Section 12.1
The Transfer of Contractual Rights
and Duties
Transfer of
Contracts
and
Section
12.1
The
Transfer
of
Contractual
Chapter 12 Remedies for Breach
Rights and Duties
Section 12.1
The Transfer of Contractual Rights
and Duties
Section 12.2
Remedies of the Injured Party
Understanding Business and Personal Law
Transfer of Contracts and Remedies for Breach
Section 12.1 The Transfer of Contractual
Rights and Duties
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
Transfer of Contracts and Remedies for Breach
Section 12.1 The Transfer of Contractual
Rights and Duties
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
Transfer of Contracts and Remedies for Breach
Section 12.1 The Transfer of Contractual
Rights and Duties
What You’ll Learn
How to identify a situation involving
privity of contract (p. 249)
Understanding Business and Personal Law
Transfer of Contracts and Remedies for Breach
Section 12.1 The Transfer of Contractual
Rights and Duties
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
Transfer of Contracts and Remedies for Breach
Section 12.1 The Transfer of Contractual
Rights and Duties
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
Transfer of Contracts and Remedies for Breach
Section 12.1 The Transfer of Contractual
Rights and Duties
Section Outline
Transfer of Rights
How Rights May Be Assigned
What Rights May Be Assigned
Transfer of Duties
Novation
Third Parties
Understanding Business and Personal Law
Transfer of Contracts and Remedies for Breach
Section 12.1 The Transfer of Contractual
Rights and Duties
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
Transfer of Contracts and Remedies for Breach
Section 12.1 The Transfer of Contractual
Rights and Duties
Transfer of Rights
Recall that when individuals enter
contracts, they:
receive rights (benefits)
incur duties (detriments)
Understanding Business and Personal Law
Transfer of Contracts and Remedies for Breach
Section 12.1 The Transfer of Contractual
Rights and Duties
Transfer of Rights
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.
Understanding Business and Personal Law
Transfer of Contracts and Remedies for Breach
Section 12.1 The Transfer of Contractual
Rights and Duties
Transfer of Rights
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.
Understanding Business and Personal Law
Transfer of Contracts and Remedies for Breach
12.1 12.1 The Transfer of Contractual
Section
Rights and Duties
Transfer of Rights
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
When payment
was due, Cathy
paid the $1,800
to Anthony’s
landlord.
Transfer of Contracts and Remedies for Breach
Section 12.1 The Transfer of Contractual
Rights and Duties
How Rights May Be Assigned
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.
Understanding Business and Personal Law
Transfer of Contracts and Remedies for Breach
Section 12.1 The Transfer of Contractual
Rights and Duties
What Rights May Be Assigned
Most rights may be assigned unless
the assignment changes the
obligations of the other party to the
contract in an important way.
Understanding Business and Personal Law
Transfer of Contracts and Remedies for Breach
Section 12.1 The Transfer of Contractual
Rights and Duties
What Rights May Be Assigned
Rights to the payment of money and
the delivery of goods are the most
common types of rights that are
assigned.
Understanding Business and Personal Law
Transfer of Contracts and Remedies for Breach
Section 12.1 The Transfer of Contractual
Rights and Duties
What Rights May Be Assigned
Generally, no special form is
required to make an assignment.
Any words that clearly indicate a
person’s intent are sufficient.
Understanding Business and Personal Law
Transfer of Contracts and Remedies for Breach
Section 12.1 The Transfer of Contractual
Rights and Duties
Can rights be assigned orally?
Should they be?
Why or why not?
Understanding Business and Personal Law
Transfer of Contracts and Remedies for Breach
Section 12.1 The Transfer of Contractual
Rights and Duties
ANSWER
They can be assigned orally, but an
oral assignment can be difficult to
prove.
Understanding Business and Personal Law
Transfer of Contracts and Remedies for Breach
Section 12.1 The Transfer of Contractual
Rights and Duties
Pre-Learning Question
What do you think delegation means
with respect to contracts?
