Deck 13: Third Party Rights and Discharge

Question 1

Third Party Beneficiaries.
Wilken owes Rivera $2,000. Howie promises Wilken that he will pay Rivera the $2,000 in return for Wilken's promise to give Howie's children guitar lessons. Is Rivera an intended beneficiary of the Howie-Wilken contract? Explain.

Answer 1

Third party beneficiaries:
An individual for whose sake an agreement is made but still who is not a part of the contract which is formed is the third party beneficiary. Such a beneficiary has the right to take legal action in case there is any violation in the contract. In the present situation Mr H makes a promise to pay the debt that Mr W has contracted to Ms R. So Ms R is the intended beneficiary. She can be known as the creditor beneficiary.

Question 2

Eagle Company contracts to build a house for Frank. The contract states that "any assignment of this contract renders the contract void." After Eagle builds the house, but before Frank pays, Eagle assigns its right to payment to Good Credit Company. Can Good Credit enforce the contract against Frank? Why or why not?

Answer 2

In this bilateral agreement Company E decides to assign the right to payment to Company GC whereas the contract clearly mentions that the right cannot be assigned otherwise the contract is rendered void. This rule has several exceptions (for example the right to negotiable funds) however the present cast cannot be classified as an exception. So in this case Company GC cannot force the contract against Mr F as Company E did not have the right to assign the right to payment to Company GC as per the contract.

Question 3

Answers to the even-numbered questions in this For Review section can be found in Appendix F at the end of this text.
What is an assignment? What is the difference between an assignment and a delegation?

Answer 3

The difference between an assignment and a delegation:
In a contract where there are two parties and both have equal rights and duties. There is requirement by one party for the other to complete a specific task and the other party has a duty to complete the task. In some cases one of the parties might want to transfer her or his legal rights to some other person under the contract. The transferring of the rights by one person to another person is known as the assignment. The importance of the assignment can be judged by the fact that it is used intensively in the financing of the businesses. Therefore when the rights are transferred by one party to another person it is known as assignment, just similarly to this even duties can be transferred. Generally duties are not assigned they are said to be delegated. Therefore delegation of duties can be referred to as the transfer of duties either in part or completely to a third person.

Question 4

Val's Foods signs a contract to buy 1,500 pounds of basil from Sun Farms, a small organic herb grower, as long as an independent organization inspects the crop and certifies that it contains no pesticide or herbicide residue. Val's has a contract with several restaurant chains to supply pesto and intends to use Sun Farms' basil in the pesto to fulfill these contracts. When Sun Farms is preparing to harvest the basil, an unexpected hailstorm destroys half the crop. Sun Farms attempts to purchase additional basil from other farms, but it is late in the season and the price is twice the normal market price. Sun Farms is too small to absorb this cost and immediately notifies Val's that it will not fulfill the contract. Using the information presented in the chapter, answer the following questions.
1. Suppose that Sun Farms supplies the basil that survived the storm but the basil does not pass the chemical-residue inspection. Which concept discussed in the chapter might allow Val's to refuse to perform the contract in this situation?
2. Under which legal theory or theories might Sun Farms claim that its obligation under the contract has been discharged by operation of law? Discuss fully.
3. Suppose that Sun Farms contacts every basil grower in the country and buys the last remaining chemical-free basil anywhere. Nevertheless, Sun Farms is able to ship only 1,475 pounds to Val's. Would this fulfill Sun Farms' obligations to Val's? Why or why not?
4. Now suppose that Sun Farms sells its operations to Happy Valley Farms. As part of the sale, all three parties agree that Happy Valley will provide the basil as stated under the original contract. What is this type of agreement called?

Question 5

Question with Sample Answer-Assignment.
Aron, a college student, signs a one-year lease agreement that runs from September 1 to August 31. The lease agreement specifies that the lease cannot be assigned without the landlord's consent. In late May, Aron decides not to go to summer school and assigns the balance of the lease (three months) to a close friend, Erica. The landlord objects to the assignment and denies Erica access to the apartment. Aron claims that Erica is financially sound and should be allowed the full rights and privileges of an assignee. Discuss fully whether the landlord or Aron is correct.

Question 6

Ready Foods contracts to buy two hundred carloads of frozen pizzas from Speedy Distributors. Before Ready or Speedy starts performing, can the parties call off the deal? What if Speedy has already shipped the pizzas? Explain your answers.

Question 7

Answers to the even-numbered questions in this For Review section can be found in Appendix F at the end of this text.
In what situations is the delegation of duties prohibited?

Question 8

Spotlight on Drug Testing-Third Party Beneficiaries.
Bath Iron Works (BIW) offered a job to Thomas Devine, contingent on Devine's passing a drug test. The testing was conducted by NorDx, a subcontractor of Roche Biomendical Laboratories. When NorDx found that Devine's urinalysis showed the presence of opiates, a result confirmed by Roche, BIW refused to offer Devine permanent employment. Devine sued Roche, claiming that the ingestion of poppy seeds can lead to a positive result and that he tested positive for opiates only because of his daily consumption of poppy seed muffins. Devine argued that he was a third party beneficiary of the contract between his employer (BIW) and NorDx (Roche). Is Devine an intended third party beneficiary of the BIW-NorDx contract? Why or why not? Do drug-testing labs have a duty to the employees to exercise reasonable care in conducting the tests? Explain. [Devine v. Roche Biomedical Laboratories, 659 A.2d 868 (Me. 1995)]

Question 9

Answers to the even-numbered questions in this For Review section can be found in Appendix F at the end of this text.
What factors indicate that a third party beneficiary is an intended beneficiary?

