I.

Breach; Anticipatory Repudiation; Intro to Remedies

a. K remedies: a quick review
i. Expectation: put promisee in as good as position as if the K had been performed
1. the benefit of the bargain
2. lost profits + reliance = expectation
ii. Reliance: put promisee in as good a position as if the K had not been made
iii. Restitution: restore any benefit that promisee has conferred on the other party
1. Extent to which property has been increased
And, rarely
iv. Specific performance: require promisor to fulfill his promise
v. Punitive damages rarely available. Damages are meant to compensate, not the
punish the breaching party
b. Rest. 2d § 351 – Consequential Damages
i. Damages not recoverable for loss that breaching party did not have reason to
foresee as probable result of breach when the K was made
ii. Foreseeable:
1. Ordinary course of events
2. Special circs that the breaching party had reason to know
iii. If you could have foreseen it, you could have done something to protect yourself!
Like let the other party know what’s up and make special circumstances
1. Puts a burden on the person to say something
iv. Can only recover for things that could have been foreseen – what damages are
the consequence/result of the breach?
c. Efficient Breach 1: Before

d. Efficient Breach 2: After Buyer gets what they

wanted – their
expectation measure

2 of the parties are

better, no one is worse

Compensatory damages
 e. Efficient Breach 3: An Alternative Analysis?

f. The Expectation Measure: Two Formulas

i. Lost profit plus reliance
1. Value lost by reason of the breach + any expenditures made in carrying
out one’s obligations under the K
ii. K price less cost avoided
1. K price – costs saved in not having to carry out one’s obligations under
the K
iii. These should come out to be the same thing.

