The Transfer of Contractual Rights and Duties The Transfer of Contractual Rights and Duties Section 12.1

Understanding Business and Personal Law The Transfer of Contractual Rights and Duties Section 12.1 Transfer of Contracts and Remedies for Breach Section 12.1 The Transfer of Contractual Rights and Duties Section 12.2 Remedies of the Injured Party 12 Chapter Transfer of Contracts and Remedies for Breach

Understanding Business and Personal Law The Transfer of Contractual Rights and Duties Section 12.1 Transfer of Contracts and Remedies for Breach What You’ll Learn How to explain the nature of an assignment (p. 242) How to identify contractual rights that can be assigned (p. 242)

Understanding Business and Personal Law The Transfer of Contractual Rights and Duties Section 12.1 Transfer of Contracts and Remedies for Breach What You’ll Learn How to explain the nature of a delegation (p. 245) How to explain the nature of a novation (p. 248)

Understanding Business and Personal Law The Transfer of Contractual Rights and Duties Section 12.1 Transfer of Contracts and Remedies for Breach What You’ll Learn How to identify a situation involving privity of contract (p. 249)

Understanding Business and Personal Law The Transfer of Contractual Rights and Duties Section 12.1 Transfer of Contracts and Remedies for Breach Why It’s Important Understanding when contractual rights and duties can be assigned will prepare you to deal with such situations when they arise.

Understanding Business and Personal Law The Transfer of Contractual Rights and Duties Section 12.1 Transfer of Contracts and Remedies for Breach Legal Terms assignment (p. 242) delegation (p. 245) novation (p.248) privity of contract (p. 249) third-party beneficiary (p. 249)

Understanding Business and Personal Law The Transfer of Contractual Rights and Duties Section 12.1 Transfer of Contracts and Remedies for Breach Transfer of Rights How Rights May Be Assigned What Rights May Be Assigned Section Outline Transfer of Duties Novation Third Parties

Understanding Business and Personal Law The Transfer of Contractual Rights and Duties Section 12.1 Transfer of Contracts and Remedies for Breach Pre-Learning Question Do you think it is legal to assign to someone else the rights and duties you acquire through a contract?

Understanding Business and Personal Law The Transfer of Contractual Rights and Duties Section 12.1 Transfer of Contracts and Remedies for Breach Recall that when individuals enter contracts, they: Transfer of Rights receive rights (benefits) incur duties (detriments)

Understanding Business and Personal Law The Transfer of Contractual Rights and Duties Section 12.1 Transfer of Contracts and Remedies for Breach Rights and duties may be transferred legally from the original parties to someone new, as long as the contract does not specifically say you can’t. Transfer of Rights

Understanding Business and Personal Law The Transfer of Contractual Rights and Duties Section 12.1 Transfer of Contracts and Remedies for Breach The transfer of a right under a contract is called an assignment. The party who transfers the right is the assignor. The party to whom the right is transferred is the assignee. Transfer of Rights

Understanding Business and Personal Law The Transfer of Contractual Rights and Duties Section 12.1 Transfer of Contracts and Remedies for Breach 12.1 Transfer of Rights When payment was due, Cathy paid the $1,800 to Anthony’s landlord. Anthony had a contract with Cathy to rebuild her front steps for $1,800. Anthony owed his landlord $1,800. He therefore assigned his right to the $1,800 to his landlord.

Understanding Business and Personal Law The Transfer of Contractual Rights and Duties Section 12.1 Transfer of Contracts and Remedies for Breach The law does not specify how one party may assign a right to another. However, it is best to put an assignment in writing, because an oral assignment can be difficult to prove. How Rights May Be Assigned

Understanding Business and Personal Law The Transfer of Contractual Rights and Duties Section 12.1 Transfer of Contracts and Remedies for Breach Most rights may be assigned unless the assignment changes the obligations of the other party to the contract in an important way. What Rights May Be Assigned

Understanding Business and Personal Law The Transfer of Contractual Rights and Duties Section 12.1 Transfer of Contracts and Remedies for Breach Rights to the payment of money and the delivery of goods are the most common types of rights that are assigned. What Rights May Be Assigned

Understanding Business and Personal Law The Transfer of Contractual Rights and Duties Section 12.1 Transfer of Contracts and Remedies for Breach Generally, no special form is required to make an assignment. Any words that clearly indicate a person’s intent are sufficient. What Rights May Be Assigned

Understanding Business and Personal Law The Transfer of Contractual Rights and Duties Section 12.1 Transfer of Contracts and Remedies for Breach Can rights be assigned orally? Should they be? Why or why not?