Question 10

Assignments.
Senna Hills, Ltd., granted Southern Union Co. the right to distribute propane in a residential subdivision developed by Senna in exchange for a fee. Under their agreement, Senna's "right to receive a Fee shall continue for so long as the Propane System is owned by Southern Union." The agreement also allowed Southern Union to assign the distribution right. Later, Sonterra Energy Corp. bought the distribution system and was assigned the distribution right, but did not pay the fee to Senna. Did Sonterra breach the propane service agreement? Why or why not? [Senna Hills, Ltd. v. Sonterra Energy Corp., __ S.W.3d __ (Tex.App.-Austin 2010)]

Question 11

Answers to the even-numbered questions in this For Review section can be found in Appendix F at the end of this text.
How are most contracts discharged?

Question 12

Duties That Cannot Be Delegated.
Bruce Albea Contracting, Inc., the contractor on a highway project, subcontracted the asphalt work to APAC-Southeast, Inc. Their contract prohibited any delegation without Albea's consent. In midproject, APAC delegated its duties to Matthews Contracting Co. Although Albea allowed Matthews to finish the work, Albea did not pay APAC for its work on the project. Albea argued that APAC had violated the antidelegation clause, rendering their contact void. Is Albea correct? Explain. [Western Surety Co. v. APAC-Southeast, Inc., 302 Ga.App. 654, 691 S.E.2d 234 (2010)]

Question 13

Answers to the even-numbered questions in this For Review section can be found in Appendix F at the end of this text.
What is a contractual condition, and how might a condition affect contractual obligations?

Question 14

Case Problem with Sample Answer-Conditions of Performance.
James Maciel leased an apartment in Regent Village, a university-owned housing facility for Regent University (RU) students in Virginia Beach, Virginia. The lease ran until the end of the fall semester. Maciel had an option to renew the lease semester by semester as long as he maintained his status as an RU student. When Maciel completed his coursework for the spring semester, he told RU that he intended to withdraw. The university told him that he could stay in the apartment until May 31, the final day of the spring semester. Maciel asked for two additional weeks, but the university denied the request. On June 1, RU changed the locks on the apartment. Maciel entered through a window and e-mailed the university that he planned to stay "for another one or two weeks." When he was charged with trespassing, Maciel argued that he had "legal authority" to occupy the apartment. Was Maciel correct? Explain. [Maciel v. Commonwealth, __ S.E.2d __ (Va.App. 2011)

Question 15

Notice of Assignment.
Arnold Kazery was the owner of a hotel leased to George Wilkinson. The lease included renewal options of ten years each. When Arnold transferred his interest in the property to his son Sam, no one notified Wilkinson. For the next twenty years, Wilkinson paid the rent to Arnold and renewed the lease by notice to Arnold. When Wilkinson wrote to Arnold that he was exercising another option to renew, Sam filed a suit against him, claiming that the lease was void. Did Wilkinson give proper notice to renew? Discuss. [Kazery v. Wilkinson, 52 So.3d 1270 (Miss.App. 2011)]

Question 16

A Question of Ethics-Assignment and Delegation.
Premier Building Development, Inc., entered a listing agreement giving Sunset Gold Realty, LLC, the exclusive right to find a tenant for some commercial property. The terms of the listing agreement stated that it was binding on both parties and "their * * * assigns." Premier Building did not own the property at the time, but had the option to purchase it. To secure financing for the project, Premier Building established a new company called Cobblestone Associates. Premier Building then bought the property and conveyed it to Cobblestone the same day. Meanwhile, Sunset Gold found a tenant for the property, and Cobblestone became the landlord. Cobblestone acknowledged its obligation to pay Sunset Gold for finding a tenant, but it later refused to pay Sunset Gold's commission. Sunset Gold then sued Premier Building and Cobblestone for breach of the listing agreement. [Sunset Gold Realty, LLC v. Premier Building Development, Inc., 133 Conn.App. 445, 36 A.3d 243 (2012)]
1. Is Premier Building relieved of its contractual duties if it assigned the contract to Cobblestone? Why or why not?
2. Given that Sunset Gold performed its obligations under the listing agreement, did Cobblestone behave unethically in refusing to pay Sunset Gold's commission? Why or why not?

Question 17

Critical Legal Thinking.
The concept of substantial performance permits a party to be discharged from a contract even though the party has not fully performed her or his obligations according to the contract's terms. Is this fair? Why or why not? What policy interests are at issue here?

Question 18

Business Law Critical Thinking Group Assignment.
ABC Clothiers, Inc., has a contract with John Taylor, owner of Taylor Sons, a retailer, to deliver one thousand summer suits to Taylor's place of business on or before May 1. On April 1, John receives a letter from ABC informing him that ABC will not be able to make the delivery as scheduled. John is very upset, as he had planned a big ad campaign.
1. The first group will discuss whether John Taylor can immediately sue ABC for breach of contract (on April 2).
2. Now suppose that John Taylor's son, Tom, tells his father that they cannot file a lawsuit until ABC actually fails to deliver the suits on May 1. The second group will decide who is correct, John or Tom.
3. Assume that Taylor Sons can either file immediately or wait until ABC fails to deliver the goods. The third group will evaluate which course of action is better, given the circumstances.