Unformatted text preview: Kulper - Econ 189 Kulper 1 Third Party Beneficiary
Someone who was not a party to the contract but stands to benefit from it.
• An intended beneficiary may enforce a contract if the parties intended her to benefit and if either:
– enforcing the promise will satisfy a duty of the promisee to the beneficiary; or – the promisee intended to make a gift to the beneficiary. (Schauer v. Mandarin Gems of CA: Darin Erstad buys $43K ring for fiancé; short marriage; improper ring rating) • Any beneficiary who is not an intended beneficiary is an incidental beneficiary, and may not enforce the contract.
Kulper - Econ 189 Kulper 2 Third Party Beneficiary Kulper - Econ 189 Kulper 3 Assignment and Delegation
• A contracting party may transfer his rights under the contract, which is called an assignment of rights. • A contracting party may transfer her duties pursuant to the contract, which is a delegation of duties. • The assignor is the one making an assignment and the assignee is the one receiving an assignment.
Kulper - Econ 189 Kulper 4 Assignment
• Any contractual right may be assigned unless assignment:
– (a) would substantially change the obligor’s rights or duties under the contract; or
– (b) is forbidden by law or public policy; or – (c) is validly precluded by the contract itself. Kulper - Econ 189 Kulper 5 Assignment of Rights Kulper - Econ 189 Kulper 6 Rights of the Parties after Assignment
• Once the assignment is made and the obligor notified, the assignee may enforce her contractual rights against the obligor. • The obligor may generally raise all defenses against the assignee that she could have raised against the assignor.
Kulper - Econ 189 Kulper 7 Delegation of Duties
• Most duties are delegable. But delegation does not by itself relieve the delegator of his own responsibility to perform the contract. • An obligor may delegate unless
– (1) delegation would violate public policy, or – (2) the contract prohibits delegation, or – (3) the obligee has a substantial interest in Kulper - Econ 189 Kulper personal performance by the obligor.
8 Delegation of Duties Kulper - Econ 189 Kulper 9 Discharge
• A party is discharged when she has no more duties under a contract. • Most contracts are discharged by full performance. • Sometimes the parties discharge a contract by agreement. • Rescind means that they terminate it by mutual agreement.
Kulper - Econ 189 Kulper 10 Contract Discharge Kulper - Econ 189 Kulper 11 • Strict Performance Performance • Substantial Performance – Performance that is exactly what promised; is usually not expected and failure to do so does not cause a discharge. – A party that substantially performs its obligations will receive the full contract price, minus the value of any defects. – A party that fails to perform substantially receives nothing on the contract and will only recover the value of the work, if any.
Kulper - Econ 189 Kulper 12 Good Faith
• The Restatement (Second) of Contracts §205 states: “Every contract imposes upon each party a duty of good faith and fair dealings in its performance and its enforcement.” (Brunswick Hills Racquet Club v. Route 18 Shopping Center: request to exercise option on tennis club; no response)
Kulper - Econ 189 Kulper 13 • Material Breach
for damages Breach – Generally courts will discharge only if a party committed a material breach – one that causes substantial harm. • Discharged party has no obligation to perform and may sue – Will limit the time within which the injured party may file suit. CA is generally as follows:
• • • • • • •
Personal Injury: 2 years. Fraud: 3 years. Libel / Slander / Defamation: 1 year. Injury to Personal Property: 3 years. Product Liability: 2 years. Contracts: Written, 4 years; Oral, 2 years. Malpractice: Attorney 14 years; Physician 13 yrs Kulper - Econ 189 Kulper • Statute of Limitations 14 Impossibility
• True Impossibility
– Something has happened making it utterly impossible to fulfill the promise. • Destruction of subject matter of contract • Death of promisor in a personal services • contract Illegality (purpose becomes illegal) Kulper - Econ 189 Kulper 15 Remedies – Identifying the “Interest”
– Designed to put the injured party in the position she would have been in had both sides fully performed their obligations. • Compensatory damages → • Consequential damages → • Incidental damages → Kulper - Econ 189 Kulper 16 Compensatory Damages
• Compensatory damages are the most common • •
monetary awards. They generally flow directly from the contract, such as an order to pay what was promised or to pay for expenses caused by the breach. The injured party must prove the breach caused damages that can be quantified with reasonable certainty.
– Generally: difference between Defendant’s promised performance and actual. – Sale of Goods: difference between the contract price and market. – Sale of Land: Specific performance?
Kulper - Econ 189 Kulper 17 Consequential Damages
• Consequential damages are those resulting from the unique circumstances of this injured party. • The injured party may recover these damages only if the breaching party should have foreseen them when the parties formed the contract. (Hadley v. Baxendale)
Kulper - Econ 189 Kulper 18 Incidental Damages
• Incidental damages are the relatively minor costs incurred when the injured party responds to the breach. • Expenses incurred in obtaining performance from another source. – Includes newspaper advertisements, travel, etc. Kulper - Econ 189 Kulper 19 Identifying the “Interest” (cont’d)
• Reliance Interest
– Designed to put injured party in position he would have been in had he never entered contract (cannot establish expectation interest) – Designed to return to the injured party a benefit that he has conferred on the other party, which it would be unjust to leave with that person. • Restitution Interest Kulper - Econ 189 Kulper 20 Equitable Interests
When money is not sufficient to help the injured party, a court may order a transfer of property or may issue an injunction to prevent a particular action from continuing. • Specific Performance • Injunction – A court will order the parties to perform the contract only in cases involving the sale of land or some other asset that is unique. – An injunction is a court order that requires someone to do something or refrain from doing something.
(Milicic v. Basketball Marketing Co. – Sought injunction to keep company from sending letters and interfering with endorsement contracts.
Kulper - Econ 189 Kulper 21 Special Issues of Damages
• Mitigation of Damages
– A party may not recover for damages that could be avoided with reasonable efforts. • Ex. Landlord/Tenant – Tenant vacates property; duty to attempt to find replacement tenant Kulper - Econ 189 Kulper 22 ...
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This note was uploaded on 03/17/2010 for the course ECON 100B taught by Professor Kilenthong during the Spring '08 term at UCSB.
- Spring '08