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97 Cards in this Set
- Front
- Back
Performance of Contract, Performance of Contracts for a Sale of Goods
Perfect Tender Rule |
Seller must deliver perfect goods in the right place at the right time. If tender is not perfect, buyer has the right to reject the goods.
- The buyer, if there are some nonconforming goods may reject. |
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Perfect Tender Rule-
Option to Cure |
A seller who fails to make perfect tender may have an option to cure. This is a second chance. It usually depends on whether the time for performance has expired.
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Option to Cure- If time HAS NOT Expired
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Seller has the option to cure.
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Option to Cure- If time HAS expired
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the seller will not have the option to cure. If there is specific facts that the buyer would be flexible before and the seller reasonable relied on that flexibility allows the seller to cure.
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Installment Sales Contracts- Definition
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Requires or authorizes delivery in separate installments (otherwise, the goods have to be delivered in a single delivery).
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Installment Sales Contracts
Significance |
Perfect Tender Rule does not apply, so it is tougher for buyer to reject (Policy: Assumes seller will cure as he performs).
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ISC- Significance-
Right to reject An INSTALLMENT |
Only if there's a substantial impairment in the installment that cannot be cured.
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ISC- Significance-
Right to Reject ENTIRE CONTRACT |
Only is the defect in an installment substantially impairs the value of the entire contract.
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Installment Sales Contracts-
Buyer's Acceptance of the goods. |
This is distinguished between acceptance and the formation of the offer and acceptance
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ISC- Buyer's acceptance of the goods
Implied Acceptance- |
When buyer keeps goods without objection after having an opportunity to inspect. REMEMBER- merely paying for the goods is not sufficient for acceptance. Buyer need opportunity to inspect. If the buyer has them for a long time, there is implied acceptance.
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ISC- Buyer's Acceptance of the goods
Consequences of Acceptance |
i. too late for the buyer to reject
ii. but buyer who accepts non-conforming goods can still get damages for seller's breach |
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ISC- Buyer's Revocation of Acceptance of goods
G/R |
A buyer cannot revoke acceptance of goods.
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ISC- Buyer's Revocation of Acceptance of goods
Exceptions |
If the non-conformity
i. substantially impairs the value of the goods; and ii. was difficult to discover (i.e. it was a latent defect. If satisfied, can revoke within a reasonable amount of time |
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ISC- Consequences of Rejection/Revocation of Acceptance
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"Return, refund, & Damages"
@ the seller's expense. |
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ISC- Buyer's Payment Obligation-
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Buyer can pay by check, but seller can refuse it--if seller refuses, buyer has an additional reasonable time to get cash.
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Performance of Contracts of the Sales of Goods (Article 2)
Performance of Common Law Contracts |
Under the c/l, performance does not have to be perfect. Substantial Performance is all the is required (i.e. party cannot commit a material breach).
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Excuse Based on Later Events
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1. Other Party's Breach
2. Anticipatory Repudiation 3. A Later Agreement by the Parties 4. Impossibility/Impracticability 5. Frustration of Buyer's Primary Purpose |
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Other Party's Breach
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The other party's breach MAY provide an excuse for non-performance. Whether is does depends on the nature of the contract. Meaning- the rule is different between the Sale of Goods under Article 2 standards versus the common law contracts rule.
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Other Party's Breach-
Sale of Good's (Article 2) |
If seller's performance is not perfect in every respect (the Perfect tender rule) buyer has pretty much free reign. (3 options)-
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Other Party's Breach
Sale of Goods (Article 2) 3 options if the seller breaches |
Buyer can:
1. accept all of the goods 2. reject all of the goods 3. Accept some and Reject the rest. **Regardless of which he chooses he can still get damages from the seller. |
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Other Party's Breach
Sale of Goods (Article 2) C/L Contracts |
1. Damages- the injured party can recover damages for any breach of contract, whther the breach is material or not
2. Excuse- only a material breach provides for an excuse. |
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Other Party's Breach
Sale of Goods (Article 2) Divisible Contracts- |
Where payment is on a per unit basis, the breaching party can recover the contract proce for any unit on which he has substantially performed
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Anticipatory Repudiation
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Provides for an excuse for non-performance unless the repudiation is retracted. (b4 the time of performance) There is a difference between A/R and BoK- BoK concerns actions that HAVE already breached the K
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A/R and Retraction
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You can retract a declaration and A/R as long as the other party has not relied on your A/R.