II. Damages
a. Real Property Ks (Buyer’s Breach)
i. Seller’s standard remedy: (K price) – (FMV)
ii. Alternative remedy: (K price) – (foreclosure sale price)
1. Where standard remedy would not fully compensate seller
2. E.g. American Mechanical (B knew that foreclosure sale would be
likely)
iii. -Seller has duty to mitigate damages (general rule)
iv. American Mechanical Corp v. Union Machine Co.
1. P sells land and equipment to D. P in bad financial shape, and D knows
it. P under pressure from the bank. K price for the land is 135K – then,
the bank forecloses. Foreclosure sale price is 90K. Seller has lost 45K
because of the breach and difference in value
2. Assigned to help learn the expectation measure of damages
3. Damages were foreseeable to the buyer – Hadley v. Baxendale!
4. Standard measure is not what the seller gets – instead, gets an alternative
rule, an exception. Exception used when standard remedy doesn’t
compensate
5. -There was a duty to mitigate, but nothing the seller could do.
a. Was unable to secure another purchaser. The bank moved
quickly to take possession, and the property was not of the kind
that there would be a ready market. Couldn’t avoid foreclosure
b. Construction Ks (Breach by Homeowner)
i. Contractor’s standard remedy:
1. (K price) – (cost of completion) – (payments received)
 ii. New Era Homes Corp. v. Engelbert Forster
1. NEH contracted to make renovations to D’s home. 150 for signing the K,
1K for delivery and starting work, 1.5K after carpentry and plumbing,
and 425 after the job was completed. D makes first two, but after NEH
does step 3, D refuses to pay. D admits breach, but says you’re only
entitled to would it could show it actually lost, not the 1.5K
2. P wants it to be divisible, but it’s not.
a. Divisibility depends on intention/interpretation
b. Here, this K had progress payments, they weren’t looking at it as
pairs of part performances
c. The total price was consideration for the whole work, just
scheduled payments convenient to the parties based on the words
the parties used
d. Why would signing your name be worth $425? Would be writing
the K for them if these were separate deals
c. UCC § 1-305(1) – Remedies to be Liberally Administered
i. Remedies “shall be liberally administered to the end that the aggrieved party may
be put in as good a position as if the other party had fully performed but neither
consequential or special nor penal damages may be had except as specifically
provided in this Act or by other rule of law.”
1. First part – trying to compensate. That’s the goal
2. Second part – seller doesn’t get consequential damages, but the buyer
can
3. What this means – the seller could resell and get damages under 2-708,
but only to the extent that he is fully compensated! The damages
provisions are cumulative
d. UCC § 2-703 – Seller’s Remedies in General (outlines seller’s remedies)
i. Where the buyer wrongfully rejects or revokes acceptance of goods or fails to
make a payment due on or before delivery or repudiates . . . the aggrieved seller
may: (can elect to do any of these things, resell and get damages)
1. (a) withhold delivery of such goods;
2. (d) resell and recover damages (as provided in § 2-706);
3. (e) recover damages for non-acceptance (§ 2-708) or in a proper case the
price (§ 2-709);
4. (f) cancel.
e. UCC § 2-706(1) – Seller’s Resale
i. The seller may resell the goods to another buyer.
ii. Where the resale is made in good faith and in a commercially reasonable manner,
the seller may recover
1. The difference between the resale price and the contract price
a. (K price) – (resale price)
2. Together with any incidental damages
3. But less expenses saved in consequence of the buyer’s breach
iii. Assumption: (K price) > (resale price) – if not, would not be consistent with § 1-
305(1) which only intends to compensate a party. Also, market probably went
down and that’s why the buyer is breaching
iv. Most of the time, the seller will resell. It’s the normal, rational thing to do
f. UCC § 2-708(1) – Seller’s Damages for Non-acceptance or Repudiation
i. Subject to 2-708 subsection (2) [re lost profits]
ii. The measure of damages for non-acceptance or repudiation by the buyer is
1. The difference between the market price at the time and place for tender
a. (K price) – (mkt price at time and place for tender)
i. Tender = delivery
2. Together with any incidental damages (provided in 2-710)
3. But less expenses saved in consequence of the buyer’s breach
iii. Assumption: (K price) > (mkt price)
1. The market has probably dropped, that’s why the buyer is breaching
iv. Implicit mitigation requirement
g. UCC § 2-709(1)(b) – Action for the Price
i. (1) When the buyer fails to pay the price as it becomes due, the seller may
recover the price
1. (b) of goods identified to the contract
a. If the seller is unable after reasonable effort to resell them at a
reasonable price OR
b. The circumstances reasonably indicate that such effort will be
unavailing
2. Seller may also recover incidental damages under 2-710
h. Hypo
i. Papa Mo sells sandals. Ks with a retail buyer to sell 200 sandals at $6 a pair for
1.2K total price payment on delivery. Mkt value is 1.1K. Buyer rejects because
the market falls to 1K.
ii. Can he resell? Yes.
iii. Can he sue for damages? Sure.
iv. What if the sandals are specially manufactured? Can get 2-709 price.
i. UCC § 2-708(2) – Profit Remedy (Lost Volume Seller)
i. If the measure of damages under 2-708(1) are inadequate to put the seller in as
good a position as performance would have done, then the measure of damages is
the profit (including reasonable overhead) which the seller would have made
from full performance by the buyer
1. Together with any incidental damages (2-710)
2. Less payments received (of resale?)
ii. Profit = (K price) – (cost to S)
iii. S could potentially keep the profits of the resale and recover the profit that would
have been made on the first sale?
j. The Lost Volume Seller
i. Typical sale:
1. Limited supply; S cannot sell cars both to B1 and B2
2. S could not have resold to B2 if B1 had not breached
ii. Lost volume seller:
1. Unlimited supply; S has capacity to sell cars both to B1 and B2 (and to
anybody else who wants one)
