Contracts Flashcards
1
Q
What law applies to a contract?
A
Sale of goods = UCC Art. 2
All other contracts = common law
2
Q
Bilateral Contract
A
One consisting of the exchange of mutual promises (promise for a promise). Can be accepted in any reasonable way (promising or beginning performance)
3
Q
What are the two situations where a unilateral contract might arise?
A
- Offeror clearly indicates that completion of performance is the only means of acceptance
- Where there is an offer to the public (ex. reward offer)
4
Q
What are goods?
A
All things movable at the time they are identified as items to be sold under a contract.
5
Q
Merchant
A
One who regularly deals in goods of the kind sold or who otherwise by their profession holds themselves out as having special knowledge or skills as to the practices or goods involved.
6
Q
What are the elements of a valid contract?
A
- Offer
- Acceptance
- Consideration
- No defenses to formation or enforcement
7
Q
Valid Offer
A
- Manifestation of present intent to contract demonstrated by a promise, undertaking, or commitment
- Communicated to an identified offeree
- Definite and certain terms
8
Q
When may a communication be a solicitation or invitation rather than an offer?
A
When it is conveyed using broad communication media or an advertisement
9
Q
What terms must be included for a real estate transaction to have a definite offer?
A
Identify the land (deed description not required) and the price
10
Q
What terms must be included in a contract for sale of goods?
A
The quantity being offered, unless it is a requirements or output contract.
11
Q
How may an offer be terminated?
A
-Lapse of time
-Revocation
-Rejection
-Termination by operation of law
12
Q
When may offer be terminated by lapse of time?
A
If it is not accepted within specified time period or within a reasonable time (if no specified time period)
13
Q
When may offer be terminated by rejection?
A
-When offeree expressly states that they do not intend to accept
-When a counteroffer (but not a mere inquiry) is made by offeree
14
Q
Does a rejection of an option terminate the offer?
A
No, they can still accept the original offer within the option period unless the offeror has detrimentally relied on the rejection.
15
Q
When is a rejection effective?
A
When it is received by offeror
16
Q
When may an offer be terminated by revocation?
A
-Directly, when the offeror expressly terminates the offer
-Indirectly, when the offeree receives correct information from a reliable source of acts to the offeror that would indicate to a reasonable person that the offeror no longer wishes to make the offer
*Effective when received
17
Q
When are offers irrevocable?
A
- Option contract where offeree gives consideration to hold open offer (can be held open as long as parties specify)
- Merchant’s firm offer: when a merchant offers to buy or sell goods in a signed writing that gives assurances that it will be held open (no consideration required, no longer than 3 months)
- Detrimental Reliance, when offeror could reasonably expect that offeree would rely to detriment and offeree so relies
- Offer for a true unilateral contract once performance has begun
18
Q
When will a contract be terminated by operation of law?
A
- Death or insanity of either party
- Destruction of proposed contract’s subject matter
- Supervening illegality
19
Q
What is the traditional common law standard for acceptance?
A
Mirror image rule - there must be absolute and unequivocal acceptance of every term. Any different or additional terms in the acceptance result in a rejection and counteroffer.
20
Q
What is the UCC standard of acceptance?
A
-An offer to buy goods for current or prompt shipment can be accepted by a promise to ship or by a shipment of goods (if nonconforming, it’s also a breach unless the buyer is notified that it’s an accommodation)
-battle of the forms: an acceptance that adds terms to an offer is valid. Between merchants, additional terms become part of the contract unless they materially alter the contract, the offeror objects, or the offer is limited to its terms.
21
Q
What are the methods of acceptance?
A
-UCC = reasonable means
-Unilateral contract = performance
-Bilateral contract = promise or performance
22
Q
When is acceptance effective by mail?
A
At the moment of dispatch, unless an exception applies:
-Offer stipulates that acceptance must be received to be effective
-option contract involved
-Offeree sends rejection first or sends rejection second but it arrives first and offeror detrimentally relies
23
Q
Consideration
A
A bargained-for exchange with detriment to the promisee or legal benefit to promisor
*Substitutes may be promissory estoppel or detrimental reliance
24
Q
Will a court consider adequacy of consideration?
