Chapter 12 Third Party Rights and Discharge

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Chapter 12Third Party Rights and Discharge
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Learning Objectives

• What is the difference between an assignment and
  a delegation?
• What rights can be assigned despite a contract
  clause expressly prohibiting assignment?
• What factors indicate a third party is an
  intended beneficiary?
• How are most contracts discharged?
• What is a contractual obligation, and how might a
  condition affect contractual performance?

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Assignments

• Transfer of contractual rights to a 3rd party
  (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 obligors performance changes.
• Forest Commodity Corp. v. Lone Star Industries,
  Inc. (2002).

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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.

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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.
• Vogan v. Hayes Appraisal Associates, Inc. (1999).

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Contract Discharge

• Discharge is the full performance of all duties.
• Conditions to 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.

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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.

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Contract Discharge

• Material Breach
• 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.
• Kim v. Park (2004).
• Anticipatory Repudiation
• One party gives notice of refusal to perform.
• Innocent party treats AR as material breach.

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Contract Discharge

• Discharge by Agreement
• Discharge By Mutual Rescission 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.

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Contract Discharge

• Discharge by Operation of Law
• Contract Alteration.
• Statutes of Limitations.
• Bankruptcy.
• Impossibility of Performance (Objective).
• Partys incapacitation.
• Subject matter is destroyed.
• Performance becomes illegal.
• Commercially impracticable.