Contracts, Fall 2008

1. Contracts, Fall 2008 Class 29

2. Third Party Beneficiaries • Intended Beneficiary • By promisor? • By promisee? • By both? • Incidental Beneficiary Note: see special rules for gov’t contracts • Need terms of promise to provide for 3d party beneficiary liability OR • [public policy rationale]

3. Assignment of Rights and Delegation of Duties • Assignment • Default is assignability • Exceptions: • If assignment materially changes duty of obligor or risk to obligor, etc. • If statute or public policy forbids • If contract forbids • (and even if contract forbids, both common law and UCC sometimes allow, esp. as to assignment of rights to get $). • Assignor no longer has right once she’s assigned it

4. Delegation of Duties • Can delegate duties unless • contract so prohibits or • obligee has stake in performance of duty by original obligor, • Original obligor remains liable, unless contract provides otherwise.

5. Hypothetical If the government pays eminent Dr. AntiCancer, who, as his name suggests, is an anticancer researcher, to fund a lab and research and Dr. AntiCancer then renegs, can cancer patients sue Dr. AntiCancer? How about people with a genetic predisposition to getting cancer? What if it’s a particular type of cancer that Dr. AntiCancer has expertise working on, and there are only 12 people who have it?

6. Discussion • The more identifiable the beneficiaries are, the more straightforward the relationship between what was contracted for and the ‘damage’ that results from the breach, etc., the more likely a P will have a suit as an intended third party beneficiary.

7. Hypothetical • The government makes a deal with me, a shady (government doesn’t know that) ice-cream vendor, who’s supposedly going to be selling kids in poor neighborhoods high-nutrition ice cream at a very low price. In fact, I sell them Cub Foods generic brand at very high prices. The government doesn’t seem inclined to do anything about this – can a kid from a poor neighborhood who fails at school because she’s lacking in the proper nutrition sue the vendor?

8. Discussion • If the neighborhoods (or better yet, particular blocks) are specified, maybe ages of children are specified, and if there is some established connection between better nutrition of the type provided by the ice cream and performance in school, a potential P has a better case, although how would we quantify the value of the better performance?

9. Hypotheticals and Discussion • I owe Marge Simpson $1 million; she owes Smithers $1 million. If she and I agree (in a contract) that I’ll pay him instead of her, can he enforce the promise? • Straightforward creditor beneficiary. Answer is yes • (Smithers and I agree (in a contract) that Marge should give us a million dollars, that we’ll use to start a cat-grooming business. Can anybody enforce?) • No. Marge can’t be given obligations without her consent • My friend Larry takes his dog Lula to the dog training school; the training doesn’t work so well, though, and Lula bites me the next day. Can I sue the training school? • Even if Larry’s contract with the school guarantees Lula won’t bite, I’m too distant to be a third party beneficiary. The school wouldn’t reasonably be seen to have intended people Lula might encounter to be third party beneficiaries.

10. Hypotheticals and Discussion • I hire Maid A to clean my apartment. Maid A sends over Maid B instead. Both have gone to same ‘maid training school;’ in fact, they’re identical twins. Can I refuse to let maid B do the job and treat Maid A as being in breach? What if my contract with Maid A provides that the duty is non-delegable? • Should be delegable unless contract provides otherwise. No stake in having job done by A rather than identical B. • Maid B does a crummy job. Can I sue Maid A? • Yes; delegation of duty doesn’t remove delegator’s obligation to original obligee.

11. Hypotheticals and Discussion • I’m a partner in a partnership. My partnership interest doesn’t carry voting rights, but it does entitle me to monthly checks. I want to assign my right to receive those checks to somebody else; the partnership agreement prohibits me from doing so without the approval of the general partner, which approval can be withheld at the general partner’s discretion. What result? • General policy against restrictions on assignability may permit assignability notwithstanding agreement restriction. • I assign the right to Smith to get the partnership distributions; the partnership is required to pay distributions and doesn’t do so. Can I sue the partnership? • Assignor should no longer have a right to get the distributions once he’s assigned them.

12. Hypothetical and Discussion • I run a radio station and hire Madonna to come sing the opening anthem. On the day she’s supposed to come, and sends over her ex-husband Sean Penn instead with a note that says “Sean is really a much better singer than I am…you won’t be sorry if you use him instead of me. What result? • She can’t delegate to Penn. I have a stake in the duty being performed by her.

13. Hypotheticals and Discussion • I go too often to Filene’s basement and buy reduced-price turtleneck sweaters. I charge them on my Filene’s charge card, and presently am in arrears for $75,000. Can I assign 100% of my future paychecks to Filene’s until the debt is paid in full? • No: public policy prohibits 100% assignment • I’m suing Petco for advising me that at the age of 7, my cat needed ‘geriatric’ cat food. I told her about this, and she was so traumatized that the trauma itself will clearly shorten her lifespan appreciably, according to the vet. My lawsuit is a big winner, I’m told by all my lawyers, but I need money now. Can I sell to an investor the rights to my lawsuit winnings? • No problem in selling right if I’ve already gotten a judgment. More questionable prior to the pursuit of the suit, given sensitivity to separation of financial incentive for suit and real party in interest.