Friday, June 1, 2007

Contracts-Third-Party Issues: Delegation

Two ways to delegate:
1. give permission for another party to perform obligor/delegor's duties under the contract. This gives rise to no assumption of duty by the delegate and delegate cannot be liable for breach.

2. form contract with delegate supported by consideration. This gives rise to an assumption of legal duty to perform under the contract. Delegate and delegor are liable to obligee for subsequent breach -- at election of obligee. Under this theory, obligee is an intended third-party beneficiary of the delegation contract and has immunity from setoffs but not counterclaims.

Contract terms prohibiting or restraining delegation will be enforced.

Under UCC, delegation is reasonable grounds for insecurity. Obligee can seek adequate assurances.

Contract duties of personal character cannot be delegated.

If delegation is effective, obligee must cooperate in delegate's attempt to perform.

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