SAME MONETARY POSITION as if there had been no breach.
Damages when S breaches, B keeps the goods Fair Market Value if perfect – Fair Market Value as Delivered (or cost of repair)
Damages when S breaches, S has the goods Market Price at time of discovery of breach – K price; OR reasonable replacement price – K price (whichever is greater)
Damages when B breaches, B keeps the goods Contract Price
Damages when B breaches, S has the goods Contract Price – Resale, UNLESS S cannot resell, then S can recover the Contract Price + (in some cases) Provable Lost Profits
Incidental Damages Costs incurred in dealing w/ the breach such as costs of storing rejected goods in a sale of goods or finding a replacement in a services K – ALWAYS recoverable
Consequential Damages SPECIAL damages. Limited to damages arising from Plaintiff's special circ and recovery of consequential damages is limited to situations in which Defendant had reason to know of those special circ at time of K.
Avoidable Damages No recovery for damages that could have been avoided w/o undue burden on Plaintiff. Burdens of pleading and proof on defendant.
Liquidated Damages 1) Damages were difficult to forecast at time K was made and 2) provision is a reasonable forecast.
Excuses for Non-Performance 1) Other party's non-performance, 2) Anticipatory Repudiation, 3) Insecurity about whether other party is going to perform, 4) Improper Performance, 5) Non-Occurrence of an Express Condition, 6) Later K, 7) Later, Unanticipated Event
Anticipatory Repudiation (Early Breach) An Unambiguous statement or conduct 1) that the repudiating party will not perform 2) made prior to the time that performance was due.
Anticipatory Repudiation (Time of Recovery) Ant. Rep. GENERALLY gives rise to an immediate claim for damages for breach UNLESS the claimant has already finished her performance.
Retraction of Anticipatory Repudiation Can be withdrawn so long as there has NOT been a material change in position by the other party. If the repudiation is timely retracted, the duty to perform is reimposed, but performance can be delayed until adequate assurance is provided.
Insecurity about whether the other party is going to Perform (Art 2 ONLY!) If words/conduct of one party give REASONABLE GROUNDS FOR INSECURITY, the other party can 1) give written demand for adequate assurance, and 3) if commercially reasonable, stop performance.
Improper Performance (Excuse) Art 2 applies Perfect Tender Rule. Common Law applies Material Breach Rule.
Material Breach Rule Only a material breach by other party excuses party from performing a K governed by common law (can recover for any breach).
Substantial Performance NO Material Breach
Material Breach in re Quantity. Part done = less than 1/2
Divisible Contract Exception (Material Breach Rule) In a Divisible Contract, there can be a contract law recovery for substantial performance of a divisible part, even though there has been a material breach of entire contract.
Express Condition 1) Language in a K, 2) Limits obligations created by other K language, 3) triggering words: If, Only If, Provided that, So Long As, Subj To, In the Event that, Unless, When, Until, On condition that (in the K)
What is the standard for determining whether an express condition has occurred (i.e. been "satisfied")? General Rule: Strict Compliance. Exception: Condition of personal satisfaction of one of the parties – honest and good faith dissatisfaction (cts look to whether a reasonable person would be satisfied)
How can an express condition be eliminated so that its non-occurrence does not affect performance obligations? Waiver by person who benefits from/protected by express condition; OR person protected by express condition hinders/prevents occurrence of express condition.
What is the difference between conditions precedent and conditions subsequent? Almost all K conditions are conditions precedent – conditions that excuse perf until/unless they occur. Conditions subsequent occur after start of perf and excuse perf when they occur. (neither create new perf obligations, but limit perf obligations)
Rescission Performance of K must be executory on both sides.
Accord Agreement by parties to an already existing obligation to accept a DIFFERENT performance in satisfaction of the existing obligation.
Effect of Accord AND Satisfaction. If the new agreement (Accord) is performed (Satisfaction), then performance of the original obligation is excused.
What if the Accord is not performed? The other party can recover on either the original obligation OR the Accord (but not both).
Modification An agreement by parties to an existing obligation to accept a different agreement in satisfaction of the existing obligation.
Novation An agreement between BOTH parties to an existing contract to the substitution of a new part (i.e. same perf, different party)
Who is liable after a Novation? Novation excuses the contract for performance of the party who is substituted for or replaced.
How is delegation different from Novation? Novation requires the agreement of BOTH parties to the original contract, and excuses the person replaced from any liability for non-performacne. Delegation does NOT require the agreement of both parties and does NOT excuse.
Excuse by reason of Later, Unanticipated Event 1) Who is arguing her performance is excused? 2) What was her performance? 3) Determine whether the post-K occurrence affected her ABILITY to perform, not just the cost of her performance.