2. If B1 had not breached, S could have sold cars to both of them
k. Employment K – Breach by Employer
i. Employee’s recovery =
 1. salary agreed for the period of service, minus
2. Amount that employer affirmatively proves employee has earned or with
reasonable effort might have earned from other employment
ii. Comparable or substantially similar employment?
iii. Shirley Maclaine Parker v. Twentieth Century-Fox Film Corp.
1. Employer K’d to pay employee 750K to star in a musical called Bloomer
Girl. Studio decided not to make it, and offered her a starring role in a
Western, Big Country, Big Man, for the same money. She declined and
sued for her OG money
2. Here, employer could not show that the other employment was
comparable, or substantially similar, to that of which the employee has
been deprived
3. Big Country was “different or inferior” to Bloomer Girl, the studio’s
mitigation defense was rejected
iv. Implicit mitigation requirement?
l. Construction K – Breach by Contractor
i. Standard measure: cost to complete or repair the faulty construction
ii. Alternative measure: diminution in mkt value of the property
1. Where the contractor has substantially performed & completion/repair
damages would be grossly disproportionate!
a. Jacob and Youngs v. Kent!! And Peevyhouse
iii. Rivers v. Deane
1. Deane (D) was contracted with to construct an addition to P’s home. D
performed faulty construction that could only be corrected with
substantial additional work
2. Cardozo’s alternative rule inappropriate here, because the D deviated
seriously from the K. Wasn’t just a slight variation
m. Peevyhouse v. Garland Coal & Mining Co.
i. Ma and Pa Peevyhouse owned a farm w/ coal deposits. The leased land to D to
extract coal and perform strip mining. Also, upon completion of the work, they
would have to perform certain restorative and remedial actions to the farm
property, which they failed to do.
ii. Leaving their property with a big hole in it only decreased the property value by
$300, even though it would cost 25K-29K to fix it.
1. This cost is totally disproportionate! Unlikely that a reasonable
landowner would spend 29K to increase the value of a piece of land by
$300
2. Damages would be so excessive here, would cause unreasonable
economic waste
iii. The centerpiece of the K was digging the hole and extracting coal, not to fix the
property back up
1. The breach here was only incidental!
2. Where the K provision breach was merely incidental to the main purpose
in view [to recover coal], and where the economic benefit which would
result to lessor by full performance is grossly disproportionate to the cost
of performance, the damages which lessor may recover are limited to the
 diminution in value resulting to the premises because of the non-
performance
n. American Standard, Inc. v. Harold Schectman
i. American Standard owned property that had been the site of various industrial
operations. They decided to sell the property for 275K. K’d with D to demolish
structures, remove equipment, and grade the property as specified. D failed to
complete the work to grade the property
ii. D argued that, at most, we should only have to pay $3K, that’s what the value of
the property diminished by b/c P sold it for only 3K less than FMV. P gets a jury
verdict for 90K, the cost to complete the grading work
iii. Even though there was a big difference, the cost of completion in the correct
measure of damages.
iv. (1) Contrasted from Peevyhouse – not an incidental breach in the way filling the
hole was. No substantial performance here, not incidental to their goal of selling
the property
v. (2) This was a willful breach so not an innocent transgressor!
o. UCC § 2-711(1) – Buyer’s Remedies in General
i. Where the seller fails to make delivery or repudiates, or the buyer rightfully
rejects the goods or justifiably revokes acceptance . . . the buyer may cancel and
1. (a) “cover” and get damages under 2-712, or
2. (b) get damages for non-delivery under 2-713
ii. Assuming: cover price is higher b/c seller will breach when the market goes up
p. UCC § 2-712 – Cover
i. (1) The buyer may cover by making in good faith and without unreasonable
delay any reasonable purchase of goods in substitution for those due from the
seller
ii. (2) The buyer may recover from the seller as damages
1. The difference between the cost of cover and the contract price
a. (cover price) – (K price)
2. Together with any incidental and consequential damages (2-715)
iii. (3) Failure of the buyer to effect cover within this section does not bar him from
any other remedy
q. UCC § 2-713(1) – Buyer’s Damages for Non-delivery or Repudiation
i. The measure of damages for non-delivery or repudiation by the seller (buyer’s
damages) =
1. The difference between the market price at the time when the buyer
learned of the breach and the contract price
a. (mkt price at time B learns of breach) – (K price)
2. Together with any incidental or consequential damages (2-715)
3. But less expenses saved in consequence of the seller’s breach
ii. Implicit mitigation requirement
r. UCC § 2-714 – Buyer’s Damages for Breach in Regard to Accepted Goods
(buyer can keep non-conforming goods and still get a remedy)
i. (2) The [standard] measure of damages for breach of warranty is
ii. The difference at the time and place of acceptance between the value of the
goods accepted and the value they would have had if they had been as warranted
1. Standard measure = (value as warranted) – (value as accepted)
 iii. Unless special circumstances show proximate damages of a different amount
iv. (3) Buyer may also recover consequential (and incidental) damages
s. UCC § 2-715(2) – Buyer’s Incidental and Consequential Damages
i. [Buyer’s] consequential damages resulting from the seller’s breach include:
1. (a) any loss resulting from general or particular requirements and needs
of which the seller at the time of contracting had reason to know and
which could not be reasonably prevented by cover or otherwise; and
a. -First part is Hadley, -second part says if the buyer doesn’t try to
cover, they can’t get consequential damages
2. (b) injury to person or property proximately resulting from any breach of
warranty