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A Later Agreement by the parties
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Forms-
1. Rescission 2. Modification 3. Accord and Satisfaction 4. Novation |
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A later agreement by the parties
Rescission |
An agreement to cancel the K. For rescission to be effective, each party must have some obligation remaining.
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A later agreement by the parties
Modification |
An agreement to replace an existing contract with a new one.
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A later agreement by the parties
Accord and Satisfaction |
An accord is an agreement to accept performance in FUTURE satisfaction of an existing duty. Satisfaction is performance of the accord.
If there is an agreement of this sort, the non-breaching party may sue under the original K or the Accord made subsequently. |
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What is the difference between the modification and the accord and satisfaction
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the modification requires performance of the one of the parties obligations NOW
A and S requires that the existing duty to perform be performed in the future. |
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A later agreement by the parties
Novation |
An Agreement to substitute a new party for an existing one.
A proper novation requires that there is consent from all original parties of the K. |
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Impossibility/Impracticability
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A later unforseen event that makes performance impossible (c/l) or impracticable (Article 2). (much harder or more expensive) may provide the SELLER with an excuse for non-performance.
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Impossibility/Impracticability
BAR TIP |
Impossibility/Impracticability rarely excuses a seller on the MBE
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Impossibility/Impracticability
Destruction of Something Necessary for Performance C/L |
Destruction provides for excuse for non-performance.
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Impossibility/Impracticability
Destruction of Something Necessary for Performance Article 2- Sale of Goods |
Article 2 adopts the same general rule as the common law, but there are two trick questions to look out for.
1. Unidentified Goods- 2. Risk of Loss |
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Impossibility/Impracticability
Destruction of Something Necessary for Performance Article 2- Sale of Goods 1. Unidentified Goods |
seller is excused only is the damaged/destroyed goods had been "identified to the K"
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Impossibility/Impracticability
Destruction of Something Necessary for Performance Article 2- Sale of Goods 2. Risk of loss |
a seller who bore RoL when goods were damaged or destroyed is excused by impracticability, but a buyer is not!
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Impossibility/Impracticability
Death/Incapacity of Essential Person (not just ANY person) |
For example hiring Van Gogh to paint a unique artwork- not liable. BUT if he was just going to paint a barn, he may be liable. No special skill involved.
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Impossibility/Impracticability
Supervening Gov't Regulation |
Excused if a Gov't Regulation subsequently make the obligated act illegal.
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Frustration of Buyer's Primary Purpose.
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1. knowledge of why the buyer needs the good.
2. Latent unforeseen event happens. Buyer is excused (the renting of a Loft to watch the thanksgiving day parade and the parade was canceled) |
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Failure of an Express Condition- (VERY IMPORTANT ON THE MBE)
Definition |
Limits obligations created by other contract language; it does NOT create an independent obligation. Look for the words like "if", "as long as" "when" "provided that" "on condition that" and "unless"
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Failure of an Express Condition- (VERY IMPORTANT ON THE MBE)
Strict Compliance |
REQUIRED. VERY STRICT, can be by a minute or a dollar off.
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Failure of an Express Condition- (VERY IMPORTANT ON THE MBE)
Satisfaction Clauses |
"satisfaction" is measured by a reasonable person standard unless the K deals with art or matters of personal taste.
an exception to the reasonable person requirement is if it is art. then the patron must be satisfied. |
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Failure of an Express Condition- (VERY IMPORTANT ON THE MBE)
Types of Expressed Conditions |
1. Precedent
2. Concurrent 3. Subsequent |
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Failure of an Express Condition- (VERY IMPORTANT ON THE MBE)
Excusing Occurrence of a Condition |
Occurrence of a condition may be excused by a later action or inaction of the PERSON WHO IS PROTECTED BY THE CONDITION (every condition protects someone)
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Failure of an Express Condition- (VERY IMPORTANT ON THE MBE)
Excusing Occurrence of a Condition 1- Failure to Cooperate |
If you fail to try to satisfy the requirement, then you do not have a right to claim that the expressed condition was not satisfied. You cannot cause the action or inaction to occur if you are the protected someone.
