The Transfer of Contractual Rights and Duties The Transfer of Contractual Rights and Duties Section...

The Transfer of Contractual Rights and Duties


Section 12.1Section 12.1

Understanding Business and Personal Law

The Transfer of Contractual The Transfer of Contractual Rights and Duties Rights and Duties


Transfer of Contracts and Remedies for Breach

Section 12.1Section 12.1The Transfer of Contractual Rights The Transfer of Contractual Rights

and Duties and Duties

Section 12.2Section 12.2Remedies of the Injured Party Remedies of the Injured Party

1212ChapterChapter Transfer of ContractTransfer of Contracts and s and Remedies for BreachRemedies for Breach





What You’ll Learn

How to explain the nature of an How to explain the nature of an assignment (p. 242)assignment (p. 242)

How to identify contractual rights that can How to identify contractual rights that can be assigned (p. 242)be assigned (p. 242)





What You’ll Learn

How to explain the nature of a delegation How to explain the nature of a delegation (p. 245)(p. 245)

How to explain the nature of a novation How to explain the nature of a novation (p. 248)(p. 248)





What You’ll Learn

How to identify a situation involving How to identify a situation involving privity of contract (p. 249)privity of contract (p. 249)





Why It’s Important

Understanding when contractual rights and Understanding when contractual rights and duties can be assigned will prepare you to duties can be assigned will prepare you to deal with such situations when they arise.deal with such situations when they arise.





Legal Terms

assignment (p. 242)assignment (p. 242)delegation (p. 245)delegation (p. 245)novation (p.248)novation (p.248)privity of contract (p. 249)privity of contract (p. 249)third-party beneficiary (p. 249)third-party beneficiary (p. 249)





Transfer of Rights How Rights May Be AssignedWhat Rights May Be Assigned

Section OutlineSection Outline

Transfer of Duties

Novation

Third Parties





Pre-Learning Question Pre-Learning Question

Do you think it is legal to assign to someone else the rights and duties you acquire through a contract?





Recall that when individuals enter Recall that when individuals enter contracts, they:contracts, they:

Transfer of Rights Transfer of Rights

receive rights (benefits)receive rights (benefits)incur duties (detriments)incur duties (detriments)





Rights and duties may be transferred Rights and duties may be transferred legally from the original parties to legally from the original parties to someone new, as long as the contract someone new, as long as the contract does not specifically say you can’t.does not specifically say you can’t.






The transfer of a right under a The transfer of a right under a contract is called an contract is called an assignmentassignment..The party who transfers the right is The party who transfers the right is the assignor.the assignor.The party to whom the right is The party to whom the right is transferred is the assignee.transferred is the assignee.






12.112.1


When payment was due, Cathypaid the $1,800to Anthony’slandlord.

Anthony had a contract with Cathy to rebuildher front steps for $1,800.

Anthony owed his landlord $1,800. He therefore assigned hisright to the$1,800 to his landlord.





The law does not specify how one The law does not specify how one party may assign a right to another. party may assign a right to another.

However, it is best to put an However, it is best to put an assignment in writing, because an oral assignment in writing, because an oral assignment can be difficult to prove.assignment can be difficult to prove.

How Rights May Be Assigned How Rights May Be Assigned





Most rights may be assigned unless Most rights may be assigned unless the assignment changes the the assignment changes the obligations of the other party to the obligations of the other party to the contract in an important way.contract in an important way.

What Rights May Be Assigned What Rights May Be Assigned





Rights to the payment of money and Rights to the payment of money and the delivery of goods are the most the delivery of goods are the most common types of rights that are common types of rights that are assigned.assigned.






Generally, no special form is Generally, no special form is required to make an assignment.required to make an assignment.Any words that clearly indicate a Any words that clearly indicate a person’s intent are sufficient.person’s intent are sufficient.






Can rights be assigned orally? Should they be? Why or why not?





ANSWERANSWER

They can be assigned orally, but an oral assignment can be difficult to prove.






What do you think delegation means with respect to contracts?





The transfer of a duty is called a The transfer of a duty is called a delegationdelegation and should not be and should not be confused with an assignment, which is confused with an assignment, which is a transfer of rights.a transfer of rights.