Understanding Business and Personal Law The Transfer of Contractual Rights and Duties Section 12.1 Transfer of Contracts and Remedies for Breach ANSWER They can be assigned orally, but an oral assignment can be difficult to prove.

Understanding Business and Personal Law The Transfer of Contractual Rights and Duties Section 12.1 Transfer of Contracts and Remedies for Breach Pre-Learning Question What do you think delegation means with respect to contracts?

Understanding Business and Personal Law The Transfer of Contractual Rights and Duties Section 12.1 Transfer of Contracts and Remedies for Breach The transfer of a duty is called a delegation and should not be confused with an assignment, which is a transfer of rights. Transfer of Duties

Understanding Business and Personal Law The Transfer of Contractual Rights and Duties Section 12.1 Transfer of Contracts and Remedies for Breach In a transfer of duties, a party to a contract delegates another person to perform the obligation in his or her place. Transfer of Duties

Understanding Business and Personal Law The Transfer of Contractual Rights and Duties Section 12.1 Transfer of Contracts and Remedies for Breach Although the performance of an obligation may be delegated, the responsibility for it may not. Subcontracting is a form of delegating. Transfer of Duties

Understanding Business and Personal Law The Transfer of Contractual Rights and Duties Section 12.1 Transfer of Contracts and Remedies for Breach The following duties may not be delegated: Transfer of Duties A party agrees to perform the service personally. The contract calls for the exercise of personal skill and judgment. The contract prohibits delegation.

Understanding Business and Personal Law The Transfer of Contractual Rights and Duties Section 12.1 Transfer of Contracts and Remedies for Breach 12.1 Transfer of Duties Ivan is still liable for the terms of the contract. 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 Press prints the PTA newsletter.

Understanding Business and Personal Law The Transfer of Contractual Rights and Duties Section 12.1 Transfer of Contracts and Remedies for Breach What is the difference between an assignment and a delegation?

Understanding Business and Personal Law The Transfer of Contractual Rights and Duties Section 12.1 Transfer of Contracts and Remedies for Breach ANSWER An assignment is a transfer of rights; a delegation is a transfer of duties.

Understanding Business and Personal Law The Transfer of Contractual Rights and Duties Section 12.1 Transfer of Contracts and Remedies for Breach Pre-Learning Question What do you think a novation is?

Understanding Business and Personal Law The Transfer of Contractual Rights and Duties Section 12.1 Transfer of Contracts and Remedies for Breach If you receive permission to assign contract rights or delegate duties to a third person, and the other party agrees to deal with the assignee, the resulting contract is called a novation. Novation

Understanding Business and Personal Law The Transfer of Contractual Rights and Duties Section 12.1 Transfer of Contracts and Remedies for Breach A novation is an agreement whereby an original party to a contract is replaced by a new party. The terms of the new contract generally remain the same as those in the original contract. Novation

Understanding Business and Personal Law The Transfer of Contractual Rights and Duties Section 12.1 Transfer of Contracts and Remedies for Breach To be effective, substitution requires the consent of all of the parties involved. Novation

Understanding Business and Personal Law The Transfer of Contractual Rights and Duties Section 12.1 Transfer of Contracts and Remedies for Breach Why can’t the performance of the work of teachers, writers, or artists be delegated to others?

Understanding Business and Personal Law The Transfer of Contractual Rights and Duties Section 12.1 Transfer of Contracts and Remedies for Breach ANSWER Such persons are selected to perform their services because of their particular skill or talent.

Understanding Business and Personal Law The Transfer of Contractual Rights and Duties Section 12.1 Transfer of Contracts and Remedies for Breach Pre-Learning Question Why is it important to understand the relationship between the parties to a contract?