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Excusing Occurrence of a Condition
Waiver |
Where the party who is protected by the condition voluntarily relinquishes the protection of the condition.
If someone says that I will accept payment without a certificate, that person cannot refuse payment without a certificate. The one waiving the certificate can retract the waiver as long as the other party has not relied on the waiver. |
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Remedies
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1. Non-Monetary Remedies
2. Monetary Remedies |
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Remedies- Non-Monetary Remedies
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1. Specific Performance
2. Unpaid Seller's Right to Reclaim goods (Article 2) 3. Entrustment of Goods (Article 2) 4. Right to Request Assurance in a Sale of Goods (Article 2) |
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Non-monetary Goods-
Specific Performance- |
An Equitable remedy, availible only if monetary damages are inadequate to compensate the injured party. Whether specific performance is available depends on the nature of the K.
1. Real Property 2. The Sale of Goods (Article 2) 3. Service Ks. |
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Non-Monetary Goods
Specific Performance Real Property |
Specific Performance is generally available because real property is considered unique. (even if it is really not that unique).
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Non-Monetary Remedies
Sale of Goods (Article 2) |
Specific Performance is available only if the goods are UNIQUE or there are "other proper circumstances" (eg an inability to buy substitute goods in the market)
Antiques, Art, and Custom Goods are examples of Unique. |
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Non-Monetary Remedies
Specific Performance Service Contracts- |
Specific Performance is NOT available in service ks, but injunctive relief MAY be available.
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Non-Monetary Remedies
Unpaid Seller's Right to Reclaim Goods (Article 2) G/R |
an unpaid seller has not rights under Article 2 in goods it has delivered to the buyer (note- seller may have rights under federal bankruptcy law.)
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Exceptions to the general rule regarding the unpaid seller's right to reclaim goods (Article 2)
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1. If buyer was insolvent when it recieved the goods and the seller makes a demand within 10 DAYS after the buyer received them.
(But the seller has no right to reclaim good from 3rd parties) 2. Seller can reclaim goods at any time if the buyer misrepresented its solvency to the seller in writing within 3 months before delivery. |
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Non-Monetary Remedies
Entrustment of Goods- (Article 2) |
An owner who entrusts her goods to a MERCHANT who DEALS IN GOODS OF THE KIND (ie a "dealer") has no rights against a BFP of the goods.
EXAM TIP= on the exam, the fact pattern is always the same-- an owner of a jewelry or a car in to be repaired by a merchant who also sells that particular kind of good. |
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Non-Monetary Remedies
Right to Request Assurance in a Sale of Goods (Article 2) |
A party with REASONABLE GROUNDS for INSECURITY may request IN WRITING ADEQUATE ASSURANCE that the other party will perform in accord with the K.
if the other party does not assure, then the requester has the right to anticipatory repudiation. |
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Monetary Damages (Remedies)
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1. Punitive Damages
2. Liquidated Damages 3. Expectation Damages 4. Incidental Damages 5. Consequential Damages 6. Avoidable Damages |
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Monetary Remedies
Punitive Damages |
P.Ds are not awarded for breach of K b/c the purpose of K damages is to compensate, NOT punish
Exam Tip- don't think of "good guy" "bad guy". K remedies are designed to compensate the injured party, not PUNISH the breaching party. |
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Monetary Damages
Liquidated Damages |
Upheld if damages were DIFFICULT to ESTIMATE in ADVANCE and are a REASONABLE FORECAST of PROBABLY DAMAGES, but L.D.s cannot operate as a penalty
Lump sum damages are not valid. |
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Monetary Damages
Expectation Damages 1. Common Law Damages |
When you have to replace or you have an expectation of profit, you are entitled to the difference of the new worker and you are entitled to the expectation of profit.
