Chapter 16 business law – Flashcards
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three-way agreement in which the obligor transfers all rights and duties to a third party
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Novation
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In novation the obligee agrees to
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obligee agrees to look only to that third party for performance
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what case deals with novation
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senberg v. Son, Inc. (1992)
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A third party beneficiary is someone
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someone who was not a party to the contract but stands to benefit from it
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According to the Restatement (Second) of Contracts Section 302: A beneficiary of a promise is an intended beneficiary and may enforce a contract if the parties intended her to benefit and if either
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a) enforcing the promise will satisfy a duty of the promisee to the beneficiary (b) the promisee intended to make a gift to the beneficiary
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Any party who is not an intended beneficiary is an incidental beneficiary, and may not enforce the contract
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Incidental Beneficiaries
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what case deals with incidental beneficiaries
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Unite Here Local 30 v. California Department of Parks and Recreation (2011)
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A contracting party may
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-may transfer his rights under the contract, which is called an assignment of rights -may transfer her duties pursuant to
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The one making an assignment
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Assignor
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The one receiving an assignment
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Assignee
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The one obligated to do something
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Obligor
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The one who has the obligation coming to her
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Obligee
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Any contractual right may be assigned unless assignment: (3)
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(a) would substantially change the obligor's rights or duties under the contract; or (b) is forbidden by law or public policy; or (c) is validly precluded by the contract itself
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Assignment is also prohibited when the obligor is agreeing to perform personal services
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Substantial Change
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The one delegating duties
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Delegator
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Delegatee
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The one assuming the duties
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Most duties are delegable. But delegation does not ...
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by itself relieve the delegator of his own liability to perform the contract
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Contract Prohibition example
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Example: landlord prohibits assignment -Tenet Healthsystem Surgical, L.L.C. v. Jefferson Parish Hospital Service District No. I (2005)
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Public Policy example
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Example: cannot assign personal injury claims
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The Uniform Commercial Code and Assignments and Security Interests
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Special Issue
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If a contracting party wants to prohibit assignment of rights, it must
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specifically do so
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If a contract states in general terms that assignment is prohibited, the UCC will limit that language to mean only that a party may
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not delegate his duties; assignment of the party's rights will still be allowed
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The UCC favors assignments, and tends to limit
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contractual clauses that prohibit assignment
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If delegation occurs in spite of a proper contractual refusal to allow delegation, the contract has been __________ by the delegating party
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repudiated
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Substantial Interest in Personal Performance
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-Services of lawyers, doctors, dentists, artists, performers are considered too personal to be delegated -Generally, when the work will test the character, skill, discretion and good faith of the obligor, she may not delegate her job
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Very common for a contract to ________ delegation
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prohibit delegation
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Example: a public works contract
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Public Policy
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An obligor may delegate his duties unless
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(1) delegation would violate public policy, or (2) the contract prohibits delegation, or (3) the obligee has substantial interest in personal performance by the obligor