Understanding Business and Personal Law
Transfer of Contracts and Remedies for Breach
Section 12.1 The Transfer of Contractual
Rights and Duties
Transfer of Duties
The transfer of a duty is called a
delegation and should not be
confused with an assignment, which is
a transfer of rights.
Understanding Business and Personal Law
Transfer of Contracts and Remedies for Breach
Section 12.1 The Transfer of Contractual
Rights and Duties
Transfer of Duties
In a transfer of duties, a party to a
contract delegates another person to
perform the obligation in his or her
place.
Understanding Business and Personal Law
Transfer of Contracts and Remedies for Breach
Section 12.1 The Transfer of Contractual
Rights and Duties
Transfer of Duties
Although the performance of an
obligation may be delegated, the
responsibility for it may not.
Subcontracting is a form of
delegating.
Understanding Business and Personal Law
Transfer of Contracts and Remedies for Breach
Section 12.1 The Transfer of Contractual
Rights and Duties
Transfer of Duties
The following duties may not be
delegated:
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
Transfer of Contracts and Remedies for Breach
12.1 12.1 The Transfer of Contractual
Section
Rights and Duties
Transfer of Duties
Ivan has a
contract to print
the PTA
newsletter but
cannot do it.
Ivan transfers
his duty to
ABC Press.
ABC Press
prints the PTA
newsletter.
Ivan is still
liable for the
terms of the
contract.
The PTA pays
Ivan and Ivan
pays ABC
Press.
Understanding Business and Personal Law
Transfer of Contracts and Remedies for Breach
Section 12.1 The Transfer of Contractual
Rights and Duties
What is the difference between an
assignment and a delegation?
Understanding Business and Personal Law
Transfer of Contracts and Remedies for Breach
Section 12.1 The Transfer of Contractual
Rights and Duties
ANSWER
An assignment is a transfer of rights; a
delegation is a transfer of duties.
Understanding Business and Personal Law
Transfer of Contracts and Remedies for Breach
Section 12.1 The Transfer of Contractual
Rights and Duties
Pre-Learning Question
What do you think a novation is?
Understanding Business and Personal Law
Transfer of Contracts and Remedies for Breach
Section 12.1 The Transfer of Contractual
Rights and Duties
Novation
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.
Understanding Business and Personal Law
Transfer of Contracts and Remedies for Breach
Section 12.1 The Transfer of Contractual
Rights and Duties
Novation
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.
Understanding Business and Personal Law
Transfer of Contracts and Remedies for Breach
Section 12.1 The Transfer of Contractual
Rights and Duties
Novation
To be effective, substitution requires
the consent of all of the parties
involved.
Understanding Business and Personal Law
Transfer of Contracts and Remedies for Breach
Section 12.1 The Transfer of Contractual
Rights and Duties
Why can’t the performance of the
work of teachers, writers, or artists be
delegated to others?
Understanding Business and Personal Law
Transfer of Contracts and Remedies for Breach
Section 12.1 The Transfer of Contractual
Rights and Duties
ANSWER
Such persons are selected to perform
their services because of their
particular skill or talent.
Understanding Business and Personal Law
Transfer of Contracts and Remedies for Breach
Section 12.1 The Transfer of Contractual
Rights and Duties
Pre-Learning Question
Why is it important to understand the
relationship between the parties to a
contract?
Understanding Business and Personal Law
Transfer of Contracts and Remedies for Breach
Section 12.1 The Transfer of Contractual
Rights and Duties
Third Parties
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.
Understanding Business and Personal Law
Transfer of Contracts and Remedies for Breach
Section 12.1 The Transfer of Contractual
Rights and Duties
Third Parties
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.
Understanding Business and Personal Law
Transfer of Contracts and Remedies for Breach
Section 12.1 The Transfer of Contractual
Rights and Duties
Third Parties
A person who is not a party to a
contract but still benefits from the
contract is called a third-party
beneficiary.
