BELL QUIZ ON CHAPTER 11 What is it called when a contract has been properly and completely carried out? What does the court ask when determining if the job was completed in a satisfactory manner? Name one of the three situations for impossibility of performance. Name one debt that cannot be discharged under bankruptcy law. True/False – Legal tender includes checks and credit cards.

Reasonable Person Test ANSWERS TO BELL QUIZ Complete Performance Reasonable Person Test a) Death or illness b) destruction of subject matter c) illegality a) education b) taxes c) alimony d) child support e) maintenance payments False

Section 12.1

Why It’s Important Understanding when contractual rights and duties can be assigned will prepare you to deal with such situations when they arise.

Transfer of Rights Recall that when individuals enter contracts, they: receive rights (benefits) incur duties (detriments)

Transfer of Rights Rights and duties may be transferred legally from the original parties to someone new, as long as the contract does not specifically say you can’t.

Transfer of Rights The transfer of a right under a contract is called an assignment. The party who transfers the right is the assignor. The party to whom the right is transferred is the assignee.

Transfer of Rights 12.1 Anthony had a contract with Cathy to rebuild her front steps for $1,800. Anthony owed his landlord $1,800. He therefore assigned his right to the $1,800 to his landlord. When payment was due, Cathy paid the $1,800 to Anthony’s landlord.

How Rights May Be Assigned The law does not specify how one party may assign a right to another. However, it is best to put an assignment in writing, because an oral assignment can be difficult to prove.

What Rights May Be Assigned Most rights may be assigned unless the assignment changes the obligations of the other party to the contract in an important way.

What Rights May Be Assigned Rights to the payment of money and the delivery of goods are the most common types of rights that are assigned.

What Rights May Be Assigned Generally, no special form is required to make an assignment. Any words that clearly indicate a person’s intent are sufficient.

Transfer of Duties The transfer of a duty is called a delegation and should not be confused with an assignment, which is a transfer of rights.

Transfer of Duties In a transfer of duties, a party to a contract delegates another person to perform the obligation in his or her place.

Transfer of Duties Although the performance of an obligation may be delegated, the responsibility for it may not. Subcontracting is a form of delegating.

Transfer of Duties The following duties may not be delegated: A party agrees to perform the service personally. The contract calls for the exercise of personal skill and judgment. The contract prohibits delegation.

Transfer of Duties 12.1 Ivan has a contract to print the PTA newsletter but cannot do it. Ivan transfers his duty to ABC Press. ABC Press prints the PTA newsletter. Ivan is still liable for the terms of the contract. The PTA pays Ivan and Ivan pays ABC Press.

(Added Slide Not On Notes) You don’t need the permission of the other party to assign contract rights or to delegate duties to a third person.

Novation If you receive permission to assign contract rights or delegate duties to a third person, and the other party agrees to deal with the assignee, the resulting contract is called a novation.

Novation A novation is an agreement whereby an original party to a contract is replaced by a new party. The terms of the new contract generally remain the same as those in the original contract.

Novation To be effective, substitution requires the consent of all of the parties involved.

Third Parties A contract is a binding agreement that establishes a relationship between the parties to the contract. This relationship between the parties is termed privity of contract.

Third Parties Privity of contract determines who can sue whom over a question of performance required by a contract. Usually the parties to a contract have standing to sue.

Third Parties A person who is not a party to a contract but still benefits from the contract is called a third-party beneficiary. Example 10 - page 249 End of Section 12.1

Section 12.2 REMEDIES OF THE INJURED PARTY

THE GOOFED UP WEDDING GIG VIDEO

Breach of Contract A breach of contract occurs when one party to a contract fails to perform the duties set out in the terms of the agreement.

Breach of Contract Sometimes parties to a contract notify the other that they will not go through with the contract before the time for performance.

Breach of Contract They have breached, or violated, the agreement before they were required to act. This is called anticipatory breach.

Damages When a contract is breached, the injured party has a choice of remedies. A remedy is a legal means of enforcing a right or correcting a wrong.

Damages The injured party has three options: accept the breach sue for money damages ask the court for an equitable remedy

Acceptance of Breach If one party breaches a contract, the other party has an excuse not to perform and may simply accept the breach and consider the contract discharged.

Money Damages Damages are payment recovered in court by a person who has suffered an injury.

Money Damages If you suffer a loss as the injured party, you may sue for money damages resulting from the breach of contract.

Money Damages The money damages should, by law, place you in the position you would have been in if the contract had been carried out.

Money Damages To recover damages, the injured party must make tender; that is, the injured party must offer to do what he or she agreed to do under the contract.

Money Damages Categories of damages include: Actual Liquidated Compensatory Nominal Consequential Punitive Incidental Speculative Figure 12.3 – page 252

Actual and Incidental Damages Actual damages are damages directly attributable to another party’s breach of contract.

Actual and Incidental Damages If a seller of goods breaches a contract, the measure of damages for the buyer is the difference between the market price at the time of the breach and the contract price, plus incidental damages.

Actual and Incidental Damages Incidental damages are any reasonable expenses, resulting from a breach, that have been incurred by the buyer. Example 12 – page 251

Liquidated Damages Damages agreed upon by the parties when they first enter into a contract are called liquidated damages. Example 13 – page 252

Minimizing Damages The principle of mitigation of damages states that even if you are the innocent party, you must try to minimize damages that might result from the other party’s failure of performance.

Minimizing Damages By minimizing damages, the innocent party is protecting the other party from any unnecessary losses. Example 14 – page 253

Equitable Remedies The remedy of money damages is not always enough to repay an injured party for breach of contract. In these cases, the injured party may seek an equitable remedy.

Equitable Remedies Two equitable remedies are: specific performance an injunction

Specific Performance When the remedy of money damages is not enough to repay a breach of contract, one party may sue the other for specific performance.

Specific Performance Specific performance means asking the court to order the other party to do specifically what he or she originally agreed to do. Example 15 – page 253

Injunction An injunction is a court order that prevents a party from performing an act of some sort. Example 16 – page 255

Injunction An injunction is only available in special circumstances, such as when money damages are inadequate compensation. may be temporary or permanent End of Section 12.2