Also known as: delegate duties · delegated duties · delegating duties · delegation of duty · duty delegation
Written by attorneys — see sources below.
The arrangement by which an obligor shifts performance of its duties under an agreement to a third party. The obligor remains liable unless the obligee agrees to a substitution that discharges the original duty.
Valley Aircraft serves as trustee for a family trust holding aerospace shares. It retains a software firm to vote the shares and advise on a new subcontract. The firm exercises broad discretion over participation decisions. Beneficiaries later challenge the trustee for failing to limit the scope of authority granted to the delegate.
Best Products holds an exclusive distribution contract requiring its best efforts to promote Nexxus hair-care products in Texas. Best sells its entire distribution business to Sally Beauty, a competitor of Nexxus. Sally assumes all promotional duties. Nexxus refuses to accept performance from Sally and treats the contract as breached.
In 1979 Nexxus Products Company, a California corporation that formulates and markets hair care products, negotiated with Best Barber & Beauty Supply Company, Inc., a Texas corporation in the business of distributing beauty and hair care products to retail stores, barber shops and beauty salons throughout Texas. Between March and July 1979 Mark Reichek, Best’s president, negotiated with Stephen Redding, Nexxus’ vice-president, over a possible distribution agreement between Best and Nexxus. This resulted in an August 2, 1979 distributorship agreement executed in the form of a July 24, 1979 letter from Reichek to Redding under which Best would serve as the exclusive distributor of Nexxus hair care products to barbers and hair stylists throughout most of Texas except El Paso. The July 24, 1979 letter set forth pricing terms, Nexxus’s agreement to underwrite training and seminars, payment by letter of credit, and termination provisions allowing cancellation only on the anniversary date with 120 days’ prior notice and requiring Nexxus to buy back inventory at cost if it terminated the relationship. In July 1981 Sally Beauty Company, Inc., a Delaware corporation with its principal place of business in Texas and a wholly-owned subsidiary of Alberto-Culver Company, acquired Best in a stock purchase transaction and merged Best into Sally Beauty, which succeeded to Best’s rights and interests in all contracts; Alberto-Culver is a major manufacturer of hair care products and a direct competitor of Nexxus. Shortly after the merger Stephen Redding met with Michael Renzulli, president of Sally Beauty, and wrote a letter stating that Nexxus would not allow Sally Beauty to distribute its products because Sally Beauty was wholly owned by a direct competitor. In August 1983 Sally Beauty commenced this action by filing a complaint in the Northern District of Illinois, claiming that Nexxus had violated the federal antitrust laws and breached the distribution agreement. Nexxus moved for summary judgment on the breach claim. The district court granted the motion on January 31, 1985. The remaining claims were dismissed by stipulation in May 1985, and final judgment was entered on the breach of contract claim.
View caseNo. The original obligor remains liable unless the obligee agrees to a novation that substitutes the delegate and discharges the delegating party. This rule appears in both the Restatement and the UCC provisions on delegation.
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Delegation is barred when the contract terms or the nature of the duty show that the obligee has a substantial interest in personal performance by the original obligor. Personal-services contracts and those requiring unique skill or control commonly fall into this category.
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Such language is read as prohibiting delegation of duties rather than assignment of payment rights. The clause protects the obligor from substituted performance but does not automatically bar transfer of the right to receive money.
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