Presentation on theme: "Contract Rights and Duties"— Presentation transcript:
1 Contract Rights and Duties Contracting parties have a legal obligation to perform the duties specified in their contract.If one party fails to perform as promised, the other party may enforce the contract and sue for breach.
2 Assignment of RightsAssignment – The transfer of contractual rights by the obligee to another party.Assignor – The obligee who transfers the right.Assignee – The party to whom the right has been transferred.
3 Contract No. 1: Creditor (Obligee) Contract No. 2 Assignment of note Assignment of a RightContract No. 1Loan of MoneyContract No. 1: Creditor (Obligee)Debtor(Obligor)Contract No. 2: AssignorNote(Promise to pay)Contract No. 2 Assignment of noteRight to enforce payment of noteAssignee
4 Rights That Can and Cannot Be Assigned Generally, a party may assign rights, provided performance will not materially change.Personal Service Contracts. Contracts for the provision of personal services are generally not assignable.
5 Effect of An Assignment of Rights Where there has been an assignment of a right, the assignee “stands in the shoes of the assignor” and is entitled to performance from the obligor.
6 Notice of AssignmentTo protect his or her rights, the assignee should immediately notify the obligor that:The assignment has been made, andPerformance must be rendered to the assignee.
7 Delegation of DutiesDelegation – A transfer of contractual duties by the obligor to another party for performance.Delegator – The obligor who transferred his or her duty.Delegatee – The party to whom the duty has been transferred.
8 Delegation of a Duty Promisee (Obligee) Delegatee Contract No. 1: Promisor (Obligor)Contract No. 1Promise to PerformPromisee(Obligee)Contract No. 2: DelegatorContract No. 2 Delegation of dutiesDuty of performanceDelegatee
9 Duties that Can and Cannot Be Delegated If the obligee has a substantial interest in having the obligor perform the acts required by the contract, duties may not be transferred.e.g., Personal service contracts calling for the exercise of personal skills, discretion, or expertise.e.g., Contracts whose performance would materially vary if the obligor’s duties were delegated.
10 Effect of Delegation of Duties If the delegation is valid, the delegator remains legally liable for the performance of the contract.If the delegatee does not perform properly, the obligee can sue the obligor-delegator for any resulting damages.
11 Effect of Delegation of Duties (continued) Assumption of DutiesWhen a delegation of duties contains the term assumption, I assume the duties, or other similar language:The delegatee is legally liable to the obligee for nonperformance.
12 Third-Party Beneficiaries Third parties sometimes claim rights under others’ contracts.Such third parties are either:Intended Beneficiaries, orIncidental Beneficiaries
13 Intended Beneficiary A third party who is not in contract. Has rights under the contract.Can enforce the contract against the obligor.Intended beneficiaries are classified as:Donee Beneficiaries orCreditor Beneficiaries
14 Donee BeneficiariesDonee Beneficiary Contract – A contract entered into with the intent to confer a benefit or gift on an intended third party.Donee Beneficiary – The third party on whom the benefit is to be conferred.
15 Donee Beneficiary Contract Life Insurance Company (Promisor)Insured (Promisee)Original Contract(Life insurance policy)Right to enforce contractNamed Beneficiary (Donee Beneficiary)
16 Discharge by Performance A party’s duty to perform under a contract may be discharged by:By Performance- both parties have fulfilled their duties within the contractIf not, the injured party can claim a breach of contractWhen one party fails to perform a crucial duty under a contract, the other party may regard his own obligation as discharged
17 Discharge by Performance By Performance cont’d:Substantial Performance- most of the duties have been performed; only minimal duties left uncompletedViewed as a minor breachShould expect full performance by the non-breaching party less the damages suffered; unless the breach was done deliberately, then considered a major breach
18 Discharge by Performance By Performance cont’d:Anticipatory Breach- when one party notifies the other that they will be unable to complete performanceThe non-breaching party can wait until the promised time of performance or immediately sue for breach
19 Discharge by Performance By Performance cont’d:Timing of Performance- for those contracts without a specified time of performance, a reasonable length of time is determined by a judge/jury based on the circumstancesEx. Delivery of vegetables vs. furniture
20 Discharge by Mutual Agreement The parties to a contract may mutually agree to discharge or end their contractual duties.Mutual agreement of the partiesRescission- parties agree to return all considerationSubstitution- parties decide the original contract is not what they want, therefore, an new (substitute) is created
21 Discharge by Mutual Agreement Mutual agreement cont’d:Accord and satisfaction- parties agree to a change in performanceNovation- parties agree to allow a substitute party perform a contractual duty
22 Discharge by Impossibility of Performance The parties may agree in their contract that certain events will excuse nonperformance of the contract.e.g., Natural disasterse.g., Labor strikese.g., Shortages of raw materialse.g., Death or disability for a personal servicee.g., Subject matter is destroyed
23 Discharge by Operation of Law A contract may be unenforceable due to the law.Alteration- a material change in the terms of a contract without one party’s consentBankruptcy- a debtor is relieved of responsibility to pay a creditorStatute of Limitations- the time period to enforce a contract has elapsed
24 Remedies for BreachRemedy- a legal means by which an injured party enforces a rightMinor Breach- generally money damages are awarded as a remedy; injured party must still performMajor Breach- injured party need not continue performanceRescission and restitution- return consideration
25 Remedies for Breach Major Breach cont’d- Money damages CompensatoryConsequentialPunitiveLiquidatedNominalSpecific performance
26 Other contractual terms to know: Mitigate damages- the injured party is required to take reasonable steps to minimize their injuryWaiver- party intentionally gives up a contractual right