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Business Law Ch 11

Summary of slides for Chapter 11 for Fundamentals of Business Law

QuestionAnswer
What is Privity of Contract? Only original parties to a contract have rights and liabilities under the contract
What are exceptions to Privity of Contract? assignments, delegations, and Third party beneficiary contracts, and the original parties intended to directly benefit a third party at time of contracting
In a bilateral contract, what does one party have the right to due? What is the duty of the 2nd party? 1 party has the right to require the other party to perform while the other party has a duty to perform
What is the transfer of the 1st parties rights? Is an assignment
What is an assignor? is the party assigning the rights to the third party
What is an assignee? is the party receiving the rights
What is an obligee? the person to whom a duty or obligation is owed
What is an obligor? the person who is obligated to perform the duty
What happens to the rights of an assignor when they unconditionally assigned those rights? Their rights are extinguished and the assignee has the right to demand performance from the original party to contract
When can rights not be assigned? When a statue prohibits it, when contract is personal in nature, when the assignment will significantly change the risk or duties of the obligor, or when when the contract prohibits assignment
What rights can be assigned regardless? right to receive money, rights to land, negotiable instruments, rights to receive damages in sales of goods
What is Notice of Assignment? Once a valid assignment has been made, notice should be given to the obligor of assignment (person with duty to perform) though assignment is effective immediately and a notice is not needed
What is a delegation? When contractual duties are delegated to a third party
What is a delegator? the party making the delegation of duty, the obligor
What is delegatee? the party to whom the duty is owed, the third party
What duties cannot be delegated? duties personal in nature, when the performance by the third party will vary in materially from what that expected by the obligee, when contract prohibits delegation
What is the effect of delegation? delegator remains liable to obligee, delagatee is liable is delegation creates a third party beneficiary relationship in the obligee, obligee can sue delegator and delegatee for breach if it occurs
What is "Assignment of All Rights"? A contract today generally assumes assignment of rights and assumption of duties
What is Intended Beneficiary? The 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 contract
What is an Incidental Beneficiary? If a third party is not an intended beneficiary, the third party benefit between the two parties was unintentional
Can incidental beneficiaries sue to enforce the contract? No, they cannot sue
What are two types of intended beneficiaries? Creditors and donees
What is a creditor? A contract where promisor promises another party (promisee) to pay a debt the promisee owes to a third party (creditor beneficiary)
What is a donee and do they have a right to sue to enforce a contract? The third party's benefit is a gift, a donee has the right to sue to enforce the contract
What is vesting? When a right is conveyed to a third party
When does the rights of an Intended Beneficiary vest? When third party expresses consent to an agreement acknowledging that a contract was formed for her benefit, when a third party materially alters their position in a detrimental reliance on the contract, or when the conditions for vesting are satisfied
When can a party be discharged from a valid contract? A condition occurring or not occurring, full performance or a material breach by the other party, agreement of the parties, operation of the law
What is a Conditions Precedent? A possible future event, the occurrence or not occurrence of which will trigger the performance of a legal obligation or terminate an existing obligation under a contract
What is Conditions Subsequent? Condition that serves to terminate a party's absolute promise to perform. This condition follows the absolute duty to perform; if the condition occurs, the party need not perform further
What is Concurrent Conditions? Each party's duty to perform is conditioned on the other party's duty to perform. Normally these are simultaneous duties
What are the types of Discharge by Performance? tender, complete performance, substantial performance, performance to Satisfaction of Another, Material Breach, Anticipatory Repudiation
What is tender? The unconditional offer to perform by a person who is ready, willing, and able
What is Complete Performance? Parties performed exactly as agreed or "perfect", all conditions are satisfied
What is Substantial Performance? Party in good faith performs substantially all terms can enforce contract, confers most of the benefits promised, damages can be rewarded
What is Performance to Satisfaction of Another? If personal in nature, then actual personal satisfaction; usually must satisfy reasonable person standard, requires approval by a third person
What is Material Breach of a contract? A material breach occurs when performance is not substantial and the non-breaching party is excused from performance an entitled to damages
What happens 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? Occurs when one party refuses to perform his contractual obligation, before obligation is due and is treated as a material breach where the non-breaching party can sue for damages immediately
When may Anticipatory Repudiation occur? When market prices drive one party to an extreme disadvantage
What are the types of Discharge by Agreement? Discharge by Mutual Rescission, Discharge by Novation, and Discharge by Accord and Satisfaction
What is Discharge by Mutual Rescission? For 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
What is Discharge by Novation? Parties agree to substitute a third party for original party which revokes and discharges a prior contract
What are the requirements for Discharge by Novation? previous valid obligation, agreement by all parties, extinguishment of old obligations, and a new valid contract
What is Discharge by Accord and Satisfaction? accord, parties agree to accept performance different from performance originally promised
What is accord? contract to perform existing contractual duty not yet discharged
What is satisfaction? performance of accord
What are the types of Discharge by Operation of Law? Material Alteration of the Contract, Statues of Limitations, Bankruptcy, Impossibility of Performance, Objective Impossibility, Temporary impossibility, Commercial Impracticality, Frustration of Purpose
What is Material Alteration of the Contract? the innocent party is discharged after material alteration
What is Bankruptcy? Generally bars the enforcement of non-exempt transactions
What is Objective Impossibility? The supervening event not forseeable (death, incapaciation, destruction of material, change in law)
What is Commercial Impracticability? Performance becomes extremely difficult or costly, and must not be known by parties when contract was made
What is Frustration of Purpose? Supervening events make it impossible to attain purpose both parties had in mind. Event must not have been reasonably forseeable, and decreases the value of what the party receives under contract
Created by: fredrickss