III. Specific Performance; Liquidated Damages & Agreed Remedies

a. Certainty of Damages
i. Damages must be reasonably certain
1. Not “mathematically certain,” but not speculative either
ii. The “New Biz Rule”
1. Lost profits not available – not reasonably certain there would have been
any profits
2. New business lacks a track record to show what profits are expected to
be. Since not reasonably certain, new biz cannot get lost profits as part of
their consequential damages
b. Specific Performance
i. Intro doctrine
1. Old hornbook rule  Available only when money damages are
inadequate
2. Usually an exceptional remedy
3. An equitable remedy (gave judge discretion to fashion a specific
performance). An element of fairness, justice, common-sense
4. More lenient today in giving specific performance
ii. Categories of specific performance
1. Land sale
a. Land is a category where money damages are inadequate. Land
is unique, there is only one of that plot of land in the world
2. Certain Kind of Unique Goods
a. UCC § 2-716 – Buyer’s Right to Specific Performance or
Replevin
i. (1) Specific performance may be decreed where the
goods are unique or in other proper circumstances.
ii. (1) The decree [for specific performance] may include
such items and conditions as to payment of the price,
damages, and other relief as the court may deem just.
1. Gives a great deal of discretion to the judge.
Focus on intuitive fairness
 b. What does unique mean here?
i. One of a kind items, such as custom items or family
heirlooms. A K to buy your grandma’s ring, a rare
painting from a dead artist. The money couldn’t get you
these items elsewhere
c. OR unique because the cover market is thin
i. Nothing particularly special about these goods, but the
economic situation is such that it’s hard to get a
replacement
ii. Curtice Brothers Co. v. Catts
1. P in the tomato canning business. D is a farmer.
Output K for a season of tomatoes grown on a
particular field of land. D refuses to sell and
breaches the K. What remedy for P?
2. Cover market is thin!  there’s a growing
season of 6 weeks, and the buyer can’t get the
tomatoes from others in that time period b/c
other farmers had already made output Ks. Had
to prep with equipment and labor for this time
3. “The aspect of the situation bears no
resemblance to that of an ordinary K for the sale
of merchandise in the course of an ordinary
business.” Goods unique because of the cover
market  specific performance
4. And they mean serious business in this decree.
“D may be restrained from selling the crop to
others, and if necessary, a receiver can be
appointed to harvest the crop.”
3. Personal Service Ks
a. Lumley v. Wagner (1852) – page 1007
i. K to perform for 3 months, D was an opera singer. D
repudiates, accepted a different offer. P sues for specific
performance, wanted the court to order her to sing. D’s
argument  she’s a unique talent, $ would not be
adequate enough to compensate me because she’s
famous/unique
b. Rule: No decree of specific performance. Even if the services are
unique, still, courts will not order specific performance and make
you perform
i. In Lumley, not going to force her to sing or pay.
ii. Would be like involuntary servitude
iii. Not going to force people to work together when they
aren’t going to get along in a tense situation
iv. How do we know if she’s actually going to sing or not??
1. Would have to appoint an expert, would get way
too complicated. How do measure singing to
one’s full spirit? Effect of coercion?
 c. Exception: Negative Enforcement
i. Not to enforce her to sing, but to prevent her from
singing in any other performance for a competitor
d. Exception to the exception
i. Unless the situation is such where she would be forced
to go sing for Lumley. If the probable result would be to
compel performance for the original party, not going to
use negative enforcement b/c we’d be back in the
complicated situation we were in before. Or maybe other
problems with the labor market
ii. If there’s no other feasible alternatives
e. American Broadcasting Companies (ABC) v. Warner Wolf
(1981) NY Court of Appeals
i. Personal service K where the person rendering the
service is unique. He breached
ii. Court did not order specific performance for ABC
c. Liquidated Damages
i. Liquidates Damages mean fixed, determined, ascertained. Damages that have
been fixed in a certain way by a clause in the K. When are they enforced? Not
enforced? Courts traditionally have been very skeptical, don’t like them. But
more likely to enforce today
ii. Why are courts skeptical to enforce? Don’t we have freedom of K and the
peppercorn theory?
1. Courts worried that if we allow parties to liquidate damages, parties