Sale of Goods in re Later, Unanticipated Event (Excuse) Look for Risk of Loss first. If Risk of Loss is on B, B pays. If Risk of Loss is on S, B does not have to pay. If S has Risk of Loss, S will be excused ONLY if goods are specifically identified to K.
Death after Contract. GENERALLY, Death does not make a person's contract obligations disappear. EXCEPTION: Death of party to K who is SPECIAL person.
Subsequent Law/Regulation Later law makes performance of contract illegal – Excuse by Impossibility. Later law makes MUTUALLY understood purpose of contract illegal – Excuse by Frustration of Purpose.
Third-Party Problems Third-Party Beneficiaries, Assignments, and Delegations
Third-Party Beneficiary problem Two parties contracting with the common intent of benefit to a third party.
Third-Party Beneficiary Not a party to the K. Able to enforce K others made for her benefit.
Promisor Person who is making the promise that benefits the Third-Party.
Promisee Person who obtains the promise that benefits the Third-Party.
Intended/Incidental Only intended beneficiaries have contract law rights. Intent of the two parties to contract determines whether intended of incidental.
Creditor/donee Intended beneficiaries are either donees or creditors. Usually donees.
Did the Third-Party Beneficiary's rights vest? Did the Third-Party know of and rely on or assent as requested? If so, her rights have vested and the K cannot be canceled or modified w/o her consent, UNLESS the K otherwise provides.
Can a Beneficiary recover from the promisee? No, EXCEPT Creditor beneficiary can recover from promisee, BUT ONLY on pre-existing debt.
Defense of Promisor. If Third-Party Beneficiary sues the Promisor, the Promisor can assert any defense that he would have had if sued by the promisee.
Assignment A transfer of rights under a contract. Involves two steps: 1) K between only two parties, AND 2) one of the parties later transfers rts under that K to a Third-Party.
Assignor Party to the contract who later transfers rights under the contract to another.
Assignee Not a party to the contract. Able to enforce the contract b/c of the assignment.
Obligor Other party to the contract.
Prohibition of Assignments Language of prohibition takes away the right to assign but not the power to assign, which means that the assignor is liable for breach of contract, but an assignee who does not know of the prohibition can still enorce the assignment.
Invalidation of Assignments Language of invalidation takes away BOTH the right to assign and the power to assign so that there is a breach by the assignor and no rights in the assignee.
Assignability under Common Law Even if a K does not in any way limit the rt to assign, CL bars an assignment that substantially changes the duties of the obligor. (e.g. assignment of payment is not a sub. change; assignment of rt to K perf other than rt to payment, usually sub change.)
Requirements of Assignment GENERALLY, consideration is not required, BUT gratuitous assignments can be revoked.
Who can sue whom in an Assignment? AE can recover from OB. AR for consideration CANNOT recover from OB. OB has same defenses against AE as it would have against AR. Payment by OB to AR is effective until OB knows of Assignment.
Modification Agreements in re Assignment Modification agreements between OR and AR are effective if OR did not know of Assignment.
Implied Warranties of Assignor in an Assignment for consideration In an assignment for consideration, the AR warrants 1) the rt assigned actually exists, 2) rt assigned is not subj to any then-existing defenses by OB, AND 3) the AR will do nothing a/f the assignment to impair the value of the assignment.
What does Assignor NOT warrant? What the obligor will do after the assignment.
Multiple Assignments All Gratuitous Assignments = Last Assignee generally wins. Multiple Assignments for Consideration = First Assignee for consideration wins.
When does a subsequent Assignee take priority over an earlier Assignee for value? Only when the subsequent Assignee both 1) does not know of the earlier assignment AND 2) is the first to obtain a) payment, b) a judgment, c) a novation, OR d) indicia of ownership.
Delegation Party to a K transferring work under that K to a Third-Party.
Assignment vs Delegation Assignment is a transfer by a party to a K of his rts/benefits under the K to a Third-Party who was not a party to the K. Delegation is the transfer by a party to a K of his duties/burdens under the K to a Third-Party who was not a party to the K.
Which duties are delegable? GENERALLY, contractual duties are delegable. EXCEPTIONS, 1) K prohibits delegations or prohibits assignments OR 2) personal services contract that calls for VERY SPECIAL skills.
What if, after delegation, the Third-Party delegatee does not perform? 1) Delegating party ALWAYS remains liable; 2) Delegatee liable ONLY if she receives consideration from delegating party.
What does a Delegation for Consideration create? A Third-Party Beneficiary Obligation.
Created by: Sarah_Shore