Contracts: At which point does a delegation become a novation?

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YalteseFalcon

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Contracts: At which point does a delegation become a novation?

Postby YalteseFalcon » Fri Feb 10, 2017 12:15 am

3PB questions give me acid reflux.

At what point does a delegation of a contract become a novation? This is prompted by a Barbri MPQ question I flubbed.

My understanding is that in a delegation, the delegator always remains liable on the contract, whether or not the delegation is supported by consideration. If the delegatee does not perform, the obligee can go after the delegator no matter what. If the contract is supported by consideration, the obligee can go after either the delegator OR the delegatee.

The MPQ question was something like this: P contracts to paint O's house. P can't, but his friend X is competent and can do it instead. O agrees. X screws up. What recovery for O?

The answer was that O can go after X because it is a novation. So, is the line between a novation and a delegation in this case O's assent to X painting? If O didn't know, it would be a delegation and O could go after P? And if it was a delegation, then O could go after X anyway, if P gave him a case of beer in consideration for him to do the paint job?

rkrawchu

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Re: Contracts: At which point does a delegation become a novation?

Postby rkrawchu » Fri Feb 10, 2017 3:32 am

With a novation, Both parties to the original contract have to agree one of them will be replaced and a new contract will form. The person who is replaced is no longer part of the contract at all. Different from a delegation where you could delegate your duty without the other party to the original contract having to agree. And of course you as the delegator would still be liable

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cnk1220

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Re: Contracts: At which point does a delegation become a novation?

Postby cnk1220 » Fri Feb 10, 2017 1:47 pm

Thanks for this!

I also hate contracts 3P rights question (and contracts in general- it's safe to say I actually do better on property lol).

Retailer/wholesaler enter into agreement under which wholesaler supplies retailer with goods and retailer makes payment to 1 of wholesaler's creditors. Before creditor becomes aware of agreement retailer and wholesaler agreed retailer would pay wholesaler directly. Creditor sues to enforce original agreement.

Which best describes the rights?


C. Creditor is an intended beneficiary but has no rights

D. Creditor's rights as 3PB vested when brought suit to enforce agreement between retailer and wholesaler.


I thought it was D. I thought one of the times the right "vests" is WHEN you bring suit, in fact barbri's little exam tip told me to look for that in the fact pattern...so I did and...what a surprise it's wrong. Why does he not have rights then?

I'm confused as to this idea of "vesting" if one of the ways your rights "vest" is when you bring suit to enforce the agreement then how can D be an incorrect statement of law?

rkrawchu

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Re: Contracts: At which point does a delegation become a novation?

Postby rkrawchu » Fri Feb 10, 2017 9:04 pm

Because the original parties (wholesaler and retailer) modified their agreement before the creditor was aware of it, he lost his rights to enforce it (because payments are now going directly to wholesaler). So while creditor could still be considered an intended beneficiary because he is a creditor of the promise and the wholesaler is hopefully going to pay him, since he is no longer mentioned in the modified version of the contract, he has no rights to enforce it. I assume now he would have to sue wholesaler directly to get his money, and can no longer sue for breach of contract.

It's tricky because in C they say he is still an intended beneficiary even though he technically can't enforce it now since it was modified before he became aware of it.

C is still a better answer than D though because to bring suit on the promise he would have had to know he was an intended beneficiary of it before they changed who the payments were going to. So if he would have sued before the two originals modified it, then his rights would have vested and they could no longer modify it. Here, he sued after they had already changed it.


I hope that helps clarify and hopefully most of the contracts questions won't be that complex on the MBE.

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cnk1220

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Re: Contracts: At which point does a delegation become a novation?

Postby cnk1220 » Fri Feb 10, 2017 9:14 pm

rkrawchu wrote:Because the original parties (wholesaler and retailer) modified their agreement before the creditor was aware of it, he lost his rights to enforce it (because payments are now going directly to wholesaler). So while creditor could still be considered an intended beneficiary because he is a creditor of the promise and the wholesaler is hopefully going to pay him, since he is no longer mentioned in the modified version of the contract, he has no rights to enforce it. I assume now he would have to sue wholesaler directly to get his money, and can no longer sue for breach of contract.

It's tricky because in C they say he is still an intended beneficiary even though he technically can't enforce it now since it was modified before he became aware of it.

C is still a better answer than D though because to bring suit on the promise he would have had to know he was an intended beneficiary of it before they changed who the payments were going to. So if he would have sued before the two originals modified it, then his rights would have vested and they could no longer modify it. Here, he sued after they had already changed it.


I hope that helps clarify and hopefully most of the contracts questions won't be that complex on the MBE.



Yay thank you! Now I finally know the difference and won't blindly guess anymore.

YalteseFalcon

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Re: Contracts: At which point does a delegation become a novation?

Postby YalteseFalcon » Sat Feb 11, 2017 2:04 pm

Yes, thanks very much! 3PB is one of those areas that I see coming from a mile away on an MBE question. I just don't approach them with any confidence.



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