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A Handbook of Business Contracts

A Handbook of Business Contracts

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Published by: SAtAN on Nov 03, 2008
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06/23/2013

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Breach of condition is breach of contract. Even though certain conditions of a contract may not require
performance to start until a future date, parties that agree to the conditional contract cannot refuse to
perform the future condition without being in breach of contract.

Anticipatory Repudiation: I Won’t Perform

Anticipatory Repudiation is the right of one party to a contract to sue for breach before the date set for
performance when the other party conveys his or her intention not to perform. For example, I hire you
to cut my grass next Sunday and agree to pay you $20. On Saturday, I tell you that I won’t pay you if
you cut my grass. Since my future duty was to pay you $20, and I have clearly stated that I won’t pay
you that money, I have breached by anticipatory repudiation. You can now sue me for the $20.

Voluntary Disablement: I Can’t Perform

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Breach by voluntary disablement is any voluntary act by a party with a future duty that results in that
party’s future ability to perform. Breach by voluntary disablement means you cannot perform. For
example, if I agree to sell you my house but then sell it to another person, I would be in breach on the
day I sold that the house to that third party. You could bring an immediate cause of action and all
conditions would be excused. The court would accelerate my duty to convey the house to you.
However, this specific performance (forcing me to sell you the house) would not be available if the
new buyer bought the house in good faith (without knowledge of our agreement). In that case, you
would have no choice but to seek monetary damages and sue me for breach by voluntary disablement.

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TThhiirrdd PPaarrttiieess

No man was ever endowed with a right without being
at the same time saddled with a responsibility.

- Gerald W. Johnson

A third party is any person or party who was neither the Offeror nor the Offeree when the contract was
formed, but who may have rights under that contract. There are three types of third parties:
Intended beneficiary—a third party who is specifically referred to in the terms of the contract.
Assignee of rights—a third party who, although not referred to in the original agreement, was
subsequently transferred a promise by one of the original parties.
Delegate of duties—a third party who assumes the duties of one of the original parties to the
agreement.

Intended Beneficiaries

A third-party beneficiary contract is a contract between two or more parties, the performance of which
is intended to directly benefit a third party. This intention gives the intended third-party beneficiary a
right to file suit for breach of contract by any of the original contracting parties, if the third-party’s
rights have vested.

Rights vest if and when the third party has knowledge of the agreement and he or she: (1) changes
position in reliance upon the agreement; (2) files a complaint initiating a cause of action against the
Promisor; or, (3) expressly consents to receive the performance of the Promisor at the request of either
the Promisor or the Promisee. The third party beneficiary cannot prevent changes to the agreement
unless his rights have vested. If his or her rights have not vested, the Promisor and Promisee may
rescind or modify the contract.

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