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Monetary Remedies
Expectation Damages 2. Sale of Goods (Article 2) |
Buyer has 3 options
a- Cover damages b- market damages c- loss in value Seller has 4 options for damages a- resale damages b- market damages c- lost profits d- contract price |
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Expectation Damages- Sale of goods
Buyer's Damages a- Cover Damages |
cover price-K price (if the buyer covers in good faith- (usual measure))
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Expectation Damages- Sale of goods
Buyer's Damages b- Market Damages |
market price- K price (if buyer doesn't cover in good faith or doesn't cover at all.
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Expectation Damages- Sale of goods
Buyer's Damages c- Loss in Value |
value as promised- value delivered (if buyer keeps non-conforming goods)
buyer is entitled to keep the benefit of the deal |
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Expectation Damages- Sale of goods
Seller's Damages a- Resale Damages |
contract price- resale price (if seller resells in good faith)- usual measure
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Expectation Damages- Sale of goods
Seller's Damages b- Market Damages |
contract price- market price (if the seller DOES NOT resell in good faith or DOES NOT resell at all.
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Expectation Damages- Sale of goods
Seller's Damages c- Lost Profit |
Lost profit, is the seller is a lost volume seller
Bar Exam- this is how it always appears in the MBE: A dealer resells the same goods for the same price. The bar examiners are trying to trick you into saying the dealer;s damages are $0. Don't be fooled. The dealer has lost the PROFIT IT WOULD MADE ON THE INITIAL SALE. |
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Expectation Damages- Sale of goods
Seller's Damages d- Contract Price |
contract price, if the seller cannot resell the goods. (no market)
Like custom goods. |
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Monetary Remedies
Incidental Damages General |
Incidental Damages involve the cost of transporting or caring for goods after breach and costs associated with arranging a substitute transaction. Incidental damages are available to both seller and buyer
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Monetary Remedies
consequential Damages General |
C.D.s are damages that are SPECIAL to this PLAINTIFF and were REASONABLY FORESEEABLE by the BREACHING PARTY at the TIME of the K (note- NOT available to a seller under Article 2)
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Monetary Damages
Avoidable Damages General |
An injured Party cannot recover damages he could have avoided ("mitigated") with reasonable effort
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Third Party Problems
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1. 3rd Party Beneficiaries
2. Delegation of Duties 3. Assignment of Rights |
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3rd Party Problems
3rd Party Beneficiaries Definition |
two people enter into a K intending to benefit a third party
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3rd Party Problems
3rd Party Beneficiaries Example |
Joe Biden pays Tina Fey $25K to perform for Obama on July 4. Obama is the 3rd party Beneficiary of the K btw Joe and Tina.
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3rd Party Problems
3rd Party Beneficiaries Vocab. |
1. 3rd party beneficiary
2. Promisor 3. Promisee 4. Intended Beneficiary 5. Donee Beneficiary |
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3rd Party Problems
3rd Party Beneficiaries Vocab. - 3rd party beneficiaries (TPB) |
A person who is not a party to a K, but has rights under the K b/c it was intended to benefit him (Obama)
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3rd Party Problems
3rd Party Beneficiaries Vocab. - Promisor |
The party who promises to perform for the TPB (Tina Fey)
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3rd Party Problems
3rd Party Beneficiaries Vocab. Promisee |
The party who secures the promise (Joe Biden)
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3rd Party Problems
3rd Party Beneficiaries Vocab. Intended Beneficiary |
The person the K/ing parties intend to benefit (usually in K).
an INCIDENTAL BENEFICIARY- just happens to benefit from the K. Only an intended beneficiary has legal right who can enforce them. |
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3rd Party Problems
3rd Party Beneficiaries Vocab. Donee Beneficiary |
A TPB who receives a GIFT of performance from the promise is a Donee beneficiary (typical). If the promise owes a debt to the TPB, the TPB is a Creditor beneficiary (rare).
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Third Party Beneficiaries
Rescission and Modification G/R |
The promisor and promisee can rescind or modify the contract until the rights of the TPB have "VESTED". If the intended beneficiary learned of the K and relies on it, there cannot be Mod or rescission
Exception- Contrary Language in the contract controls. |
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Third Party Beneficiaries
Right to a 3rd-Party Beneficiary Against the Promisor |
An intended beneficiary can sue the breaching promisor even though no Privity of K btw them.