A
No, unless something is entirely devoid of value
25
Is past consideration valid?
No, the preexisting duty rule makes performing or promising to perform an existing legal duty insufficient consideration EXCEPT:
-new or different consideration promised
-written promise to pay time-barred debt
-promise ratifying a voidable obligation
-compromise of honest dispute
-unforeseen circumstances make modification fair and equitable (modern rule) or rise to the level of impracticability (majority view)
-good faith modification under Art. 2
26
Does a modification require consideration?
Yes, traditionally a modification must be supported by new consideration.
The modern rule permits modification without consideration if (1) the modification is due to circumstances that were unanticipated when the contract was made and (2) it is fair and equitable
Under the UCC, a good faith promise of new and different terms is sufficient.
27
When is consideration not necessary? (Promissory Estoppel)
A promise is enforceable if necessary to prevent injustice if:
-The promisor should reasonably expect to induce action or forbearance AND
-Such action or forbearance is in fact induced
If this exists, reliance damages are typically awarded
28
What are defenses to enforcement?
1. Mistake
2. Fraud and misrepresentation
3. Illegality of consideration or subject matter
4. Incapacity
5. Statute of Frauds
6. Unconscionability
29
When may there be incapacity to contract?
1. Infants (minors), can disaffirm once reaching age of majority
2. Mental incapacity, can disaffirm during lucid interval or upon recovery
3. Intoxication, can affirm upon recovery
4. Duress, voidable
5. Undue influence
30
When is unilateral mistake a defense?
The contract is voidable if nonmistaken party knew or should have known of mistake.
31
When is a mutual mistake a defense?
The contract is voidable by the adversely affected party if:
1. Mistake concerns based assumption on which contract was made;
2. Mistake has material effect; AND
3. Party seeking avoidance did not assume risk
32
Are ambiguous terms a defense?
-Neither party aware/both parties aware=no contract
-One party aware=contract
33
What if a mistake is made by an intermediary?
Prevailing view is that the message as transmitted is operative unless the other party knew or should have known of the mistake.
34
When is misrepresentation a defense?
When a party justifiably relies on a material misrepresentation (whether fraudulent or not) or a fraudulent representation
35
What are some examples of unconscionability?
-inconspicuous risk-shifting provision
-contracts of adhesion
-exculpatory clauses for intentional wrongful acts
(Determined at the time the contract was formed - court can refuse to enforce in whole or in part)
36
Statute of Frauds
Certain agreements must be evidenced by a writing signed by the party sought to be bound. MY LEGS
-Marriage as consideration for promise
-Promises that cannot be performed within one year
-Promises creating interests in land
-Executors and administrators (promises to pay estate debts from own funds)
-Goods for price of $500 or more
-Suretyship (promise to answer for debt of another)
37
What are exceptions to the Statute of Frauds?
-Contract modifications, if contract as modified does not fall under the SoF
-Part performance for land sale contracts (2/3: payment, possession, valuable improvement)
-Part performance for sale of goods if goods have been specially manufactured OR goods have been paid for or accepted
38
When is a writing not required?
1. Specially manufactured goods where seller has made a substantial beginning
2. If party against whom enforcement is sought admits in pleadings, testimony, or court that contract for sale was made
3. Merchant's Confirmatory Memo Rule: Between merchants, where one party sends within a reasonable time after an oral agreement, a written confirmation of the understanding. It binds sender, and also recipient if they know of the confirmation's contents and do not object within 10 days.
39
What does the SoF require?
One or more writings that reasonably identify the subject matter of the contract, indicate that a contract has been made, and state with reasonable certainty the essential terms. (Plus a signature, which is liberally interpreted - letterhead may be sufficient under the UCC)
40
Parol Evidence Rule
When parties intend that a writing is the final expression of their bargain, no prior (oral or
written) or contemporaneous (oral) expressions are admissible to vary the terms of the writing
41
What is the effect of integration?
