Third Party Rights, Discharge, Breach of Contract, & Remedies THIRD PARTY RIGHTS AND DISCHARGESometimes in contract law, someone else has rights to the contract even though they are not a party to the contract. This chapter discusses those circumstances and also discusses how you can discharge your obligation to perform under thecontract. An Assignment is a transaction whereby an obligee (the assignor) transfers her rights to some third party (the assignee). As a consequence, the assignee may demand any performance due to the assignor, and the assignor's contract rights are extinguished. A delegation is a transaction whereby an obligor (the delegator) frees himself from his duties by having some third party (the delegatee) perform those duties. Despite his delegation, the delegator remains liable for his contract duties if the delegatee fails to perform. A contract under which a third party, X, is intended, by the terms of the contract between Y and Z, to benefit from Y's and Z's performance of the contract is a third party beneficiary contract.As a general rule, all contract rights may be assigned, except where: (1) the assignment is prohibited by statute;(2) the contract to be assigned is for personal services, unless all that remains under the contract is a money payment for services previously rendered;(3) the assignment would materially increase the risk or alter the duties of the obligor; or (4) the contract specifically forbids assignment.There are exceptions to this exception, namely the contract may not prevent the assignment of:(a) the right to receive money;(b) rights in, or the alienation of, real property;(c) negotiable instruments; or(d) the right to recover damages for breach of contract or for payment of an account under the UCC. An assignee of a right to receive money acquires any rights that the assignor held.As a general rule, all contract duties may be delegated, except where:(1) the delegator owes the obligee fiduciary duties or other duties arising from a special trust in the delegator;(2) performance depends on the personal skills or talents of the delegator (e.g., Greg Maddux cannot delegate his pitching duties to Tiger Woods);(3) performance by the delegatee would vary materially the performance expected by the obligee (e.g., Sue Smith contracts with Tiger Woods to give her golf lessons; Tiger cannot delegate those duties to Butch Harmon, Tiger's own golf instructor, because Sue wanted Tiger's personal performance); or (4) the contract specifically forbids delegation.If the delegation is enforceable, the obligee must accept performance by the delegatee. But, if the delegatee fails to perform adequately, the delegator remains liable for the delegatee's breach.The law distinguishes between intended and incidental third-party beneficiaries. Only intended beneficiaries acquire actionable legal rights in a contract. (a) Intended Beneficiary: A third party for whose benefit a contract is formed.(b) Incidental Beneficiary: A third party who benefits from the performance of a contract, but whose benefit was not the reason the contract was formed.A contractual qualification, provision, or clause which creates, suspends, or terminates the obligations of one or both parties to the contract, depending on the occurrence or nonoccurrence of some event is a condition.(a) Condition Precedent: A condition that must be satisfied before a party's contractual obligation to perform becomes absolute (e.g., Bobpromises to hire Terry as a driver as soon as Terry gets his license). (b) Condition Subsequent: A condition the occurrence or nonoccurrence of which will terminate a party's absolute obligation to perform(e.g., Mary agrees to let Sue stay in Mary's spare room for as long as Sue remains unmarried).(c) Concurrent Conditions: Mutually dependent conditions that must occur or be performed at the same time in order to give rise to any absolute obligation to perform (e.g., Nikki offers to pay Tina $100 in exchange for Tina's class ring).When a party fails to completely perform her contractual duties, the question arises whether the performance was nonetheless sufficiently substantialto discharge the contractual obligation. If so, then the party is said to have substantially performed. Substantial performance must not vary greatly from that promised in the contract, and must create substantially the same benefits as those promised. An action by a party to a contract that indicates that she will not perform a contractual obligation due to be performed in the future is anticipatory repudiation.The process by which the parties cancel a contract and return one another to their pre-contract status is recission.Novation requires:(1) a valid, prior agreement, for which(2) all parties agree to substitute a new contract;(3) discharge of the prior obligation; and(4) a valid, new agreement.BREACH AND REMEDIESThe basic types of money damages. I can recovered i a breach contract case are:(a) Compensatory Damages: Damages that compensate the non-breaching party for the injuries or losses actually sustained asa result of the breach.. (b)Consequential Damages: Damages, resulting indirectly from the breach, which were reasonably foreseeable to the breaching party at the time the breach occurred.(c) Punitive Damages: Damages designed to punish a wrongdoer and to deter similar conduct in the future. Such damages are generally not recoverable in breach of contract actions, unless the breaching party's actions give rise to a separate tort claim. (d) Nominal Damages: Damages awarded to the non-breaching party when only a "technical" injury occurred resulting in no actualdamages.Compensatory damages are calculated as follows:The value of the performance as promisedLess: The value of the performance actually rendered Less: The value of any loss avoided, or mitigated, by the non-breaching partyPlus Incidental damages by the non-breaching partyEquals:Compensatory damages.In most situations, when a breach of contract occurs, the non-breaching party has a duty to take whatever action is reasonable to minimize the damages caused by the breach. For example, if you breach your lease 10 months early, the landlord has a duty to try to re-rent it to minimize his damages. Some types of equitable (i.e., non-damage) remedies available are:(a) Rescission: Canceling a contract and returning the parties to their pre-contract position.(b) Restitution: Returning goods, property, or money previously transferred in order to restore the non-breaching party to his pre-contract position.(c) Specific Performance: Requiring the breaching party to perform exactly as called for in the contract. (This remedy is usually granted only when money damages would be an inadequate remedy and the subject matter of the contract is unique (e.g., contract to purchase an original Picasso, a particular tract of real property, or the services of a uniquely talented person).(d) Reformation: A remedy allowing the contract to be re-written to reflect the true intent of the parties. (This remedy is typically limited to cases of fraud or mutual mistake.)

Breach and Remedies 1. What is the difference between monetary damages and equitable remedies? (4 points) 2. Define each of the following: a. Compensatory Damages (2 points) b. Consequential Damages (2 points) c. Punitive Damages (2 points) d. Nominal Damages (2 points) 3. What is the formula to calculate compensatory damages? (4 points) 4. When can a Plaintiff get punitive damages in a contract case? (2 points) 5. Define recission. (2 points) Give an example of a time when someone may as for recission as a remedy (2 points) 6. Define Specific Performance. (2 points) Give an example of a time when someone may ask for specific performance as a remedy. (2 points) 7. Define Restitution. (2 points) Give an example of a time when someone may get restitution as a remedy in a contract case. (2 points) 8. Define Reformation. (2 points) Give an example of a time when someone may ask for reformation as a remedy in a contract case. (2 points) 9. Define mitigation of damages. (2 points) 10. Who has the duty to mitigate damages? (2 points) 11. Why do you think the law puts a burden to mitigate damages on that party? Do you think that is fair? (2 points)