would try to penalize breach, specify damages in an amount that exceeds
the expectation measure. If that happens, it prohibits efficient breach
iii. General Rule  Enforceable so long as they are not a penalty. Only if they are
compensation
1. Lump sum damages usually not okay because it looks more like a
penalty, not a GF approach to estimate damages
2. Per diem clauses more likely to be enforced
iv. Southwest Engineering Co. v. United States (1965)
1. USA hired Southwest to perform 4 Ks. They all had liquidated damages
on a per diem basis. For every day late, damages grew. They were late on
all four projects for reasons both within and outside of its control.
2. Test: Two requirements must be considered to determine whether the
provision included in the K fixing the amount of damages payable on
breach will be interpreted as an enforceable liquidated damage clause
rather than an unenforceable penalty:
3. First, the amount so fixed must be a reasonable forecast of just
compensation for that is caused by the breach
a. The harder it is to estimate, the more leeway you have
b. Southwest argued the gov lost nothing, so it wasn’t reasonable
c. BUT, we assess at the time the K was made, not at the time of
breach in hindsight. Here, they were reasonable.
d. Can specify as long as you don’t penalize breach. When you
made the K, what were you trying to do?
 e. Like predicting the weather – it can be a reasonable forecast,
even if you’re off later
4. Second, the harm that is caused by the breach must be one that is
incapable or very difficult of accurate estimation . . .
a. If it was difficult for the parties to estimate when they made the
K, it’s legit. We don’t want parties to penalize breach, prevent
efficient breach. If the amount seems high, but they didn’t know,
they were just making a GF estimation of damages. It’s cool if
the parties have GF business reasons for liquidating damages,
they weren’t trying to penalize. Just getting something in the
event of breach when it’s not reasonably certain
b. Could save litigation costs b/c won’t have to litigate to determine
damages. Try to at least make it more predictable.
5. Also, these requirements are viewed at the time the K was executed,
not at the time of breach. If yes to both at the time of K’ing  it’s
enforceable
v. Most jurisdictions follow the “At the time of K rule” from Southwest, but . . .
vi. UCC § 2-718(1) – Liquidation or Limitation of Damages
1. Damages may be liquidated “at an amount which is reasonable in light of
the anticipated or actual harm caused by the breach . . . A term fixing
unreasonably large liquidated damages is void as a penalty.”
a. Reasonable at the time of breach OR when breach occurs.
Expanding the enforcement of liquidation clauses for sale of
goods Ks
2. Southwest the majority rule, but the UCC rule is the majority rule for the
sale of goods!
3. Note that Southwest would have come out the same either way.
d. Limiting Remedies
i. UCC § 2-719 – Contractual Modification or Limitation of Remedy
1. (1)(a) the agreement may limit the measure of damages recoverable
a. E.g. limiting B’s remedies to return of goods and repayment of
price, or repair and replacement
2. (1)(b) agreed remedy is optional unless expressly agreed to be exclusive
(parties can provide it’s the exclusive remedy)
3. (2) Where circumstances cause an exclusive or limited remedy to fail of
its essential purpose, remedy may be had as provided in the UCC
a. Unless they fail in their essential purpose, in which case we
bounce back to UCC remedies. A limited opt-out
4. (3) Consequential damages may be limited or excluded unless the
limitation or exclusion in unconscionable. Limitation of consequential
damages for personal injury of consumer goods is prima facie
unconscionable, but limitation of damages where the loss is commercial
is not
a. (still could be unconscionable, just not prima facie)
ii. Lewis Refrigeration Co. v. Sawyer Fruit, Vegetable and Cold Storage Co. (1983)
1. Sellers sells freezer to a buyer. K says that if it doesn’t work, the seller
will replace/repair. And the only other remedy is rescission. And a
 separate clause with no consequential damages for the buyer. Freezer
doesn’t work, they delay in repairing, buyer exercises rescission and tries
to get consequential damages.
2. Seller says wait, no consequential damages here, forget normal remedies
3. But it fails under 2-719(2)!
a. The K did not fully compensate buyer for what happened, and
therefore it fails its essential purpose w/ the rescission clause
only
4. Failing of its essential purpose  it doesn’t do what the parties were
trying to do.
a. Since repair and replace on the refrigerator wasn’t possible, it
failed of its essential purpose