-Complete = writing cannot be contradicted or supplemented
-Incomplete = writing may not be contradicted but may be supplemented by proving additional consistent terms
42
What is the effect of a merger clause?
A merger clause states that the agreement is complete on its face. It is evidence of full integration.
43
What evidence outside the scope of the parol evidence rule may be admitted?
1. Evidence concerning validity
2. Evidence used to interpret (uncertain/ambiguous terms)
3. Evidence showing true consideration paid
4. Evidence in action for reformation
5. Evidence showing subsequent modifications of a written contract
44
When rules conflict, what is the hierarchy?
1. Express terms
2. Course of performance
3. Course of dealing
4. Usage of trade
45
What are the Art. 2 gapfillers?
-Price = reasonable at time of delivery
-Place of delivery = seller's business
-Time of shipment = reasonable
-Time for payment = receipt of goods
-Assortment = buyer's option
46
Express Warranty
Any affirmation of fact or promise made by the seller to the buyer, any description of the goods, and any sample or model if part of the basis of the bargain.
*Does not include statements of value or opinion
47
Implied Warranty of Merchantability
Warranty that the goods are merchantable (fit for ordinary purpose)
Implied in every contract for sale by a MERCHANT WHO DEALS IN GOODS OF THE KIND SOLD
48
Implied warranty of fitness for a particular purpose
Implied whenever any seller has reason to know (1) particular purpose for which goods are to be used and buyer is relying on seller's skill and judgment to select those goods AND (2) buyer in fact relies on seller's skill/judgment.
49
Warranty of Title
ANY SELLER warrants that the title transferred is good, that transfer is rightful and that there are no liens or encumbrances of which the buyer is unaware.
50
Warranty Against Infringement
MERCHANT SELLER regularly dealing in goods of the kind sold automatically warrants that the goods are delivered free of patent, trademark, copyright claims.
51
How to disclaim warranty of title
Only by specific language or circumstances putting buyer on notice that seller is not claiming title
52
How to disclaim implied warranty of merchantability
-Specific disclaimer must mention "merchantability" and be conspicuous if in writing
-Can be disclaimed by "as is," buyer's examination or refusal to examine, or course of dealing
53
How to disclaim implied warranty of fitness for a particular purpose
Conspicuous writing or general disclaimer ("as is," refusal to examine, course of dealing)
54
How to disclaim an express warranty
Disclaimer is usually not given effect
55
When will a limitation on damages not be upheld?
If it is unconscionable or if it limits damages for personal injury caused by breach of warranty on consumer goods.
56
What damages are available for breach of warranty?
Difference between goods tendered and goods as warranted
57
To whom do warranties extend?
Majority view is that seller's warranty liability extends to any natural person who is in the family or household of the buyer or who is a guest in the buyer's home.
58
When does risk of loss pass for defective goods?
When defects or cured or when buyer accepts goods in spite of their defect
59
Noncarrier Case Risk of Loss
Parties did not intend for goods to be moved by a common carrier.
-Merchant seller = risk passes to buyer upon taking possession
-Nonmerchant seller = risk passes upon tender of delivery
60
Carrier Case Risk of Loss
-Shipment Contract (default) = risk passes on delivery to carrier
-Destination Contract = risk passes when goods are tendered to buyer at destination
-FOB = risk passes on delivery to FOB location
61
What duties does a seller have under a shipment contract?
1. Make a reasonable contract with the carrier on behalf of the buyer
2. Deliver the goods to the carrier
3. Promptly notify the buyer of the shipment
4. Provide the buyer with any documents needed to take possession of goods
62
What is the risk of loss in a sale or return contract?
Sale or return contract - buyer takes goods for resale but may return if unable to resell
If goods are returned to seller, risk remains on buyer while goods are in transit
63
What is the risk of loss for a sale on approval contract?
Sale on approval - buyer takes goods for trial period and may return them even though they conform to the contract.
