In this presentation we're going to talk about third parties remedies and discharge. At the end of this presentation we will be able to:
• Define legal rights of beneficiaries
• Identify legal rights of incidental beneficiaries
• Explain delegation of duties
• Defined and explain Novation
• Describe what constitutes satisfactory performance of a contract
• List the ways that a contract can be discharged for non-performance
• List the types of damages available in the event of a breach of contract
When considering the formation of a contract we typically think of a two or more parties. If we think of the simplest contract, we have two parties involved. If we talk about a party of persons A and person B conducting a contract that has some mutual benefit between A and B, it is possible that a third party involved will have some type of benefit from the contract as well. In other words, contract between for example A and B that also has benefits that would be given to person C, a third party, which we would then be calling the third-party beneficiary. This is an example where we could have a beneficiary involved who is not in the original negotiation between A and B but yet still has some benefits assigned to them through the contract formed by A and B.
In some cases, even though they're not involved in the negotiation of the the contract it is possible for the third party that received these beneficiaries to enforce the rights to the benefits in case of a problem or a breach of contract.
When considering a contract, we typically have the concept of an intended beneficiary, a beneficiary who is intended to be a beneficiary within the construction of the contract. For example, intended beneficiaries could include creditors for a contract, insurance beneficiaries, or donee beneficiaries.
A creditor is going to be an outside third party, typically a vendor, for one or two or both individuals or parties involved in the contract owe something to a creditor. The creditor is going to be a third party that either one or both individuals within the contract owe something to, typically a vendor, owed to as a result of the contract. This may result by purchasing something or a good or service from a vendor of sometime in the past which had not yet been paid. In this situation we can see that the contract would be between A and B, making some type of arrangement, and we can imagine a situation where person A has an outstanding debt that needs to be paid. As part of the arrangement between A and B, B could pay for the debt that was owed by A in return for some other type of consideration. In this example the creditor, the person who is owed money by A, would benefit from this contract although the creditor is not directly in the negotiation of the contract. The creditor is going to be a third party who would be benefiting from the contract.
An insurance beneficiary is one of the most common types of third party beneficiaries which would typically fall under a donee beneficiary. In the case of an insurance beneficiary the person who is contracted to be the beneficiary of an insurance payments may not have been involved in the initial contract. In other words, we're going to have an insurance payout going to someone other than the people that actually made the original contract. For example, if we had some type of life insurance contract it would be between the person making the cut in the insurance policy and the business and the person that would be the beneficiary of the contract is not directly involved within the making of the contract and therefore is to this contract creation but is a beneficiary to receive benefits and the contract of course being designed for the benefit of that party.
In contrast to a beneficiary who is intended, we could have an incidental or unintended beneficiary for a contract as well. We can imagine that being the case where we have a contract between A and B and C then is going to be a beneficiary but it's not expressly part of the contract to give any benefit to C. We just know that if A and B do perform whatever contract they have it may have a substantial benefit to C. For example, if we're put in a new store in a particular mall and that store was a big draw to the mall than other stores that are in that mall could have a positive benefit from the contract between A and B through increased traffic in the mall. In economic terms we call this a positive externality.
Unlike if they were an intended beneficiary an unintended beneficiation does not have the legal recourse to the same degree that they would have for a contract that was made with them as an intended beneficiary. If it's unintended they don't have the same type of legal recourse.
Once a contract is made we do have the concept of assignment and delegation and that's going to be the idea that once we have the contract set we could assign, or transfer, the rights of the contract to another individual. There are exceptions to the this. For example, if the contract explicitly says within the contract that we cannot assign then that wouldn't be the case but if in many cases we have the ability to assign then the rights of the contract to another individual or party.
Delegation is, on the other hand, the transfer of the duty of the contract to another individual or party. The same principles apply that there are certain exceptions including that if the contract expressly says within the contract that that is not something that can be done.
The assignment may be in writing or an oral and sign assignment, but it usually tends to follow the same type of rules in the equal dignities rule which states that if the original contract needed to be in writing then the assignment to would need to be in writing rather than just having an oral assignment.
When processing the original contract, it is possible that the parties that are involved in the original contract could include a condition that will not allow assignments. Even in cases where all obligations of a contract are assigned to another party the assignor of those obligations it could still be, and generally is still, responsiple if those obligations are not performed by the individuals or parties they were assigned to. In other words, the assignor, the individual assigning the tasks and obligations, will still be liable if those obligations were not done well or not done at all to the obligator, the other individual involved, or party involved in the contract.
If, however all three parties involved do agree to the assignment of the obligations and the liability related to them to the new assignee then we have we can say that the liability would be between the obligate or the original party to the negotiation and then the assignee, the one who has now been assigned the obligations. In other words, the contract is essentially now between at the ensignee and the obligator. This is called novation.
youtu.be/VB4Ip6XLBW8?list=PLGjzi_qwYojiaZ3tkLItif6wzsLvBzplf
Most contracts are discharged at the point in time when the obligations are met. For example, when both parties have met and performed the obligations then the contract would typically be discharged by performance, by the completion of the terms of the contract.
If a contract does not specify the timeframe in which an obligation needs to be performed, then we would use the concept of a reasonable time frame. We would assume that the contract and the obligations within them should be done in a reasonable time which would be a fair time, a time that would probably be in alignment with similar contracts for similar circumstances. Reasonable time is then a time that may fairly, properly, and conveniently be required to do the task that is to be done.
Satisfactory performance is going to be a term to determine whether or not the performance of the duties have been done satisfactorily. The satisfactory performance would be that the task had been done up to the standards that would be expected by the individuals involved within the contract. In other words, it would specify that the people involved, the parties involved in the contract, had performed their duties in accordance with the agreement of the contract.
