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MS 331 Ch11

Business Law: Ch 11 Contracts: Third Party Rights and Discharge

QuestionAnswer
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
Created by: savelae