Introduction to ContractsThe Agreement: Offer
The Agreement: AcceptanceConsideration
Reality of Consent
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Capacity to ContractIllegality
WritingRights of Third Parties
Performance and Remedies
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Rights of Third Parties
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Learning Objectives
Assignment of ContractsDelegation of DutiesThird-Party Beneficiaries
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Sometimes a person who entered into a contract must transfer the contract rights or duties to another person (third party) Examples: sublease of your apartment, asking
another person take over work you agreed to do, or doing something to benefit a third person
Key to successful transfer: understand the third party’s abilities, limitations, and needs
Overview
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A person who owes a duty to perform under a contract is called an obligor
The person to whom the duty is owed is called the obligee
Overview
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Transfer of a right under a contract is called an assignment
Example: Jane arranges for her employer to transfer her next paycheck to her parents’ bank account Employer is the obligor (owes Jane money) Jane is the obligee and assignor Jane’s parents are the assignees
Assignment of Contracts
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Assignments may be made in any way sufficient to show assignor’s intent to assign
A writing is not necessary Unless statute of frauds applies
Assignee does not need to give consideration to assignor in exchange for the assignment
Details of Assignment
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Assignment will not be effective if it: Is contrary to public policy
Example: PPG Industries, Inc. v. JMB/Houston Center Violates a non-assignment clause in a contract Adversely affects obligor in some significant way
Assignment may be ineffective if the contract right involved a personal relationship or element of personal skill or character
Limitations on Assignment
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Appointment of another person to perform a duty under a contract is called a delegation
Example: Mike mows Janet’s lawn weekly. Mike becomes ill and arranges for Sonny to mow Janet’s lawn Janet is the obligee Mike is the obligor and delegator Sonny is the delegatee
Delegation of Duties
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Caution: an assignment extinguishes the assignor’s right and transfers it to the assignee, but the delegation of a duty does not extinguish the duty owed by delegator Delegator remains liable to the
obligee unless the obligee agrees to make a new contract substituting the delegatee’s for the delegator
Delegation of Duties
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In an effective delegation, performance by the delegatee will discharge the delegator The reason why you should understand the
delegatee’s abilities and limitations
Effective Delegation
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Duties are not delegable if the delegation: Is contrary to public policy Is prohibited by a contract clause
Also, duties that are dependent on the individual traits, skill, or judgment of the person who owes the duty to perform may not be delegable Example: a hip hop artist could not reasonably
delegate concert obligation to an opera star
Non-delegable Duties
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Delegation may be made in any way that shows the delegator’s intent to delegate
Delegator may be discharged from performance by a substituted contract (novation) in which obligee agrees to discharge original obligor and substitute a new obligor Effect: Original obligor has no further
obligation
Details of Delegation
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If parties to a contract intended to benefit a third party, courts give effect to their intent permitting third party to enforce the contract Referred to as third-party beneficiary
Example: Father contracts and pays for Homes, Inc. to build house as gift for Son Son (third-party beneficiary) may sue Homes,
Inc. if the company breaches the contract Father may also sue Homes, Inc.
Third-Party Beneficiaries
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Incidental beneficiary is one obtaining a benefit as unintended by-product of a contract No rights under contract
In foregoing example, Son’s Wife would be an incidental beneficiary
Incidental Beneficiaries
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