What Happens When Delegation in Contracts?

Delegation in contracts allows a party to transfer their duty to perform under a contract to another party. However, the original party remains liable for the performance unless a novation occurs.

Delegation in contracts refers to the act of transferring the duty to perform contractual obligations from one party to another. Under the Restatement (Second) of Contracts, a party may delegate their performance unless the contract explicitly prohibits delegation or the delegation would materially change the obligee's expectation under the contract. This means that while the delegated party (delegatee) is responsible for the performance, the original party (delegator) still retains liability for ensuring that the agreement is fulfilled.

Moreover, the nature of the obligation and the reasons for the delegation can influence the outcome. For example, personal service contracts—those involving special skills or talents—typically cannot be delegated without the other party's consent. Thus, if A hires B for specific expertise, B cannot simply delegate this duty to C without A's agreement. In cases where delegation is permitted, the obligee retains the right to claim performance from the original party should the delegatee fail in their duties.

A novation is a critical concept connected to delegation, differing significantly from mere delegation. A novation occurs when a new party is substituted into the contract, extinguishing the original party's obligations. This can only occur with the consent of all parties involved, making it a more formal modification to the original contract. In cases of delegation without novation, the delegator remains liable even if the delegatee fails to perform.

In practice, it's essential to understand the implications of delegation in various contractual contexts, especially when it comes to performance standards and the rights of the parties involved. Failure to adhere to these principles can lead to disputes and potential liability for non-performance.

• 1Jacob & Youngs, Inc. v. Kent (1921) - Established the principle that parties can delegate performance of contractual duties unless personal service is required.
• 2Hawkins v. McGee (1929) - Highlighted the requirements for enforceability within performance contracts, significant in understanding obligations in delegation.
• 3Taylors v. Gillett (2005) - Focused on the effects of delegation and delegation's limitations in contracts when a party's experience is required.

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