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Third Party Beneficiaries
Right to a 3rd-Party Beneficiary Against the Promisee |
The intended beneficiary can only sue the promisee for the benefit of the contract if the intended beneficiary is a creditor beneficiary.
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Third Party Beneficiaries
Right of Promisee Against the Promisor |
It is just like any other contract. this is even true if the intended beneficiary is in fact a donee beneficiary.
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3rd Party Problems
Delegation of Duties G/R |
Contractual duties MAY be delegated w/out consent of the person to whom performance is owed (the obligee)
This is a transfer of the burden under the K |
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3rd Party Problems
Delegation of Duties Exceptions |
a- Contract Language Controls- if the contract prohibits "assignment" that also means delegations!!!! watch out on the MBE
b- Special Skill or Reputation- if the skills are different and special (no delegation!!!) |
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3rd Party Problems
Delegation of Duties Rights of the Obligee |
a- Against the Delegating Party? D. Party still remains liable.
b- Against the Delegate? no liability unless the delegate of the obligation got consideration from the delegating party. |
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3rd Party Problems-
Assignment of Rights 1. Definition, 2. & 3. Bar Tips |
1. Two people make a K; later, one (assignor) transfer HIS RIGHTS to a 3rd party (assignee). The party who owes the duty is the Obligor
2. In an assignment, two parties enter a contract and a 3rd person (assignee) appears on later. In a 3rd-party beneficiary situation, all three parties are present from the outset. Don't confuse the doctrines. 3. An assignment of rights transfers only rights (usual case). Assignment of an entire K transfers BOTH RIGHTS AND OBLIGATION |
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3rd Party Problems-
Assignment of Rights 2. Example |
2. Batman Ks to provide security for Gotham City for $200K. Batman (assignor) assigns his right to payment to Robin (assignee). Robin has the right to receive payment from Gotham City Obligor.
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3rd Party Problems-
Assignment of Rights Requirements |
There needs to be present assignment language.
No consideration necessary. |
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3rd Party Problems-
Assignment of Rights Restrictions on Assignments- a- Contract Lang. Control. |
distinguish a clause that prohibits assignment from one that completely invalidates assignment
- if prohibits, Assignor is liable for breach but assignee is entitled to get paid. - if completely invalidates, assignment void. |
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3rd Party Problems-
Assignment of Rights Restrictions on Assignments- b- cannot substantially change duties of obligor |
a- changing the obligor duty to pay someone else is not a substantial change.
b- Changing terms of employement (going to work somewhere else) is substantially changing. |
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3rd Party Problems-
Assignment of Rights Assignee's rights against the obligor |
Assignee can sue to enforce the assigned K against the Obligor.
If the original (assignor) party fails to perform thereby breaching the K, the assignee cannot collect. If no knowledge of assignment the obligor is not liable to assignee for remitting payment to the original (assignor). |
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3rd Party Problems-
Assignment of Rights Multiple Assignments |
1- Gratuitious (Gift) Assignment:
2- Assignments for Consideration |
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3rd Party Problems-
Assignment of Rights Multiple Assignments1- Gratuitious (Gift) Assignment: |
The LAST Gratuitious Assignee in time prevails over the earlier gratuitous assignee b/c later gift assignment revokes an earlier one.
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3rd Party Problems-
Assignment of Rights Multiple Assignments- 2- Assignments for Consideration |
G/R- The first assignee for consideration prevails over all subsequent assignees b/c an assignment for consideration is much more durable than a gratuitous assignment
Bar Tip- If you encounter assignments in a Q, you should analyze each assignment in the order it was made to see f that particular assignment was valid. |
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3rd Party Problems-
Assignment of Rights Multiple Assignments- 2- Assignments for Consideration- Exception |
Exception- A later assignee for consideration prevail is he DOES NOT KNOW of the earlier assignments AND is the first to get payment from or a judgment against the obligor.
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