1. Chapter 8 Contracts: Third Party Rights, Discharge, Breach and Remedies

2. What is the difference between an assignment and a delegation?
Learning Objectives
What is the difference between an assignment and a delegation?
What factors indicate a third party is an intended beneficiary?
How are most contracts discharged?
What is a condition and how does a condition affect contractual performance?

3. Assignments Transfer of contractual rights to a 3rd party.
3rd party is called the assignee.
The assignee has the right to demand performance from the other original party (Obligor) to the contract.
Cannot Assign rights for personal services or when obligor’s performance changes.

4. Delegations
Transfer of duties to a 3rd party (Delegatee) by Delegator.
Delegatee owes duty to original party in contract.
Delegator is still liable for performance of duty.

5. Third Party Beneficiaries
3P Intended Beneficiary (Creditor and Donee) Original parties to K intend at the time of contracting that the contract performance directly benefit a 3rd party. After rights vest, 3P can sue for breach.
3P Incidental Beneficiary. Benefit is unintentional. 3P has no rights.

6. Contract Discharge Discharge is the full performance of all duties.
Conditions of Performance:
Condition is a possible future event that may or may not happen.
Triggers or terminates performance.
Condition Precedent: prior to performance
Condition Subsequent: follows initial performance.
Concurrent: occur simultaneously.

7. Contract Discharge
Discharge by Performance: Complete vs. Substantial Performance
Complete Performance: perfect performance under the contract.
Substantial Performance: technically a minor breach but as long as in good faith, the non-breaching party remains liable to pay.
Satisfaction Contract: performance is conditioned on reasonable satisfaction.

8. Contract Discharge Material Breach Anticipatory Repudiation
When performance is not substantial
Innocent party is excused from performance and has the right to sue for damages.
A minor breach may be cured.
Anticipatory Repudiation
One party gives notice of refusal to perform.
Innocent party treats AR as material breach.

9. Contract Discharge Discharge by Agreement
Discharge By Rescission: both parties must make another agreement.
Discharge by Novation: new contract with substitution of a third party for one of the original parties.
Accord and Satisfaction: settlement to discharge original contract.

10. Contract Discharge Discharge by Operation of Law Contract Alteration
Statutes of Limitations
Bankruptcy
Objective Impossibility of Performance
Party’s incapacitated,
Subject matter is destroyed,
Performance becomes illegal, or
Commercially impracticable.

11. Damages Compensatory Damages Compensates injured party (Plaintiff)
Plaintiff must prove actual damages caused by breach. Amount:
Generally: difference between Defendant’s promised performance and actual.
Sale of Goods: difference between the contract price and market.

12. Damages Consequential (Special) Damages Punitive (Exemplary) Damages
Foreseeable damages that result from breach of contract.
Caused by other than breach of contract.
Punitive (Exemplary) Damages
Deter wrongdoer; set example.
Nominal Damages

13. Damages Mitigation of Damages Liquidated Damages vs. Penalties
Injured party has a legal duty to mitigate damages.
Liquidated Damages vs. Penalties
Liquidated: fixed, certain dollar amount agreed to by parties, paid in the event of breach. LD’s are enforceable.
Penalty: designed to penalize a party. Generally not enforceable.

14. Equitable Remedies Rescission: cancel or undo a contract.
Available for fraud, mistake, duress and failure of consideration.
Restitution: recapture the benefit conferred on the defendant that has unjustly enriched her.
Parties must return goods, property or money.
Specific Performance
Reformation: court re-writes the contract to reflect parties’ true intentions.

15. Equitable Remedies
Recovery based on Quasi-Contract. Plaintiff must show:
Benefit was conferred on the other party.
Party conferring benefit expected to be paid.
Party seeking recovery did not volunteer.
Retaining benefit without payment would be unjust enrichment.
Election of Remedies