1. Chapter 11: Contractual Obligations and their Enforcement
Lexy Cascone, Taylor Gaffney, Mike Geinopolos, & Russel Gartman

2. Legal Application #1
Keisha Arthur hired a general contractor to build her new home who in turn delegated most of the work to four independent subcontractors.
QUESTION: Is this a legal delegation of duties?
Is the general contractor responsible for the subcontractors work?

3. Legal Application #1 Response
YES: It is legal for general contractors to delegate work to skilled subcontractors. The general contractor is still legally responsible for the performance of any delegated work.

4. Transfer of Contract Rights
Assignment: the transfer of contractual rights VS
Delegation of Duties: transfer of contractual duties
Assignor: the party who transfers the right
Assignee: party who receives the right
What happens when contractual rights are transferred?
Does not change the legal rights of the other party to the contract
Obligor: one who owes a duty under the contract
GENERALLY: A party assigns contractual rights to another, provided performance will not be materially changed
Performance: fulfillment of contractual promises as
agreed

5. Legal Application #1 Reference
IMPORTANT: A person can not delegate to another any duty where performance requires unique personal skill or special qualifications. It was legal for the general contractor to delegate the house work to skilled subcontractors as long as they were all qualified and certified to do the job.

6. Discharge of Obligations
Discharge: termination of duties
- Contracts discharged by complete performance of terms
FAILURE TO DO SO= BREACH OF CONTRACT
-Substantial performance: minor duty of contract remains, but all duties performed
-A minor breach does NOT discharge the duties of the non-breaching party
-A party injured by a breach of contract must elect or choose a remedy when suing
- Default: when a party fails to perform
- Defaulting party must notify the other party to a contract BEFORE the time of performance= anticipatory breach

7. Significance and Classification of Breach
A party injured by a breach of contract is required by law to take reasonable steps to minimize the harm done: Mitigate the damages
***A judge or jury decides the significance and classification of a breach***

8. 2 ways Parties who agree to change terms of contract can avoid breach
Subsequent Agreement
2 ways Parties who agree to change terms of contract can avoid breach
Rescission: parties agree to unmake or undo their entire contract from the beginning
Substitution: Parties decide the present contract is not what they want= REPLACE with new contract. Discharges original contract by substitution

9. Remedies for a Breach Basic Remedies for MINOR breach: Imprisonment
Money Damages
Rescission: treat contract as cancelled
Restitution: permits parties to recover money or property. Available when parties have attempted to contract but failed
Basic Remedies for a MAJOR breach
Rescission
Restitution
Specific Performance: breaching party to do exactly what was required under contract

10. Money Damages
Compensatory: restores injured parties to the same financial position prior to the breach
EXAMPLE:
Charlotte, home broker, contracted to buy a house from Ben for $65,000 knowing the fair market value of the property was higher. Charlotte spent $3000 on title search, a survey, an appraisal, loan origination fees, etc. If Ben committed a material breach for refusing to sell, a court would award Charlotte $2000 as compensatory damages. This would restore the broker to her financial situation prior the breach.

11. Money Damages cont…
Consequential: place injured parties in the same financial situation prior the contract being performed
Grants money for the injuries caused by the breach
Punitive: to punish and to make an example of the defendant
Liquidated: Parties agree on a certain amount of monetary damages that will be paid is a breach occurs
Not all liquidated clauses are enforceable
Example: excessive amount of monetary damage
Nominal: no substantial harm done, acknowledgement that wrong was committed in not performing a duty under contract
* Additional Note: a ready willing and able offer to perform an obligation: tender

12. Remedies for BREACH OF CONTRACT
Rescission and Restitution
Specific Performance
Damages
Injunction
Waiver
Types of Damages
Compensatory Damages
Consequential Damages
Liquidated Damages
Nominal Damages
Punitive Damages

13. CLICKER ACTIVITY

14. Chapter 11 Test ANSWERS
1) T 2) T 3) T 4) F 5) F 6) F 7) T 8) F 9) T 10) T
11) C 12) A 13) B 14) C 15) D 16) A 17) C 18) C 19) B 20) C