Satisfactory performance may be either expressed or implied as a condition of the contract. The term complete performance means that all parties have fully completed everything that was termed for them to do. They have completed all the duties obligated by the contract. When not quite all the procedures have been done we would use a term such as substantial performance and that would mean that most of the requirements of the contract have been done with the exception of fairly or relatively small components. We might term the small conditions to be things that would be in in material type details of the contract that don't really affect the overall outcome or the overall agreed on goal of the contract.
Many contracts may include conditions of performance including for example a condition precedent. If we have a condition to precedence within the contract, that would mean that one duty of a contract needs to be performed before a second duty. In other words, one individual or one party would be obligated to perform the duty before the second individual. If the first individual does not perform the first duty or the conditioned president is not done, then the second party would not be liable and either there would be a rescission or a termination of the entire agreement at that time the entire contract at that point.
Non-performance is the term used when there is a failure to complete the task or promises of the contract, of the agreement. We would typically think there is nonperformance, if there's a failure to complete the task, that there would be some type of breach of contract, and if there's a breach of contract then there could be legal action taken at that point.
There are other circumstances that could lead to nonperformance which would lead to some type of discharge of the contract other than a breach of contract. If in the case that there is a breach of contract and there could be a legal action to pursue that breach of contract. If on the other hand, there's some kind of reason that an obligation could not be met so such as some later circumstance happened that made the completion of the task impossible then there may be a discharge by impossibility and by operation of law at that point. It may also just be agreed upon by the individuals within the contract to discharge before the performance has been done.
When creating a contract, it is possible to set within the contract conditions that would then terminate the contract. For example, if there's a contract that is put in place and there's an obligation of the contract to be completed, but if we can foresee some type of future situation where we would want to put as a condition to end the contract we could specifically put that condition into the contract. We could say if this happens then the contract would be discharged even without a performance at that point in time due to this condition.
A termination by waiver is going to be a situation where one party has not completed a task up to the conditions of the contract and no legal action is taken. If no legal action is going to be taken, then we basically have a termination by waiver rather than by a mutual rescission. We're not rescinding the contract. Instead there has been a condition that has not been met, that has not been pursued or being pursued in a legal way and therefore we have a termination by waiver.
Accord and satisfaction in this is another form of discharge of a contract and that would basically be were the individuals set up a new form, a new type of contract, and have new duties and obligations within the new contract. That would be the new Accord for the contract and then as those new duties are satisfied that would be the satisfaction of that new contract
A general release is going to be a type of discharge in which case there's going to be a document expressing the intent of the creditor, the person owed, to release the debtor from the obligation on an existing debt.
A breach of contract will happen when one of the parties do not complete one of the tasks or duties within the contract. This could be the non-completion of a task and if there's a time constraint it could be a non-completion of a task within the given time period. It can also be that the task may have been completed but not up to the standards that would be laid out in the contract or expected in a contract of that nature.
An anticipatory breach of contract would occur if one party decides that they're not going to be able to complete the contract as given within the terms and timeframe of the contract and then states before the terms are completed or the time limit being completed that they do not intend to fulfill the obligations within the contract. In this type of situation, the injured party can either take a legal action at that point in time, at the point in time that they are notified, or they can wait until the completion of the time period that was given in order to complete a particular task and then take action at that point.
The concept of abandonment of a contractual obligation would mean that within the process of completing the duties, the process had then been abandoned before the completion of the tasks or duties. In such case where one party abandons the task or duty then of course the other individual would not typically be held responsible for completing their portion of the obligation under contract.
When we do have a breach of contract we could seek legal remedies to compensate for the loss for the breach of contract. We could have actual damages which will be typically a case where we would argue for actual damages within the breach of contract and those would be damages that we would show that are actual in terms of the contract that was not completed and the damage that would be caused due to that lack of completion. This could also be could be called compensatory damages because we're really compensating for the loss that took place due to that breach of contract.
There could also be requested incidental damages when there is a breach of contract and that's going to be the concept typically of future damages, any further losses that would be a consequence of the breach of contracts. We'd have to say we need to guard against the future damages that would be in place and those will be incidental damages that could be asked for compensation within the case of breach of contract.
There could also be a consequential damage and those are going to be the type of damages resulting from a breach of contract for special circumstances that exists within a particular set of circumstances, within a particular contract.
Then of we have the punitive damages and those are all are going to be those damages that would be sought to punish the individual who had the breach of contract the idea being that to have a punishing factor, a legal factor of deterrence in other words, for that individual or party to not do the same thing in the future and/or for other individuals to not want to do a similar act.
The term nominal damages refers to the symbol damage, a kind of like a token damage, awarded to parties who have had some type of injury to their rights. their legal rights having been injured, but there's no real actual loss.
Liquidated damages is going to be the idea that we're going to state within the contract the damages that would be awarded in the case of some type or a particular type of breach of contract.
An injured party is also required to mitigate damages from a particular situation as well. For example, if there's a breach of contract then the injured party would then still need to seek the best results from that breach of contract as possible to lessen the losses as much as possible. In other words, the injured party couldn't legally try to increase the losses that would be a result to possibly injure the other party in the case of having to repay for those losses. The injured party in other words, has an obligation to, although they've suffered a loss through possibly a breach of contract, find the best solutions to mitigate further damages in that situation.
If there's a decree of specific performance within a breach of contract case that would basically be the course saying that we would like you to perform some specific duty possibly, most likely, to complete the task that was given within the original contract to complete. In this case rather than, within a breach of contract at setting, we'd have a monetary type of remedy for the situation we may seek some other type of remedy and that might be a specific performance type rendered remedy which would be to complete the task that was given under the original contract.
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