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MS 331 Ch11
Business Law: Ch 11 Contracts: Third Party Rights and Discharge
| Question | Answer |
|---|---|
| Privity of Contract: only ___________ have rights and liabilities under the contract | original parties to a contract |
| What are exceptions to the privy of contract? | Assignments, delegations, and third party beneficiary contracts |
| In a bilateral contract 1 party has a right to _____________________ and the 2nd (other) party has a __________________ | require the other party to perform; duty to perform |
| The transfer of a first party's right is an _________ | assignment |
| Define: Assignor | party assigning rights to third party. |
| Define: Assignee | party receiving rights. (the third party) |
| Define: Obligor | person who is obligated to perform the duty. |
| Define Obligee | person to whom a duty or obligation is owed. |
| When rights of assignor are unconditionally assigned, their rights are _________ | extinguished. |
| ________________ has right to demand performance from original party to contract. | The third party (assignee) |
| [Assignments] What are examples of rights that cannot be assigned? | 1.When a statute expressly prohibits an assignment 2.what a contract is personal in nature 3.When the assignment will significantly change the risk or duties of the obligor 4.When contract prohibits assignment 5.Notice of assignment |
| [Assignments] What are some examples of when rights can be assigned regardless of contract prohibiting assignment? | 1.Cannot prevent right to receive money. 2.Cannot prevent rights in land. 3.Negotiable instruments. 4.Rights to receive Damages in sales of goods (breach or for payment). |
| [Assignments] Describe notice of assignment | Once a valid assignment has been made notice should be given to obligor of assignment (person with duty to perform); Assignment is effective immediately, notice not legally required. |
| [Assignments] Describe issues with notice of assignment | right assigned to two difference parties --- Some jurisdictions first assignment gets priority, in others first to give notice to obligor gets priority; or obligor discharges performance before receiving notice of assignment |
| Contractual duties in a contract that are ________ to a third party. | delegated |
| Define delegator: | Delegator (obligor): party making the delegation of duty. |
| Define delegatee: | Delegatee (third-party): party to whom the duty is owed. |
| [Delegations] __________ remains liable (to obligee), even after delegation. | Delegator |
| [Delegations] Delegatee is _______ if delegation contract creates a third party beneficiary relationship in the obligee. | liable |
| [Delegations] “Assignment of All Rights.” in contract today generally assumes ____________________ | assignment of rights and assumption of duties |
| __________: contract is made for the express purpose of a promisor giving a gift to a third party (donee), the donee can sue the promisor directly if the promisor breaches the contract. | Intended Beneficiary |
| ________ – party making the promise which benefits the third party | Promisor |
| What are the different types of intended beneficiaries? | 1.Incidental 2.Creditor 3.Donee |
| [Third Party Beneficiaries] Define: Incidental | If a third party is not an intended beneficiary they are an incidental beneficiary. ---a third party beneficiary’s benefit from contract between two parties is unintentional. |
| [Third Party Beneficiaries] Define: Creditor | Contract where promisor promises another party (promisee) to pay a debt the promisee owes to a third party (creditor beneficiary) |
| [Third Party Beneficiaries] Define: Donee | a third party’s benefit is a gift. |
| [Third Party Beneficiaries] Define: vesting | When a right is conveyed to third party |
| [Third Party Beneficiaries - vesting] When the third party demonstrates express consent to the agreement, such as by sending a letter or note acknowledging awareness of, and consent to, _________________ | a contract formed for her benefit |
| [Third Party Beneficiaries - vesting] When the third party _______________________________________,such as when a donee beneficiary contracts to have a home built in reliance on the receipt of funds promised to him or her in a donee beneficiary contract. | materially alters his or her position in detrimental reliance on the contract |
| [Third Party Beneficiaries - vesting] When the conditions for vesting are satisfied. For example, the rights of a beneficiary under a life insurance policy vest _________________. | when the insured person dies |
| 3rd P _______ Beneficiaries (Creditor and Donee) Original parties to contract intend at the time of contracting that the contract performance directly benefit _____________________ a 3rd party. After rights vest, 3rd P can sue for breach. | Intended; Intended |
| 3rd P _________ Beneficiaries. Benefit is unintentional. 3rd P has no rights | Incidental |
| A party may be discharged from a valid contract by: [4 things] | 1.A condition occuring 2.full performance or material breach 3.agreement of the parties 4.operation of law |
| Describe Conditions precedent | A possible future event, the occurrence or nonoccurrence of which will trigger the performance of a legal obligation or terminate an existing obligation under a contract. |
| Describe conditions subsequent | Condition that serves to terminate a party’s absolute promise to perform; The condition follows the absolute duty to perform; if the condition occurs the party need not perform further |