Transfer of Duties Transfer of Duties





In a transfer of duties, a party to a In a transfer of duties, a party to a contract delegates another person to contract delegates another person to perform the obligation in his or her perform the obligation in his or her place.place.






Although the performance of an Although the performance of an obligation may be delegated, the obligation may be delegated, the responsibility for it may not.responsibility for it may not.Subcontracting is a form of Subcontracting is a form of delegating.delegating.






The following duties may not be The following duties may not be delegated:delegated:


A party agrees to perform the A party agrees to perform the service personally.service personally.The contract calls for the exercise of The contract calls for the exercise of personal skill and judgment.personal skill and judgment.The contract prohibits delegation.The contract prohibits delegation.





12.112.1

Transfer of DutiesTransfer of Duties

Ivan is still liable for the terms of thecontract.

Ivan has a contract to print the PTA newsletter but cannot do it.

Ivan transfers his duty to ABC Press.

The PTA pays Ivan and Ivan pays ABC Press.

ABC Pressprints the PTA newsletter.





What is the difference between an assignment and a delegation?





ANSWERANSWER

An assignment is a transfer of rights; a delegation is a transfer of duties.






What do you think a novation is?





If you receive permission to assign If you receive permission to assign contract rights or delegate duties to a contract rights or delegate duties to a third person, and the other party third person, and the other party agrees to deal with the assignee, the agrees to deal with the assignee, the resulting contract is called a novation.resulting contract is called a novation.

Novation Novation





A A novationnovation is an agreement whereby is an agreement whereby an original party to a contract is an original party to a contract is replaced by a new party. replaced by a new party.

The terms of the new contract The terms of the new contract generally remain the same as those in generally remain the same as those in the original contract.the original contract.

Novation Novation





To be effective, substitution requires To be effective, substitution requires the consent of all of the parties the consent of all of the parties involved.involved.

Novation Novation





Why can’t the performance of the work of teachers, writers, or artists be delegated to others?





ANSWERANSWER

Such persons are selected to perform their services because of their particular skill or talent.






Why is it important to understand the relationship between the parties to a contract?





A contract is a binding agreement that A contract is a binding agreement that establishes a relationship between the establishes a relationship between the parties to the contract. parties to the contract.

This relationship between the parties This relationship between the parties is termed is termed privity of contractprivity of contract. .

Third Parties Third Parties





Privity of contract determines who can Privity of contract determines who can sue whom over a question of sue whom over a question of performance required by a contract. performance required by a contract.

Usually the parties to a contract have Usually the parties to a contract have standing to sue.standing to sue.






A person who is not a party to a A person who is not a party to a contract but still benefits from the contract but still benefits from the contract is called a contract is called a third-party third-party beneficiarybeneficiary..






Reviewing What You Learned

1. What is an assignment?

Section 12.1 Assessment






The transfer of rights under a contract.


Answer






2. What contractual rights can be assigned?







Most contract rights can be assigned unless the assignment changes the obligations of the other party to the contract in an important way.


Answer






3. What is a delegation?







The transfer of a contractual duty.


Answer






4. What is a novation?







An agreement whereby an original party to a contract is replaced by a new party.


Answer






5. What is privity of contract?







The relationship between the parties to a contract.


Answer






Critical Thinking ActivityThird Parties Why does the law grant third-party beneficiaries standing to bring lawsuits?






Answers will vary but should recognize the importance of third-party beneficiaries to the contract.

Critical Thinking Activity AnswerThird Parties






Legal Skills in ActionPrivity of Contract Your brother is the general manager of a restaurant in Capital City. He just learned that the Brotherhood of International Electronic Workers (BIEW) has canceled its plans to hold its annual convention in Capital City.






Legal Skills in ActionPrivity of Contract This cancellation will cause your brother’s restaurant to lose an enormous amount of money. He has decided to bring a lawsuit against the BIEW.






Legal Skills in ActionPrivity of Contract Discuss with several of your classmates whether your brother has standing to bring a lawsuit against the BIEW.






Discussions will vary but should concentrate on whether or not your brother has privity of contract or is a true third-party beneficiary.

Legal Skills in Action AnswerPrivity of Contract



End of Section 12.1End of Section 12.1

The Transfer of Contractual Rights and Duties The Transfer of Contractual Rights and Duties Section...

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