Chapter 11: Contractual Obligations
and their Enforcement
Lexy Cascone, Taylor Gaffney, Mike
Geinopolos, & Russel Gartman
Legal Application #1
Keisha Arthur hired a general contractor to
build her new home who in turn delegated
most of the work to four independent
subcontractors.
QUESTION: Is this a legal delegation of
duties?
Is the general contractor responsible for the
subcontractors work?
Legal Application #1 Response
YES: It is legal for general contractors to
delegate work to skilled subcontractors.
The general contractor is still legally
responsible for the performance of any
delegated work.
Transfer of Contract Rights
Assignment: the transfer of contractual rights
VS
Delegation of Duties: transfer of contractual duties
– Assignor: the party who transfers the right
– Assignee: party who receives the right
• What happens when contractual rights are transferred?
– Does not change the legal rights of the other party to the
contract
Obligor: one who owes a duty under the contract
• GENERALLY: A party assigns contractual rights to another,
provided performance will not be materially changed
Performance: fulfillment of contractual promises as
agreed
Legal Application #1 Reference
IMPORTANT: A person can not delegate to another
any duty where performance requires unique
personal skill or special qualifications.
It was legal for the general contractor to delegate
the house work to skilled subcontractors as long as
they were all qualified and certified to do the job.
Discharge of Obligations
Discharge: termination of duties
- Contracts discharged by complete performance
of terms
FAILURE TO DO SO= BREACH OF CONTRACT
-Substantial performance: minor duty of contract
remains, but all duties performed
-A minor breach does NOT discharge the duties of
the non-breaching party
-A party injured by a breach of contract must
elect or choose a remedy when suing
- Default: when a party fails to perform
- Defaulting party must notify the other party to a
contract BEFORE the time of performance=
anticipatory breach
Significance and Classification of
Breach
- A party injured by a breach of contract is required
by law to take reasonable steps to minimize the
harm done: Mitigate the damages
***A judge or jury decides the significance
and classification of a breach***
Subsequent Agreement
2 ways Parties who agree to change terms of
contract can avoid breach
1) Rescission: parties agree to unmake or undo their entire
contract from the beginning
2) Substitution: Parties decide the present contract is not what
they want= REPLACE with new contract. Discharges original
contract by substitution
Remedies for a Breach
• Basic Remedies for MINOR breach:
– Imprisonment
– Money Damages
– Rescission: treat contract as cancelled
– Restitution: permits parties to recover money or property.
Available when parties have attempted to contract but
failed
• Basic Remedies for a MAJOR breach
– Money Damages
– Rescission
– Restitution
– Specific Performance: breaching party to do exactly what
was required under contract
Money Damages
• Compensatory: restores injured parties to the
same financial position prior to the breach
EXAMPLE:
Charlotte, home broker, contracted to buy a
house from Ben for $65,000 knowing the fair
market value of the property was higher.
Charlotte spent $3000 on title search, a
survey, an appraisal, loan origination fees,
etc. If Ben committed a material breach for
refusing to sell, a court would award Charlotte
$2000 as compensatory damages. This would
restore the broker to her financial situation
prior the breach.
Money Damages cont…
•
•
•
•
Consequential: place injured parties in the same
financial situation prior the contract being performed
– Grants money for the injuries caused by the
breach
Punitive: to punish and to make an example of the
defendant
Liquidated: Parties agree on a certain amount of
monetary damages that will be paid is a breach occurs
– Not all liquidated clauses are enforceable
• Example: excessive amount of monetary
damage
Nominal: no substantial harm done, acknowledgement
that wrong was committed in not performing a duty
under contract
* Additional Note: a ready willing and able
offer to perform an obligation: tender
Remedies for BREACH OF CONTRACT
Breach of Contract
Rescission and
Restitution
Specific
Performance
Damages
Injunction
Waiver
Types of Damages
Compensatory
Damages
Consequential
Damages
Liquidated
Damages
Nominal
Damages
Punitive
Damages
CLICKER ACTIVITY
Chapter 11 Test ANSWERS
1) T
2) T
3) T
4) F
5) F
6) F
7) T
8) F
9) T
10) T
11) C
12) A
13) B
14) C
15) D
16) A
17) C
18) C
19) B
20) C