| Describe concurrent conditions | Each party’s duty to perform is conditioned upon the other party’s duty to perform --- normally SIMULTANEOUS duties |
| What are the different categories of Discharge by performance? | 1. Tender 2.Complete performance 3.Substantial Performance |
| [Contract discharge - discharge by performance] Describe tender | unconditional offer to perform by a person who is ready, willing, and able |
| [Contract discharge - discharge by performance] Describe Complete performance | Parties perform exactly as agreed, or ‘perfect' -- "All conditions satisfied" |
| [Contract discharge - discharge by performance] Describe Substantial Performance | Party in good faith performs substantially all of the terms, can enforce the contract. ---- Confers Most of the Benefits Promised: performance must not vary greatly from what was promised |
| [Contract discharge - discharge by substantial performance] Can damages be awarded? | Yes |
| [Contract discharge - discharge by substantial performance] Measure of damages is ___________________________ | cost to bring object of contract into compliance. |
| Describe discharge by performance to satisfaction of another | Requirement in contract --- subject matter of the contract dictates if actual person satisfaction or reasonable person standard |
| [Discharge by performance to satisfaction to another] If personal in nature ______ | then actual personal satisfaction discharges |
| [Discharge by performance to satisfaction to another] Usually if contract doesn’t expressly state actual personal satisfaction required ___________ | reasonable person standard used |
| [Discharge by performance to satisfaction to another] If contract requires approval by third party, _______ | either actual person satisfaction or reasonable person standard depending on jurisdiction |
| What is a material breach of contract? | A material breach occurs when performance is not substantial |
| In a material breach of contract, nonbreaching party is ___________________ | excused from performance and entitled to damages |
| In a minor (non-material) breach, the duty to perform is _____________________________ | not excused and the non-breaching party must resume performance of the contractual obligations undertaken. |
| What is anticipatory repudiation? | when one party refuses to perform his contractual obligation, before performance is due |
| Anticipatory repudiation is treated as a ________, and __________ party may sue for damages immediately, even though performance is not due | material breach; nonbreaching |
| [Anticipatory Repudiation] Notice by repudiating party may _____________________________ | restore parties to original obligations. |
| What are the two reasons why anticipatory repudiation is treated as an immediate material breach? | 1.The NB party should not have to remain ready to perform with other party already repudiated contract 2.NB party should have opportunity to try to mitigate damages |
| Anticipatory Repudiation may occur when Market Prices drive _____________________________ | one party to extreme disadvantage |
| [Discharge by Agreement] Describe Discharge by Mutual Rescission | For an executory contract, parties must make a new contract, oral or written. Under UCC, contracts must be in writing; If one party has performed, agreement to rescind must have additional consideration. |
| [Discharge by Agreement] Describe Discharge by Novation | parties agree to substitute a third party for an original party. Revokes and discharges a previous contract |
| What are the requirements for discharge by novation? | 1.previous valid obligation 2.Agreement by all parties 3.Extinguishment of all old obligations 4.Valid Contract |
| [Discharge by Agreement] Describe Discharge by Accord and Satisfaction | parties agree to accept performance different from performance originally promised [i.e. car instead of cash payment] |
| [Discharge by Agreement] Discharge by Accord and Satisfaction - Define Accord | contract to perform existing contractual duty not yet discharged |
| [Discharge by Agreement] Discharge by Accord and Satisfaction - Define Satisfaction | Satisfaction: performance of the accord |
| [Discharge by Operation of Law] What are examples? | 1.Material Alteration 2.Statutes of Limitations 3.Bankruptcy 4.Impossibility of Performance 5.Temporary Impossibility 6.Commercial Impracticability 7.Frustration of purpose |
| [Discharge by Operation of Law] Describe Material Alteration | The Contract: innocent party is discharged after material alteration |
| [Discharge by Operation of Law] Describe Bankruptcy | generally bars enforcement of non-exempt transactions |
| [Discharge by Operation of Law] Describe Impossibility of Performance | Objective Impossibility: the supervening event was not foreseeable: i.e. Death or incapacitation in personal contract prior to performance; destruction of the subject matter; change in law renders performance illegal |
| [Discharge by Operation of Law] Describe Commercial Impractiability | Performance becomes extremely difficult or costly, and must not have been known by parties when contract made |
| [Discharge by Operation of Law] Describe Frustration of Purpose | Supervening event make it impossible to attain purpose both parties had in mind. |
| [Discharge by Operation of Law - Frustration of purpose] Event must not have been reasonably foreseeable, and ___________ value of what a party receives under contract. | decreases |
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