IV. Assignment & Delegation; Third-Party Beneficiaries

a. Note assignment of the whole contract means an assignment of rights and a delegation of
duties. We cover each independently, could be just one too
b. Assignment of Rights
i. Definitions
1. Assignment = a transfer of a right of performance under a K (from an
obligor to an obligee)
2. Assignor = transfers a right to a third-party
3. Obligor = party who owes the duty
4. Assignee = person to whom performance is owed
5. Account receivable = the right to payment under a K
ii. Assignment (Gift)

1. Most of the time, it’s a right to payment transfer. Simons owns the right
to payment from Deeg after Movs assigned it to him. Movs owned it, but
gave it to Simons, so now Deeg owes the duty to Movs, not to Simons\
2. Assignor gets nothing in exchange from the assignee.
iii. Assignment (for value)
 1. Account receivable = the right to payment under a K
2. Assign to the bank my right under the K (to receive money over time
form the AR) in exchange for money from the bank now
3. Assignment for value: Assignor gets something in exchange from the
assignee.
iv. In both hypos, a third-party assignee now owns the right, not Movsesian
v. History: Common-law courts were originally suspicious of assignment because
of “maintenance and champerty.” Assignment could promote frivolous litigation
and speculation in Ks. But, the courts of equity allowed it, and the common-law
courts of law began to accept it too.
1. Assignment is standard today. With the growth of a large-scale credit
economy it’s required
vi. An assignment is a transfer, not a promise. So, it doesn’t have to be supported
by consideration. It’s different if you promise to assign your right to someone
else at a future date!
1. Assignment w/o consideration is also revocable by the assignor. (e.g.
Movs can revoke the gift to Simons, and his rights are extinguished)
2. In contrast, an assignment for value is generally not revocable
vii. See Rest. 2d § 317?
viii. UCC § 2-210(2) – Assignment of Rights
1. Unless otherwise agreed - all rights of seller or buyer can be assigned
except where [assignment would]
a. Assignment would materially change obligor’s duty or
b. Increase materially the burden or risk imposed on obligor by K
or
c. Impair materially obligor’s chance of obtaining return
performance
2. Common thread: there is a material, adverse impact on the obligor
3. This applies to the sale of goods, but these Article 2 rules are also
applied outside of Article 2 in common-law
ix. Presumption:
1. Parties can freely transfer their rights under a K.
x. Exceptions:
1. (1) Unless the K says so
2. (2) A material adverse effect under § 2-210(2)
 3. (3) public policy exceptions and statutory
xi. General Rule: In the absence of a statute that provides to the contrary, a K
clause that prohibits assignment is enforceable and assignment is void
1. Allhusen v. Caristo Construction Corp. (1952) NY CoA
2. D hired Kroo. There was a clause that forbid assignment of the K or any
money paid without written permission. Kroo assigned it without
permission, and D rightfully refuses to pay
3. Freedom of K rationale, parties can do this if they want
4. “clear language was used,” plain words
xii. Rule: even if a K says explicitly the right to payment under a K can’t be
assigned, it can.
1. Owen v. CAN Insurance/Continental
2. Owen was a tort victim. Received settlement payments with a clause in
the K that prohibited assignment. She tried to assign, company said nah
3. UCC § 9-318(4) – “A term in any K between an account debtor and an
assignor is ineffective if it prohibits assignment of an account . . .”
a. Statute says attempt to block an assignment of the right to
payment is ineffective. Cannot prohibit the transfer on the right
to payment under § 9-318(4)
4. Therefore, this statute preempts § 2-210(2)!
xiii. If the obligor continues to make payment to the assignor, after having notice
[of transfer to an assignee], the obligor will still have to make the second
payment [to the assignee]
1. Continental Purchasing Co. v. Van Raalte Co. (1937) NY
2. Potter assigned her wages to Continental, D acknowledged the
assignment and proposed a modified payment scheme, and D made
several payments to the assignee, then started making them to the
assignor
3. Too bad, so sad, you’re still gonna have to pay the assignee. They
acknowledged the validity of the transfer at first and payed them!
xiv. Public Policy exceptions
1. Most states prohibit wage assignments (Continental is an old case)
2. Cannot assign a K against the government
xv. An assignee stands in the shoes of the assignor
1. Good for him. Gets benefits
2. But, the assignee takes subject to whatever defenses the obligor had
against the assignor
3. Any defenses the obligor could assert against the assignor, he can now
assert against the assignee! (e.g. fraud, duress, impracticability)
4. Any recourse?
a. Depends on whether the assignor made a warranty on his
assignment, or disclaimed the warranty
b. “My right is clear, no defenses” – then if there were defenses,
could probably sue the assignor
c. *Some courts say that even without an express warranty, an
assignment for value may create an implied warranty that there
are no defenses
 xvi. Remember, now the assignee can sue the obligor if they breach
c. Delegation of Duty

