Contract Law Lecture Three (of 3) (Part 2) – Third-Party Rights

Law School

Contract Law: Third-Party Rights and UCC Distinctions

This lecture series covers contract law, including formation, defenses, performance, breach, and remedies. The final session focuses on third-party rights and Uniform Commercial Code (UCC) distinctions.

Third-Party Rights

Third-Party Beneficiaries: A third-party beneficiary benefits from a contract they were not a part of.

Intended Beneficiary: The contracting parties intended for this person to benefit, giving them the right to enforce the contract (e.g., a life insurance beneficiary).

Incidental Beneficiary: Benefits indirectly, but has no right to enforce the contract (e.g., a business benefiting from a nearby factory construction).

Beneficiary rights vest when they know about and rely on the contract, assent to it, or when the contract specifies. Once vested, the original parties might not be able to modify the contract without consent of the beneficiary.

Assignment and Delegation: Transfer of contract rights or duties.

Assignment of Rights: Transfer of a contractual right to a new party (assignee). Some contracts restrict assignments. Once assigned, the assignee can enforce the contract.

Delegation of Duties: Transfer of a contractual duty to another person (delegatee). Cannot be done if the duty requires special skill or personal trust. The delegator remains liable unless a "novation" releases them.

UCC vs. Common Law

Modification Rules:

Common Law: Requires new consideration to modify a contract.

UCC: No new consideration needed for good faith modifications to contracts for the sale of goods.

Firm Offers:

Common Law: Offers can be revoked before acceptance unless there’s an option contract.

UCC: A merchant’s written offer to buy or sell goods is irrevocable for the stated time or up to three months without consideration.

Warranties and Risk of Loss:

Warranties: The UCC outlines express and implied warranties for the sale of goods, while common law typically doesn't.

Risk of Loss: Under the UCC the risk of loss for goods depends on shipping terms and whether the seller is a merchant.

Example Scenario:

A chef contracts to buy a specialized oven, with a written firm offer. She assigns her discount to a partner and delegates the pickup to a colleague.

Firm Offer: The offer is irrevocable under the UCC due to it being a signed offer from a merchant.

Assignment: The assignment is likely valid unless it burdens the other party.

Delegation: Delegation of the pickup is likely permissible unless it is explicitly stated that the buyer must do it personally.

Exam Tips

Start by confirming a valid contract exists.

Determine if the UCC or common law applies.

Systematically work through issues like formation, breach, and third parties.

Use the IRAC method (Issue, Rule, Application, Conclusion).

Consider remedies beyond monetary damages.

Pay attention to details such as the mailbox rule and the statute of frauds.

Practice with fact patterns.

Conclusion

Contract law involves various elements such as formation, performance, breach, remedies, third-party rights, and distinctions between the UCC and common law. A systematic approach and attention to detail are crucial for success. Remember to apply the law to specific facts, and practice with hypotheticals.