Chapter 9 Contract Performance Breach Remedies Privity of Contract The relationship that exists between the promisor and the promisee of a contract Breach of Contract Failure without legal excuse of a promisor to perform the obligations of a contract Assignment The transfer to another of all or part of one s rights under a contract Assignor A party who assigns his or her rights under contract to another party Assignee A party to whom the rights under a contract are assigned Generally all rights can be assigned UNLESS o A statute expressly prohibits assignment The particular right in question cannot be assigned o The contract is for personal services The rights under the contract normally cannot be assigned unless all that remains is a monetary payment o The assignment will materially alter the obligors risk or duties A right cannot be assigned if assignment will significantly increase or alter the risks or the duties of the obligor o The contract prohibits assignment If a contract stipulates that the right cannot be assigned then ordinarily it cannot be assigned This rule has several exceptions Right to receive funds Restraints against alienation Negotiable instruments cannot be prohibited In a contract for the sale of goods the right to receive damages for breach of contract or for payment of an account owed may be assigned even though the sales contract prohibits such an assignment Notice of Assignment Once a valid assignment of rights has been made to a 3rd party that party should notify the obligor of the assignment Giving notice is not legally necessary because an assignment is effective immediately whether or not notice is given TWO problems arise when notice is not given o If the assignor assigns the same right to two different persons a question arises as to which patty has the right to receive performance from the obligor o Until the obligor has notice of the assignment the obligor can discharge his or her obligation by rendering performance to the assignor Once the obligor receives proper notice only performance rendered to the assignee can discharge the obligation Obligee One to whom an obligation is owed Obligor One who owes an obligation to another Alienation The voluntary transfer of land out of one s possession Delegation of Duties The transfer to another of all or part of ones duties under a contract Delegator A party who gives her or his obligations under a contract to another party Delegatee A party to whom contractual obligations are received As a general rule Any duty can be delegated UNLESS o Performance depends on the obligor s personal skills or talents or special trust has been placed in the obligor o Performance by a 3rd party will vary materially from that expected by the obligee o The contract prohibits delegation A valid delegation of duties does NOT relieve the delegator of obligations under the contract If the delegate fails to perform the delegator is still liable to the obligee An assignment of all rights or an assignment of the contract is often construed to mean that both the rights and the duties arising under the contract are transferred to a third party 3rd Party Beneficiary One for whose benefit a promise is made in a contract but who is not a party to the contract Example Life Insurance Intended Beneficiaries A 3rd party for whose benefit a contract is formed An intended beneficiary CAN sue the promisor if the contract is breached o Creditor Beneficiary benefits from a contract in which one party the promisor promises another party the promissee to pay a debt that the promise owes to a 3 rd party o Donee Beneficiary When a contract is made for the express purpose of giving a gift to a 3rd party the 3rd party the donee beneficiary contract is a life insurance contract Incidental Beneficiaries A 3rd party who benefits from a contract even though the contract was not formed for that purpose An incidental beneficiary has no rights in the contract and CANNOT sue to have it enforced Vesting The rights have taken effect and cannot be taken away The rights vest when one of the following occurs o When a 3rd party demonstrates express consent to the agreement such as by sending a letter or note acknowledging awareness of and consent to a contract formed for her or his benefit o When the 3rd party materially alters his or her position in detrimental reliance on the contract such as when a donee beneficiary contracts to have a home build in reliance on the receipt of funds promised to him or her in a done beneficiary contract o When the conditions for vesting are satisfied Discharge The termination of an obligation Performance The fulfillment of one s duties under a contract the normal way of discharging one s contractual obligations Absolute Conditional Condition A qualification provision or clause in a contractual agreement the occurrence or nonoccurrence of which creates suspends or terminates the obligations of the contracting parties Promises of performance are not expressly conditions or qualified Instead they are absolute promises Must be performed or the party promising the act will be in breach of contract Condition Precedent A condition in a contract that must be met before a party s promise becomes absolute Before Example Warranty Cash on Delivery Condition Subsequent A condition in a contract that if it occurs operates to terminate a party s absolute promise to perform After Example Random Drug Tests Concurrent Conditions Conditions that must occur or be performed at the same time they are mutually dependent No obligations arise until these conditions are simultaneously performed Paying for a Pepsi Discharge by Performance A contract may be discharged by complete strict or by substantial performance In some instances performance must be to the satisfaction of another Totally inadequate performance constitutes a material breach of the contract An anticipatory repudiation of a contract allows the other party to sue immediately for breach of contract Tender An unconditional offer to perform an obligation by a person who is ready willing and able to do so Paying for goods Anticipatory Repudiation An assertion or action by a party indicating that he or she will not perform a contractual obligation Complete Performance When a party performs exactly as agreed Substantial Performance A party who in good faith performs substantially all of the terms of a contract can enforce the contract against the other party under the doctrine of substantial
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