Risk does not pass until buyer accepts goods. If buyer decides to return the goods, return is at seller's risk.
64
What if the goods that were identified when the contract was made are destroyed?
Contract is avoided if they were destroyed without fault by either party and before risk of loss passes to buyer.
65
What are the standards for contract performance?
-Common law = substantial performance
-Art. 2 = perfect tender
66
Installment contract
One that requires or authorizes delivery in separate installments (seller may demand payment for each installment if the price can be so apportioned)
67
What is the difference between a promise and a condition?
A promise is a commitment to do or refrain from doing something. An unconditional promise can result in breach if it is not performed.
A condition modifies a promise--it is either something that must occur before a party has a duty to perform, or that releases a party from duty to perform. A failure of a condition discharges the liability of the promisor whose obligations will never mature, but it is not a breach.
68
Can a contract be conditioned on someone's personal taste or judgment?
Yes, but the contract must be for something like art where personal judgment is important. The lack of satisfaction must be honest and in good faith.
69
Anticipatory repudiation
A promisor, prior to the time set for performance, indicates that they won't perform when the time comes. Options for non-repudiating party:
-Treat as total repudiation and sue immediately
-Suspend performance and wait to sue until performance date
-Treat contract as discharged
-Ignore repudiation and urge promisor to perform
A person who repudiated can retract until the time their next performance is due unless the other party has cancelled or materially changed their position in reliance.
70
Prospective failure
When a party has reasonable grounds to believe that the other party will be unable or unwilling to perform when performance is due. The innocent party can suspend performance on their side until they receive adequate assurances that performance will be forthcoming (and if adequate assurances are not provided, it can be treated as repudiation).
71
Divisibility of contract
Divisible contract:
1. Performance of each party is divided into two or more parts;
2. Number of parts due from each party is the same; AND
3. Performance of each part by one party is agreed on as the equivalent of the corresponding part from the other party
If a contract is divisible and a party performs one of the units of the contract, they are entitled to the agreed-on equivalent for that unit even if they fail to perform the other units (like a price per unit contract)
72
When is a condition excused?
1. Hindrance or failure to cooperate
2. Breach of contract
3. Anticipatory repudiation—party unequivocally indicates he will not perform before
time of performance
4. Prospective inability or unwillingness to perform—doubts as to party’s performance
5. Substantial performance
6. Divisibility of contract
7. Waiver or estoppel
73
When has absolute duty been discharged?
1. Performance or tender of performance
2. Occurrence of condition subsequent
3. Illegality of subject matter after contract was made
4. Impossibility, impracticability, or frustration of purpose
5. Rescission of contract
6. Modification of contract
7. Novation (replacing parties) or substituted contract (replacing contract)
8. Accord and satisfaction
74
How may rescission occur?
-Mutual = express agreement between parties to rescind
-Unilateral = party desiring rescission must have adequate legal grounds, such as mistake, misrepresentation, duress, or failure of consideration
75
What is the effect of modification of contract?
A modification will discharge the terms of the original contract that are the subject of the modification, but will not discharge the entire contract.
76
What is the effect of a substituted contract?
The parties to a contract will enter into a second contract that immediately revokes the first contract expressly or impliedly.
77
What is accord and satisfaction?
Accord - agreement in which one party to an existing contract agrees to accept different future performance in lieu of the performance they are supposed to receive (generally must be supported by consideration, even if it is simply a different type of consideration than what is originally owed)
Satisfaction - performance of accord agreement, which will discharge the original contract and the accord. If the new contract is not performed, the original contract remains enforceable.
78
Discharge by novation
When a new contract substitutes a new party to receive benefits and assume duties that had originally belonged to one of the original parties under the terms of the old contract.
Requires:
1. A previous valid contract
2. Agreement among ALL PARTIES
3. Immediate extinguishment of contractual duties between original contracting parties
4. Valid and enforceable new contract
79
When may a contract be discharged by impossibility, impracticability, or frustration?