Understanding Business and Personal Law The Transfer of Contractual Rights and Duties Section 12.1 Transfer of Contracts and Remedies for Breach A contract is a binding agreement that establishes a relationship between the parties to the contract. This relationship between the parties is termed privity of contract. Third Parties

Understanding Business and Personal Law The Transfer of Contractual Rights and Duties Section 12.1 Transfer of Contracts and Remedies for Breach Privity of contract determines who can sue whom over a question of performance required by a contract. Usually the parties to a contract have standing to sue. Third Parties

Understanding Business and Personal Law The Transfer of Contractual Rights and Duties Section 12.1 Transfer of Contracts and Remedies for Breach A person who is not a party to a contract but still benefits from the contract is called a third-party beneficiary. Third Parties

Understanding Business and Personal Law The Transfer of Contractual Rights and Duties Section 12.1 Transfer of Contracts and Remedies for Breach Reviewing What You Learned 1. 1.What is an assignment? Section 12.1 Assessment

Understanding Business and Personal Law The Transfer of Contractual Rights and Duties Section 12.1 Transfer of Contracts and Remedies for Breach Reviewing What You Learned The transfer of rights under a contract. Section 12.1 Assessment Answer

Understanding Business and Personal Law The Transfer of Contractual Rights and Duties Section 12.1 Transfer of Contracts and Remedies for Breach Reviewing What You Learned 2. 2.What contractual rights can be assigned? Section 12.1 Assessment

Understanding Business and Personal Law The Transfer of Contractual Rights and Duties Section 12.1 Transfer of Contracts and Remedies for Breach Reviewing What You Learned Most contract rights can be assigned unless the assignment changes the obligations of the other party to the contract in an important way. Section 12.1 Assessment Answer

Understanding Business and Personal Law The Transfer of Contractual Rights and Duties Section 12.1 Transfer of Contracts and Remedies for Breach Reviewing What You Learned 3. 3.What is a delegation? Section 12.1 Assessment

Understanding Business and Personal Law The Transfer of Contractual Rights and Duties Section 12.1 Transfer of Contracts and Remedies for Breach Reviewing What You Learned The transfer of a contractual duty. Section 12.1 Assessment Answer

Understanding Business and Personal Law The Transfer of Contractual Rights and Duties Section 12.1 Transfer of Contracts and Remedies for Breach Reviewing What You Learned 4. 4.What is a novation? Section 12.1 Assessment

Understanding Business and Personal Law The Transfer of Contractual Rights and Duties Section 12.1 Transfer of Contracts and Remedies for Breach Reviewing What You Learned An agreement whereby an original party to a contract is replaced by a new party. Section 12.1 Assessment Answer

Understanding Business and Personal Law The Transfer of Contractual Rights and Duties Section 12.1 Transfer of Contracts and Remedies for Breach Reviewing What You Learned 5. 5.What is privity of contract? Section 12.1 Assessment

Understanding Business and Personal Law The Transfer of Contractual Rights and Duties Section 12.1 Transfer of Contracts and Remedies for Breach Reviewing What You Learned The relationship between the parties to a contract. Section 12.1 Assessment Answer

Understanding Business and Personal Law The Transfer of Contractual Rights and Duties Section 12.1 Transfer of Contracts and Remedies for Breach Section 12.1 Assessment Critical Thinking Activity Third Parties Why does the law grant third-party beneficiaries standing to bring lawsuits?

Understanding Business and Personal Law The Transfer of Contractual Rights and Duties Section 12.1 Transfer of Contracts and Remedies for Breach Section 12.1 Assessment Answers will vary but should recognize the importance of third-party beneficiaries to the contract. Critical Thinking Activity Answer Third Parties

Understanding Business and Personal Law The Transfer of Contractual Rights and Duties Section 12.1 Transfer of Contracts and Remedies for Breach Section 12.1 Assessment Legal Skills in Action Privity 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.

Understanding Business and Personal Law The Transfer of Contractual Rights and Duties Section 12.1 Transfer of Contracts and Remedies for Breach Section 12.1 Assessment Legal Skills in Action Privity 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.

Understanding Business and Personal Law The Transfer of Contractual Rights and Duties Section 12.1 Transfer of Contracts and Remedies for Breach Section 12.1 Assessment Legal Skills in Action Privity of Contract Discuss with several of your classmates whether your brother has standing to bring a lawsuit against the BIEW.

Understanding Business and Personal Law The Transfer of Contractual Rights and Duties Section 12.1 Transfer of Contracts and Remedies for Breach Section 1.1 Assessment 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 Answer Privity of Contract

The Transfer of Contractual Rights and Duties The Transfer of Contractual Rights and Duties End of Section 12.1