Introduction to ContractsThe Agreement: Offer

The Agreement: AcceptanceConsideration

Reality of Consent

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Capacity to ContractIllegality

WritingRights of Third Parties

Performance and Remedies

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Rights of Third Parties

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Learning Objectives

Assignment of ContractsDelegation of DutiesThird-Party Beneficiaries

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Sometimes a person who entered into a contract must transfer the contract rights or duties to another person (third party) Examples: sublease of your apartment, asking

another person take over work you agreed to do, or doing something to benefit a third person

Key to successful transfer: understand the third party’s abilities, limitations, and needs

Overview

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A person who owes a duty to perform under a contract is called an obligor

The person to whom the duty is owed is called the obligee

Overview

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Transfer of a right under a contract is called an assignment

Example: Jane arranges for her employer to transfer her next paycheck to her parents’ bank account Employer is the obligor (owes Jane money) Jane is the obligee and assignor Jane’s parents are the assignees

Assignment of Contracts

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Assignments may be made in any way sufficient to show assignor’s intent to assign

A writing is not necessary Unless statute of frauds applies

Assignee does not need to give consideration to assignor in exchange for the assignment

Details of Assignment

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Assignment will not be effective if it: Is contrary to public policy

Example: PPG Industries, Inc. v. JMB/Houston Center Violates a non-assignment clause in a contract Adversely affects obligor in some significant way

Assignment may be ineffective if the contract right involved a personal relationship or element of personal skill or character

Limitations on Assignment

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Appointment of another person to perform a duty under a contract is called a delegation

Example: Mike mows Janet’s lawn weekly. Mike becomes ill and arranges for Sonny to mow Janet’s lawn Janet is the obligee Mike is the obligor and delegator Sonny is the delegatee

Delegation of Duties

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Caution: an assignment extinguishes the assignor’s right and transfers it to the assignee, but the delegation of a duty does not extinguish the duty owed by delegator Delegator remains liable to the

obligee unless the obligee agrees to make a new contract substituting the delegatee’s for the delegator

Delegation of Duties

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In an effective delegation, performance by the delegatee will discharge the delegator The reason why you should understand the

delegatee’s abilities and limitations

Effective Delegation

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Duties are not delegable if the delegation: Is contrary to public policy Is prohibited by a contract clause

Also, duties that are dependent on the individual traits, skill, or judgment of the person who owes the duty to perform may not be delegable Example: a hip hop artist could not reasonably

delegate concert obligation to an opera star

Non-delegable Duties

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Delegation may be made in any way that shows the delegator’s intent to delegate

Delegator may be discharged from performance by a substituted contract (novation) in which obligee agrees to discharge original obligor and substitute a new obligor Effect: Original obligor has no further

obligation

Details of Delegation

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If parties to a contract intended to benefit a third party, courts give effect to their intent permitting third party to enforce the contract Referred to as third-party beneficiary

Example: Father contracts and pays for Homes, Inc. to build house as gift for Son Son (third-party beneficiary) may sue Homes,

Inc. if the company breaches the contract Father may also sue Homes, Inc.

Third-Party Beneficiaries

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Incidental beneficiary is one obtaining a benefit as unintended by-product of a contract No rights under contract

In foregoing example, Son’s Wife would be an incidental beneficiary

Incidental Beneficiaries

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