When an unanticipated or extraordinary event whose nonoccurrence was a basic assumption of the parties occurs, and neither party has expressly or impliedly assumed the risk of the event occurring.
80
When does death or physical incapacity discharge a contract?
If it is the death or incapacity of a person necessary to effectuate the contract (does not work if services can be delegated or if estate can pay contract price)
81
Is a contract discharged if the subject matter or means of performance is destroyed?
YES, unless it is the destruction of a building in progress for a contract to build. The contractor can rebuild, but the court will likely excuse the contractor from meeting the original deadline.
82
Can you discharge from impossibility if risk has already passed to the buyer?
NO
83
When will contracts for the sale of goods be discharged for impracticability?
To the extent of the impossibility or impracticability. May be an event like a shortage of raw materials, but NOT an increase in costs.
84
When is there discharge by frustration?
1. Supervening act or event;
2. At time of entering into contract, parties did not reasonably foresee the act or event;
3. Purpose of contract has been completely or almost completely destroyed by act or event; AND
4. Purpose of contract was realized by both parties at the time of making the contract
*Will be raised by someone who has to pay money because impracticability will never be sufficient for them*
85
What is discharge by account stated?
Account stated is a contract between parties where they agree to an amount as a final balance due from one to the other.
86
What is discharge by lapse?
If the duty of each party is a condition concurrent to the other's, then on the day set for performance neither party is in breach and their obligations lapse.
87
What is the effect of running of statute of limitations?
Bars judicial remedies (no action for breach of contract, so it is unenforceable in court), does not discharge duties
88
When does breach occur?
When the promisor is under an absolute duty to perform and the duty of performance has not been discharged. Party who brings the suit must show they are willing and able to perform.
89
What is the effect of a minor vs. material breach?
-Minor = substantial benefit of bargain is gained, does not relieve aggrieved party of duty of performance. Damages only for minor breach
-Material = substantial benefit of bargain is not received, so nonbreaching party may treat contract as at an end and has immediate right to remedies for breach of entire contract.
90
What is the effect of a minor breach coupled with anticipatory repudiation?
Can be treated as a material breach - can immediately sue for total damages, permanently discharged from duty of further performance.
91
How is failure to perform by time stated in contract treated?
As a MINOR BREACH unless contract expressly makes time of the essence
92
How does acceptance impact a buyer's right to reject?
Acceptance cuts off right to reject under perfect tender doctrine. Buyer accepts when:
-indicate to seller that goods conform or that they will keep goods anyway
-fail to reject within reasonable time or fail to seasonably notify seller of rejection
-do any act inconsistent with seller's ownership
93
When can a buyer revoke their acceptance?
If the goods have a defect that substantially impairs their value to the buyer AND
-they accepted goods on the reasonable belief that the defect would be cured and it has not been OR
-they accepted goods because of difficulty of discovering defects or because of seller's assurance that goods were conforming
Revocation must occur within reasonable time after buyer discovered or should have discovered defects AND before any substantial change in goods occurs
94
What is the seller's right to cure under Art. 2?
-Single delivery contracts = time originally provided for performance by giving reasonable notice and making new tender of conforming goods
-Buyer rejects goods seller reasonably believed would be acceptable = further reasonable time to make conforming tender
-Installment contracts = installment can be rejected only if nonconformity substantially impairs the value of that installment and cannot be cured.
95
Specific Performance
Available when legal remedy is inadequate - an order from the court to breaching party to perform.
*available for land or unique goods, but NOT for a contract to provide services
96
When will courts grant an order of specific performance to enforce a contract not to compete?
1. Services to be performed are unique AND
2. Covenant is reasonable (necessary to protect legitimate interest, reasonable to scope and duration, no harm to the public)
97
Actions for specific performance are subject to what equitable defenses?
-Laches = P has delayed, which has prejudiced the defendant
-Unclean hands = party seeking specific performance is guilty of wrongdoing in transactino
-Sale to bona fide purchaser
98
What are buyer's nonmonetary remedies under the UCC?