i. Delegate now has a duty to perform work for the obligee

ii. Delegation = a party confers on another person the power to perform his
contractual duty
1. A transfer of one’s duty to perform
2. Definitions:
a. Delegating party  party with the duty
b. Obligee  person to whom the duty is owed
c. Delegate  person to whom the duty is delegated
iii. The duty is discharged only when the delegate performs.
iv. If the delegate doesn’t perform, the delegating party is still liable and can be sued
for breach!
1. Obligee can still bring a lawsuit against the delegating party, otherwise it
would be way too easy to get out of contractual duties
v. Effect of Valid Designation
1. From delegating party’s perspective:
a. Performance by delegate, not delegation itself, discharges duty
b. If delegate doesn’t perform, DP still liable to obligee
2. From obligee’s perspective:
a. Obligee must accept delegate’s performance
vi. Non-delegable duties
1. K provides that duties are non-delegable
2. Public policy
a. E.g. you can’t delegate duties in a gov K
3. Obligee has substantial interest in having performance from the DP
a. E.g. for an artist to paint a picture for you
vii. UCC § 2-210(1) – Delegation of Performance
1. “A party may perform his duties through a delegate unless otherwise
agreed or unless the other party has a substantial interest in having his
original promisor perform or control the acts required by the contract.”
viii. Sally Beauty v. Nexxus Products
1. Best was going to be the exclusive dealer of Nexxus products in Texas.
However, Best was bought out by Sally, which was owned by one of
Nexxus’ direct competitors. Nexxus says hold up, this was a non-
delegable duty!
 2. Best = DP, Sally = delegate, Nexxus = obligee
3. Nexxus had a substantial interest in Best performing! § 2-210(1)!
a. Sally would not have done as good of a job as Best. Substantially
different thing than what we bargained for since Sally is a direct
competitor of Nexxus!
4. Posner dissent
a. The competitor will still make money! This is silly. This is not a
problem based on how business works.
d. Third-Party Beneficiaries

i. Some third-party, not involved in the K, that somehow benefits from the K
ii. The creditor beneficiary
1. Simons performs to Deeg to repay Movs’ debt
iii. The donee beneficiary
1. To give a gift, mince pies to Deeg
iv. Either way, Deeg can sue Simons if he doesn’t perform
v. General Rule 
1. Intended beneficiaries can enforce the K, incidental beneficiaries
cannot.
2. Did the parties, when they made the K, intend to confer a benefit on a
third-party?
3. If the K shows the parties intended to confer a benefit, then that party can
sue. A lot of people are affected by Ks, have to draw the line somewhere
vi. Rest. 2d § 302 – Intended Beneficiaries
1. Recognition of beneficiaries’ right to performance is appropriate to
effectuate the intention of the parties and either
a. Performance will satisfy an obligation of promisee to pay money
to the beneficiary
i. The creditor beneficiary
b. Circumstances indicate the promisee intends to give the
beneficiary the benefit of the performance
i. The donee beneficiary
vii. KMART Corp. v. Balfour Beatty, Inc.
1. K b/w BBI and TPL for construction work on shopping center, to design
and build it. Roof gets destroyed b/c of negligence. Can KMART sue?
2. Yes, KMART was an intended beneficiary
 a. The language shows an intent to bestow a benefit on KMART.
Construction schedules to their requirements, drawings
submitted to them, warranties to be executed in their favor
viii. One last issue  K modification between the original parties
1. Can the parties change the K in a way that diminishes value to the TP?
Can the TP sue? What if Deeg starts getting less mince pies?
2. *It depends on when the rights vest, and what jurisdiction you’re in:
a. Rights vest as soon as the K is made
b. Rights vest when the TP learns of the K and assents to it (e.g.
accepting the pies)
i. Tweeddale v. Tweeddale?
c. Rights vest when the beneficiary relies on the K
3. Rest. 2d § 311 – Vesting (a combination of 2 and 3 above)
a. Power to modify or discharge the agreement terminates when the
beneficiary, before he receives notification of the discharge or
the modification,
i. Materially changes his position in justifiable reliance on
the promise
ii. Brings suit on it or
iii. Manifests assent to it at the request of promisor or
promisee
e. Bye-bye
i. The Phantom Tollbooth