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25 Cards in this Set

  • Front
  • Back

The relationship that exists between the parties to a contract.


Privity of Contract


- Establishes basic principle: a 3rd party (a person/company who is not a party to the contract.


- Exceptions to/alterations involving the rule of Privity of Contract: (a) assignment (b) Delegation (c) 3rd party beneficiary contracts

The transfer of contract rights to a 3rd party.

Assignment


- In a bilateral contract, the 2 parties have corresponding rights/duties


- One party has a right to require the other to perform a task, and the other has a duty to perform it


- often used in business financing

Assignments




When rights under a contract are assigned unconditionally, the rights of the assignor are extinguished.


- Those rights now belong to the assignee




Effect of an Assignment


- As a result, assignee can enforce the contract by demanding performance from the obligor.


- The rights assigned to assignee carry with them possible defenses from obligor

General rule for Assignments:

All rights can be assigned


- Unless: A statute expressly prohibits assignment


- A contract is personal in nature


- The contract prohibits assignment (alienation)

Voluntary transfer of land ownership is ensured for public policy reasons.

Alienation

- Although not required to do so unless contract explicitly states it, transferor give notice to obligor of assignment.

Notice of Assignment


- Important to make sure the obligor performs for the right person

The transfer to a 3rd party of all or part of one's duties arising under a contract.

Delegations


- General rule: a delegation of duties does not relieve the delegator of his/her/its obligations.


- All duties can be delegated unless:


-- performance of duties are personal in nature


-- The contract prohibits delegation


-- Performance would vary materially from that expected by obligee


- Duties that are routine and nonpersonal can be delegated

Delegations




Clause in a contract that explicitly prohibits a party from delegating its/their duties and obligations under that contract.

Anti-Delegation Clause

Delegations




If a delegation of duties is enforceable, obligee must accept performance from delegatee. Obligee can only legally refuse performance by delegatee if the duty is one that cannot be delegated.

Effect of a Delegation


- A valid delegation does not relieve delegator of its obligations under the contract---> Obligee could potentially sue both delegator and delegatee.

One who benefits from a promise made in a contract even tho he/she/it is not party to that contract.


- Has legal rights and can sue the promisor directly for breach of contract if the promisor does not fulfill its obligations

3rd Party Beneficiary

Types of Intended Beneficiaries




Benefits from a contract in which one party promises the other party to pay a debt that the promisee owes to it

Creditor Beneficiary


- Creditor beneficiary can sue promisor directly to enforce the contract



Types of Intended Beneficiaries




Benefits from a contract which is made for the express purpose of giving a gift to it.

Donee Beneficiary


- Donee Beneficiary can sue promisor directly to enforce the contract

Rights have taken effect and cannot be taken away.

Vest

Third Party Beneficiaries




An intended 3rd party beneficiary cannot enforce a contract against the original parties until the 3rd party's rights have vested.

General Rule for 3rd party Beneficiaries

3rd party who benefits from a contract even tho the contract was not formed for that purpose.

Incidental Beneficiary


- has no rights in the contract and cannot sue to have it enforced


- EX. Mike Tyson biting Holyfield's ear off v. Spectators

Beneficiaries




- Focuses on the parties' intent, as expressed in the contract language and implied by the surrounding circumstances


- Reasonable person test

How a court distinguishes an intended beneficiary from an incidental beneficiary.



Beneficiaries




1. Performance is rendered directly to the 3rd party


2. The 3rd party has the right to control the details of performance


3. The 3rd party is expressly designated as a beneficiary in the contract

Factors that indicate 3rd party is an intended beneficiary

Termination of one's contractual duties, such as when the party has performed those duties.

Contract Discharge


- Several ways to do so


- By failure of a condition, by performance, by breach, by agreement, by operation of law.

Contract Discharge




A qualification in a contract based on a possible future event which, based on whether it occurs or does not occur, will either trigger the performance of a legal obligation or terminate an existing obligation under a contract.

Contract Discharge by failure of a CONDITION


- If the condition is not satisfied, the obligations of the parties are discharged

Contract Discharge




Condition that must be fulfilled before a party's promise becomes absolute

Condition Precedent


- Condition precedes the absolute duty to perform


- EX. Insurance policy requires you to pass physical before the company is obligated to perform.

Contract Discharge




Condition that, if it occurs, operates to terminate a party's absolute promise to perform.

Condition Subsequent


- VERY RARE


- if it occurs, the party does not need to continue performing


- EX. Law firm can fire attorney who fails to maintain his law license

Contract Discharge




Conditions that must occur or be performed at the same time (mutually dependent)

Concurrent Conditions


- EX. Buyer promises to pay for goods when they are delivered by the seller


- Buyer's duty to pay for goods becomes absolute only once goods have arrived or are attempted to be delivered


- Seller's duty to deliver the goods does not become complete until buyer pays




** therefore neither can recover from the other for breach without first tendering performance*

Contract Discharge




Contract comes to an end when both parties fulfill their respective duties by performing the acts they have promised.

Contract Discharge By Performance: Complete Performance

Contract Discharge By Performance






Party in good faith performs substantially all of the terms of a contract and can therefore enforce the contract against the other party.

Substantial Performance


- perfromance can't vary greatly from promised performance


- performance must create same benefits as promised


- if omission variance or defect in performance is irrelevant can be awarded damages



Contract Discharge By Performance




An unconditional offer to perform an obligation by a person who is ready, willing, and able to do so.

Tender


- once performance has been tendered, the party making the tender has done everything possible to carry out its contractual duties.


- Can sue for breach of contract if the other party refuses to perform.