-Cancellation (if rejection is rightful)
-Replevy identified goods (on prepayment or inability to cover)
-Specific performance with unique goods
99
What are seller's nonmonetary remedies under the UCC?
-Withhold goods (if buyer fails to make payment due on/before delivery or buyer is insolvent)
-Right to recover goods (within 10 days of buyer's receipt, if goods received on credit while insolvent)
-Demand assurances
100
Compensatory Damages
Goal is to put nonbreaching party in position they would have been in had the promise been performed.
101
What is the standard measure of damages?
Expectation damages, which provide the benefit of the bargain. Sufficient damages to buy a substitute performance.
102
Reliance damages
If plaintiff's expectation damages are too speculative, the plaintiff can recover damages they have suffered based on their reasonable reliance on the contract (put P in position they would have been in had the contract never been formed).
103
Incidental Damages
Component of compensatory damages; expenses reasonably incurred in dealing with a breach.
104
Consequential Damages (common law)
Only available if reasonably foreseeable. Special damages that reflect losses over and above standard expectation damages (often lost profits).
105
What is the certainty rule for damages?
Plaintiff must show that the losses suffered were certain in their nature and not speculative.
Traditionally = no profits from prospective business as damages
Modern = lost profits as damages if they can be made more certain by observing similar businesses or businesses previously owned by the same defendant
106
Are punitive damages awarded in contract cases?
NO
107
Liquidated Damages
Parties to a contract stipulate what damages will be paid in the event of a breach. Enforceable if:
-damages for breach are difficult to estimate or ascertain when the contract is formed AND
-amount agreed upon is reasonable forecast of compensatory damages int he event of a breach (not punitive)
108
What are buyer's damages under the UCC if the seller does not deliver or the buyer rejects/revokes?
One of the following plus incidental and consequential damages, if any, less expenses saved:
-Cover (difference between contract price and cost of buying replacement goods)
-Difference between contract price and market price at the time buyer learns of the breach
109
What are the buyer's damages under the UCC if the seller delivers nonconforming goods that the buyer accepts?
Warranty damages (difference between value of goods as delivered and value they would have had if they had been according to contract), plus incidental and consequential damages
110
Consequential Damages (UCC)
Seller liable if they had reason to know of buyer's general or particular requirements, and subsequent loss resulting from those needs could not be reasonably prevented by cover.
**Not available for seller under the UCC
111
What are the seller's damages under the UCC if the buyer repudiates or refuses to accept conforming goods?
One of the following, plus incidental damages:
-Resell goods and recover difference between contract price and resale price
-Recover difference between market price and contract price
-Lost profits measure if volume seller
112
When are lost profits available for sellers?
When the seller is a lost volume seller. This means that their supply is unlimited (they can obtain all the goods they can sell)
113
What are the standard measure of damages for breach of land sale contracts?
Difference between contract price and fair market value of land
114
What are the standard damages for employment contracts?
-Employer breach = full contract price (can be reduced if employee fails to mitigate)
-Employee breach = cost to replace employee
115
What are the standard measures for construction contracts when breached by the owner?
-Before construction = builder's prospective profits
-During construction = contract price minus cost of completion
-After completion = full contract price plus interest
116
What are the standard measure of damages for construction contracts when breached by the builder?
-Before or during construction = cost of completion plus compensation for delay
-Late completion = value of lost use
117
Mitigation
Under common law, nonbreaching party cannot recover damages that could have been avoided with reasonable effort.
-Employment = wages from comparable job in same locale
-Manufacturing/Construction = don't continue work after breach
118
Restitution
Preventing unjust enrichment - value of benefit conferred by one who conferred without gratuitous intent.
Can be used as a remedy when a contract exists and has been breached, but also when a contract is unenforceable or when no contractual relationship exists between the parties.
119
What is an action when a contract is unenforceable or no contract between the parties exists?
An action for an implied in law contract, an action in quasi-contract, or an action for quantum meruit.
Measure of damages will be value of benefit conferred.
