lecture 5 - Lecture#5 Tuesday 6:57 PM Privity of Contracts...

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Unformatted text preview: Lecture #5 Tuesday, January 26, 2016 6:57 PM Privity of Contracts Because it is only the par℀甄es that make the contract, it is the par℀甄es that can enforce it. And only the par℀甄es in the contract can have the contract enforced upon them. The par℀甄es in a contract do not have the power to impose benefits or obliga℀甄ons on a third party or outsider who are not par℀甄es in the contract. This principle is called privity of contract. Example A owes B $1000 A offers to C to renovate C's kitchen if C will pay B $1000 C goes, A does the work, C refuses to pay B Everyone has to come to court. The courts do not want to deal with two par℀甄es with the third party being affected as well An excep℀甄on to this: Vicarious Performance A contract can be performed by the employee of the employer. The employee can be considered a third party. Normally in this service line for trades can be vicariously performed by another employee Another excep℀甄on: Trusts Se℀ጅlor > Trustee The trustee is the trusted advisor that holds assets for the owner of the family and then redistribute it to the other members of the family When the Se℀ጅlor dies, the trustee gets the assets and when the family gets old enough, the trustee MUST give the money to the beneficiaries But that part of the contract must be enforced even though the Beneficiaries are the 3rd par℀甄es and that is why Trusts are an excep℀甄on to the Privity of Contract Assignment A owes B $10000 B owes C $60000 B assign to C $6000 of his receivable from A This is a Par℀甄al assignment A owes B $100000 B wants to borrow $80000 from C and assigns to C his receivable as security for the debt This is a Condi℀甄onal assignment There is a solu℀甄on to this and this is called a statutory assignment 1. Assign rights, not liabili℀甄es 2. Complete assignment, not par℀甄al 3. You make it into an Uncondi℀甄onal assignment instead of a condi℀甄onal 4. Everyone gets no℀甄fied of the assignment Discharge of Contracts When is the contract is finished: 1. Contract is performed. The par℀甄es in the contract can now be discharged of it 2. Substan℀甄al performed. Some℀甄mes perfect performance is unnecessary if it is substan℀甄ally complete 3. Tendered performance. To show that you are ready, willing and able to close For example: An℀甄cipatory Breach(Repudia℀甄on) The offeror telling the offeree that he will not be able perform his side of the contract 1. Accept the breach. She is discharged and can sue for damages Say of op℀甄on 1 is exercised : Sue for damages‐ Mi℀甄ga℀甄on: If you want to sue for damages, you must be a reasonable prudent person and not sue for maximum damages. You must take reasonable steps to reduce your claim. This is the same thing for negligence and torts 2. Not accept the breach and con℀甄nue to demand performance . She is not discharged and must be ready, willing and able to close at the performance day If op℀甄on 2 is exercised, there might be a risk of frustra℀甄on. It is a discharged contract and everyone walks away. There is no such risk in op℀甄on 1. Ques℀甄on on the midterm: Which op℀甄on should Veronica choose Frustra℀甄on Rescission is exercised here ...
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