Ch 11

Fundamentals of Business Fundamentals of Business LawLaw

Summarized Cases, 8th Ed., and Excerpted Cases, 2nd Ed.

ROGER LeROY MILLERInstitute for University Studies

Arlington, Texas

GAYLORD A. JENTZHerbert D. Kelleher Emeritus Professor in Business Law

University of Texas at Austin

Copyright © 2010 South-Western Legal Studies in Business, a part of South-Western Cengage Learning.

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Learning ObjectivesLearning 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 that a third party is an intended beneficiary?

• How are most contracts discharged?• What is a contractual condition, and how

might a condition affect contractual obligations?


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AssignmentsAssignments• 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 obligor’s performance changes.

CASE 11.1 Graham School and Dance Foundation, Inc. v. Martha Graham Center of Contemporary Dance, Inc. (2nd Circuit, 2004).


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DelegationsDelegations• 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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““Assignment of All Assignment of All Rights”Rights”


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Third Party BeneficiariesThird Party Beneficiaries• 3P Intended Beneficiaries (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 Beneficiaries. Benefit is unintentional. 3P has no rights.

• CASE 11.2 Revels v. Miss America Organization (North Carolina, 2007).


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Third Party BeneficiariesThird Party Beneficiaries


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Contract DischargeContract Discharge• 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 DischargeContract Discharge


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Discharge by Discharge by PerformancePerformance

• 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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Discharge by Discharge by PerformancePerformance

• Material Breach of Contract. – 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.


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Discharge by AgreementDischarge 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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Discharge by Operation Discharge by Operation of Lawof Law

• Contract Alteration.• Statutes of Limitations.• Bankruptcy.• Impossibility of Performance

(Objective).– Party’s incapacitation.– Subject matter is destroyed.– Performance becomes illegal.– Commercially impracticable.


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Discharge by Operation Discharge by Operation of Lawof Law

• Temporary Impossibility. – Suspends performance until the impossibility

ceases.• Commercial Impracticability.

– Performance may be excused when it becomes extremely more difficult or expensive than originally contemplated.

– CASE 11.3 Facto v. Pantagis (New Jersey, 2007).

Ch 11

Documents

Transcript of Ch 11