breach, and remedies.

Typically, only the original parties to a contract

have the rights and liabilities under that contract.

There are some exceptions that we talk about in this chapter.

Assignment, delegation,

and third party beneficiary contracts.

Assignment is a transfer of contractual rights.

Later, we'll talk about delegation being a transfer

of contractual duties.

The parties in assignment--

the assignor is the one who makes the assignment.

The assignee is the one the right is assigned to.

An obligee is somebody who is owed a duty or obligation.

And the obligor is the one who owes that duty or obligation.

So an assignee can assign rights or things

they're gonna receive in a contract to some third party,

and those rights then pass to that third party--

the assignee-- who has a right to demand performance

from the original party to the contract--

specifically the obligor.

Assignment is prohibited when there's a law against it,

when it's personal in nature,

when it would materially change the rights or duties

of the obligor,

or when it will significantly change the risk or duties

of the obligor.

Once an assignment is made, the assignee should notify

the obligor of the assignment.

There's no real duty to do this notice

but it's in the assignee's best interest.

One of the issues that comes up is if notice isn't given,

who has priority?

What if the assignor assigns the same rights

to two different people?

The obligor can discharge his obligation by performing

to the assignor.

As we mentioned, delegation is contractual duties delegated

to a third party.

Delegator is the one making the delegation.

Delegatee is the one the delegation is made to.

The effect is that the delegation is enforceable.

The obligee must accept performance

from the delegatee to whom the delegate--

the duties are delegated.

However, the valid delegation doesn't relieve the delegator

of the duties under the contract.

In other words, if you contract with somebody

and you delegate those duties to someone else,

you're still responsible for ensuring they get done.

Duties that can't be delegated-- if performance depends

on the personal skills or talents of the obligor,

some special trust relationship in the obligor,

a third party performance will materially vary

from the contractual expectations,

and when a contract expressly prohibits delegation.

Third party beneficiaries exist

when the original parties to the contract

intend to benefit someone else

who is not a party to the contract at the time

of contracting.

Makes both parties promisors.

A third party's rights are vested

when a third party demonstrates express consent

to the agreement,

when a third party materially alters his or her position

in detrimental reliance,

or when the conditions for vesting are satisfied.

For example, in a life insurance policy, once somebody dies,

then a third party beneficiary's rights would vest.

A couple intended beneficiaries--

a creditor beneficiary is somebody who benefits

from a contract in which the promisor

promises the promisee

to pay a debt the promisee owes to a third party.

A donee beneficiary is when a contract is made

for the express purpose of the promisor giving a gift

to a third party, the donee.

A donee can sue the promisor directly if the promisor

breaches the contract.

As we mentioned, intended beneficiaries

can bring an action to enforce the contract.

An incidental beneficiary is somebody who is not intended

to benefit at the time of the contract

and they can't sue to enforce the contract.

Let's look at contract discharge.

There are different ways a contract can be discharged.

It could be by condition, by performance,

by agreement of the parties in operation of law.

A condition would be a possible future event--

the occurrence or non-occurrence

of which would trigger performance of legal obligation

or terminate an existing obligation.

In other words, it's a condition that would cause somebody

to have an obligation to continue in a contract

or would cause them to be able to avoid a contract.

And condition precedents-- subsequent and concurrent--

just has to do with the timing of that condition.

So sometimes, there's a condition that precedes

a party's obligation to perform.

Discharge by performance--

complete performance would be a perfect performance,

where the parties do exactly everything that's required.

That's fairly rare.

What the court is looking for is substantial performance.

A party who performs substantially

and in good faith can enforce the contract.

Basically, they confer most of the benefits.

The benefits or performance doesn't vary greatly

from what was promised.

This is what we would call a "minor breach."

It would entitle the other party to damages.

You also could have a contract that requires satisfaction

of someone.

We call those a "satisfaction contract."

When the contract is personal, the subject matter is personal,

and actual personal satisfaction is required.

Otherwise, we're looking at a reasonable person's standard.