120
When is restitution available in quasi-contract?
1. P conferred benefit on D by rendering services or expending properties;
2. P conferred benefit with reasonable expectation of being compensated for value;
3. D knew or had reason to know of P's expectation; AND
4. D would be unjustly enriched if they were allowed to retain the benefit without compensating the plaintiff.
121
Rescission
Remedy where original contract is considered voidable and rescinded. Grounds:
-mutual mistake of material fact
-unilateral mistake if other party knew or should have known
-extreme hardship
-misrepresentations of fact or law
-duress, undue influence, illegality, lack of capacity, failure of consideration
122
Reformation
Writing setting forth the agreement between the parties is changed so that it conforms to the original intent of the parties.
Applicable if mutual mistake, unilateral mistake and party knows but did not disclose, or misrepresentation
123
What is SoL under UCC?
4 years by default. May be shortened to no less than one year by the parties, but cannot be lengthened.
Period begins to run when breach occurs (or upon delivery for a warranty issue)
124
Entrustment
Entrusting goods to a merchant who deals in goods of that kind gives them the power to transfer all rights of the entruster to a buyer in the ordinary course of business.
125
What is the implication of a voidable title?
The seller can rescind the sale and recover goods from a fraudulent buyer, but not from a good faith purchaser for value who bought from the fraudulent buyer.
126
Can a thief generally pass title?
No, because the title is void, so they have no title to transfer.
127
Who can be a third party beneficiary?
Only intended beneficiaries have rights under contract. They are beneficiaries who:
1. Are identified in the contract;
2. Receive performance directly from the promisor; OR
3. Has some relationship with the promisee to indicate intent to benefit.
128
What defenses can the promisor raise against the third party beneficiary?
Any defense that the promisor has against the promisee
129
When can a third party beneficiary enforce their rights (i.e., when do their rights vest)?
1. They manifest assent to a promise in the manner requested by the parties
2. They bring a suit to enforce the promise
3. They materially change position in justifiable reliance on the promise.
PRIOR TO VESTING, PROMISOR AND PROMISEE CAN MODIFY OR RESCIND BENEFICIARY'S RIGHTS
130
Who can the third party beneficiary sue?
Both the promisor and promisee, but can obtain only one satisfaction
131
When can a third party beneficiary sue a promisee?
-Donee beneficiary - can only sue if there is detrimental reliance
-Creditor beneficiary - may sue on underlying obligation
132
Assignment
Two parties contract, and one party transfers away their rights to a third party. The assignee (who receives the right to performance) is not an original party to the contract
133
What rights may be assigned?
All contract rights unless assignment materially alters the obligor's duty or risk or it is prohibited by law
134
What is the effect of a contract provision prohibiting assignment?
It bars only delegation of duties
*A provision that attempts to assign are void will be effective to bar assignment.
135
What is the effect of an assignment?
Establishes privity of contract between the obligor and assignee while extinguishing privity between obligor and assignor.
136
When is an assignemnt revocable?
Gratuitous assignments are revocable, while assignments for value typically or not.
137
What defenses will the obligor have against the assignee?
Any defense that is inherent in the contract
138
What does the assignor warrant in every assignment for value?
1. They have not made a prior assignment of the same right
2. The right exists and is not subject to undisclosed defenses
3. They won't interfere with assigned right
139
If there are multiple assignments, who will prevail?
-Revocable assignments = subsequent assignee prevails
-Irrevocable assignments = first assignee has priority (unless second assignee has paid value and taken without notice)
140
Delegation
A transfer of duties
141
All duties can generally be delegated except...
1. Those involving personal judgment or skills
2. Those involving special trust in delegator
3. Those restricted by contract
4. Those the performance of which by a delegate materially changes obligee's expectancy
142
What are the liabilities of parties in a delegation?
1. Delegator remains liable
2. Delegate liable if he assumes duty expressly or impliedly
143
How is assignment of "contract" or "rights under contract" construed?
To include delegation and assumption of duties