Understanding Business and Personal Law
Transfer of Contracts and Remedies for Breach
Section 12.1 The Transfer of Contractual
Rights and Duties
Section 12.1 Assessment
Reviewing What You Learned
1. What is an assignment?
Understanding Business and Personal Law
Transfer of Contracts and Remedies for Breach
Section 12.1 The Transfer of Contractual
Rights and Duties
Section 12.1 Assessment
Reviewing What You Learned
Answer
The transfer of rights under a contract.
Understanding Business and Personal Law
Transfer of Contracts and Remedies for Breach
Section 12.1 The Transfer of Contractual
Rights and Duties
Section 12.1 Assessment
Reviewing What You Learned
2. What contractual rights can be
assigned?
Understanding Business and Personal Law
Transfer of Contracts and Remedies for Breach
Section 12.1 The Transfer of Contractual
Rights and Duties
Section 12.1 Assessment
Reviewing What You Learned
Answer
Most contract rights can be assigned
unless the assignment changes the
obligations of the other party to the contract
in an important way.
Understanding Business and Personal Law
Transfer of Contracts and Remedies for Breach
Section 12.1 The Transfer of Contractual
Rights and Duties
Section 12.1 Assessment
Reviewing What You Learned
3. What is a delegation?
Understanding Business and Personal Law
Transfer of Contracts and Remedies for Breach
Section 12.1 The Transfer of Contractual
Rights and Duties
Section 12.1 Assessment
Reviewing What You Learned
Answer
The transfer of a contractual duty.
Understanding Business and Personal Law
Transfer of Contracts and Remedies for Breach
Section 12.1 The Transfer of Contractual
Rights and Duties
Section 12.1 Assessment
Reviewing What You Learned
4. What is a novation?
Understanding Business and Personal Law
Transfer of Contracts and Remedies for Breach
Section 12.1 The Transfer of Contractual
Rights and Duties
Section 12.1 Assessment
Reviewing What You Learned
Answer
An agreement whereby an original party to
a contract is replaced by a new party.
Understanding Business and Personal Law
Transfer of Contracts and Remedies for Breach
Section 12.1 The Transfer of Contractual
Rights and Duties
Section 12.1 Assessment
Reviewing What You Learned
5. What is privity of contract?
Understanding Business and Personal Law
Transfer of Contracts and Remedies for Breach
Section 12.1 The Transfer of Contractual
Rights and Duties
Section 12.1 Assessment
Reviewing What You Learned
Answer
The relationship between the parties to
a contract.
Understanding Business and Personal Law
Transfer of Contracts and Remedies for Breach
Section 12.1 The Transfer of Contractual
Rights and Duties
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
Transfer of Contracts and Remedies for Breach
Section 12.1 The Transfer of Contractual
Rights and Duties
Section 12.1 Assessment
Critical Thinking Activity Answer
Third Parties
Answers will vary but should recognize the
importance of third-party beneficiaries to
the contract.
Understanding Business and Personal Law
Transfer of Contracts and Remedies for Breach
Section 12.1 The Transfer of Contractual
Rights and Duties
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
Transfer of Contracts and Remedies for Breach
Section 12.1 The Transfer of Contractual
Rights and Duties
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
Transfer of Contracts and Remedies for Breach
Section 12.1 The Transfer of Contractual
Rights and Duties
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
Transfer of Contracts and Remedies for Breach
Section 12.1 The Transfer of Contractual
Rights and Duties
Section 1.1 Assessment
Legal Skills in Action Answer
Privity of Contract
Discussions will vary but should
concentrate on whether or not your brother
has privity of contract or is a true third-party
beneficiary.
Understanding Business and Personal Law
Transfer of Contracts and Remedies for Breach
End of Section 12.1
The Transfer of Contractual Rights
and Duties