In other words, somebody's satisfaction

couldn't be unreasonably withheld.

We'll look at material and minor breaches of contract.

A breach of contract generally is the non-performance

of a contractual duty.

That breach is material when performance

is not substantial and the non-breaching party

is excused from performance.

They're also entitled to damages.

If it's a minor or non-material breach, the duty to perform

is not excused on the non-breaching side

and they have to resume their performance.

Anticipatory repudiation

means you think there's gonna be a breach.

Before the performance is due, one of the parties

might refuse to perform or appear

as if they're not going to be able to meet

the contractual obligations.

This would be treated as a material breach.

If the other party admits they're not going to be able

to perform-- and this would entitle the non-breaching party

to bring an action immediately for damages

versus having to wait to see if the other party performs--

but notice by that repudiating party,

the party who is leading to the anticipatory repudiation,

would restore the original obligation.

In other words, if I told you

that I'm going to breach the contract

but before you changed your position,

I told you that I am now able to fulfill it,

then you would need to wait.

Discharge by agreement could be by rescission, novation,

or accord and satisfaction.

Rescission means that the parties agree

to undo the contract.

Novation would be for the old contract to go away,

a new contract to replace it that contains a party

from the old contract and a new party.

Sometimes this is called "substitution."

And accord and satisfaction

would be where there is a contract

but somebody offers to perform something different

and the other party says that would be sufficient.

So example-- I owe $10,000 but I offer to pay $8,000

and the other party takes $8,0000 now

versus waiting to try to collect $10,000.

That would be an accord and satisfaction.

The law could discharge a contract.

Perhaps it gets altered by one of the parties.

The other party-- who's innocent--

would be discharged from that.

Statute of limitations-- if somebody waits too long to sue

under a breach of contract,

then the contract would be discharged--

it wouldn't be able to recover.

Or bankruptcy is a way of discharging contracts

by operation of law.

Sometimes, it's impossibility--

in a situation where it's not foreseeable.

This could occur by death or incapacity of the parties,

the subject matter of the contract's destroyed,

or the law changes that makes the contract illegal.

It could be temporary impossibility

that suspends performance

or a situation where it's not impossible

but it's commercially impractical

and, again, the performance would need

to be extremely difficult or costly

and not really foreseeable by the party

at the time of the contract.

Or frustration of purpose.

Something intervenes, makes it impossible for the parties

to attain the purpose they had in mind

when they formed the contract.

For different types of damages in a contract--

compensatory typically is the difference

between a value of what was promised

and what was actually performed.

Incidental damages would be damages in addition

to compensatory damages that could be linked

directly to the breach,

and sale of goods is the difference

between the contract price and the market price.

And a sale of land-- perhaps the party

would ask for a specific performance

because they want the land versus the damages.

Consequential damages would be foreseeable losses

that a breaching party is aware or should be aware of.

Punitive damages would be to punish the other party--

this is not common unless there's some type of tort.

For example, fraud involved in nominal damages

would be like a dollar when there's not actual losses

but technically there's a breach.

Mitigation damages is the innocent party

being required to reduce their damages if possible.

Liquidated damages would be the parties agreeing in advance

to pay a specific amount upon breach.

The court will enforce those

unless they're an unreasonable penalty.

Generally, the court won't enforce those--

the questions that the court ask are listed there.

There's also equitable remedies.

Rescission, restitution, specific performance

and reformation.

We've talked about rescission generally--

you know, backing out of or undoing the contract.

Restitution would be returning goods, property, or money.

Specific performance would be making the party

perform the acts they promised in the contract--

and reformation would be to rewrite the contract

to reflect the party's intentions.

This is common in a situation where there's fraud

or mutual mistake.

It could be a quasi contract--

and we've talked about that before in terms of it

being a contract that the court creates

when there's not a contract--

and the requirements are that there's some benefit

conferred to the other party,

the other party takes that benefit,

the party expects to get paid when they provide that benefit,

and letting the other party keep the benefit

without paying would--