Now, imagine that person B,
the second person to come along,
doesn't have the share of stock,
but they go and they tell the company,
"Hey I'm the new stockholder here.
I'm the person who has rights to this stock.
So, next time you pay out a dividend or you have a voting notice,
some shareholder meeting notice,
make sure you send it to me because I bought the stock."
This is a mess. So, a person A gave me some money and they were first in line.
You gave them a signed document that says I sold you my stock.
Person B also gave his some money for
that same share stock you gave them a signed document they give you some money.
They notified the company that,
"Hey I'm the new shareholder."
Person C gave you some money and you gave them the actual stock certificate.
Who do you think actually has the rights to that stock?
Well, the answer is, it depends.
The answer to a lot of things is it depends.
But here in the United States,
we generally follow what's called the American Rule.
The American Rule states that,
"The first assignment in time is the one that's effective."
So, in that case person A would actually
have true ownership rights to that share of stock
because the first assignment and time effectively
eliminates my rights in the share of stock,
or your rights and the share of stock.
So, once you make that first assignment,
you don't have the right to assign it to anybody else.
Person B and person C are out of luck. That's the American Rule.
Now, the English Rule,
which you can still find in some places is that the first person to
give notice of an assignment is the person who actually has the right.
So, in that case person B would have the true rights to the share of stock,
because they gave notice to the other party to the contract,
we'll assume that it's stock ownership as a contract is very similar.
Person B gave notice to the other parties so
they would be the true owners under the English Rule.
And now there's this third exception to both the American Rule and the English Rule.
We call it the Tangible Token Rule.
The Tangible Token Rule says;
"If a contract is represented by some sort of tangible token,
say like a share of stock whoever actually has the tangible token is
the true owner of the rights regardless of where they fall in the order of assignment."
So, actually under the Tangible Token Rule,
which has been adopted in most places,
person C would be the true owner because they
have the tangible token even though person A was first,
and person B notified the other party first,
person C would have the vested rights in
the assignment of the rights under that stock certificate.
Let's move onto delegation of duties.
Remember rights are things you receive under a contract,
duties are things you do.
But, the general rule about transferring rights and duties is the same.
Delegation of duties is generally permitted.
So, let's go back to our simple example.
I'm going to sell you my bike for $100.
Your duty is to pay me $100.
Now, suppose somebody owes you $100 and you say to your friend,
"Oh, don't pay me.
Just pay the $100 in exchange for the bike."
So, you can delegate your duty to pay the $100.
From my perspective, do I care where $100 comes from,
not really. I just want my money.
So, if you delegate your duty to pay, I don't care.
And that's the general rule.
Delegation of duties is permitted.
Now, difference between rights and duties is that,
if you delegate your duties as a general rule
you are still liable for the performance of those obligations.
So, you delegate your duty to pay $100 to somebody else,
if that person doesn't pay,
you are still liable for it.
I can still sue you.
So, remember with rights once you assign it, they're gone.
With duties once you delegate them,
you're still on the hook.
So, you've got to make sure the other person performs as expected.
Now, as with rights,
we have some exceptions to the general rule,
and the first exception is actually the same.
You can have an anti-delegation clause,
just as you can have an anti-assignment clause, same thing.
And you can have an anti-delegation clause in your contract that
prevents you from delegating your duties without the approval of the other party.
Personal service contracts again,
are excepted from the general rule.
If you are hired to perform a personal service,
you can't just swap out somebody else to perform that personal service
without the approval of the other party.
So, say I'm a concert promoter and
I want to bring in my favorite band in the world to come and play at my concert venue.
So, I call up U2's manager,
U2 is my favorite band in the world.
I call it U2's manager and, "Hey,
can the boys from Dublin come and play at my venue?"
And he says, "Of course, they can. Anything for you."
And so we have a contract for U2 come a play but at the last minute they decide,
"We don't want to do it, we're going to delegate
our duty under this contract to Justin Bieber."
Do I want Justin Bieber to come to my concert?
No of course not.
They can't delegate that duty.
It's a personal service contract.
I hired them to perform a personal service,
he can't delegate that duty.
Third exception to the general rule. Now, this is a new one.
This is if you have a high trust relationship.
Sometimes we call these fiduciary relationships things like that.
For an example, suppose you hire a trustee to
administer your charitable fund or something like that.
Some sort of relationship that requires an extra level of
trust and you have some sort of
contractual or employee relationship between you and this other person.
These relationships, fiduciary relationships, high trust relationships,
the person who is being entrusted with funds or
confidential information or things like that
cannot delegate their duties under that contract,
because you place your trust in them.
So, they have to honor that.
And then final exception to the general rule.
If the delegation of your duty will materially alter some portion of the contract,
then you cannot delegate the duty without permission.
So, for example, say I'm a manufacturing company and I have a contract to
manufacture and sell some products to you and I say well, I'm at capacity.
I'm going to delegate my duty to manufacture the products to somebody else.
They'll manufacture them and they'll deliver the products.
But, maybe they're the same products but the quality isn't the same.
That would materially alter the expectations of the other parties to the contract.
So, in that case a delegation of duties would not be permitted.
Now, last note about assignment of delegation.
There's this concept called novation.
Novation is very similar to an assignment and delegation,
except that it's the complete substitution of one party for another.
So, for instance I can assign all my rights to you.
I can delegate all my duties to you,
but remember I said your duties you're still
liable for your duties even if you delegate them to someone else.
But, if you engage in what's called a novation,
you actually are relieved from your duties.
Now, in order to have a novation,
all of the parties have to agree to it.
So, all the parties to the contract plus the person being substituted in must all agree.
But if you all agree,
then basically you can have a little one page paper that says we all agree
to substitute to this person in via a novation.
Then, you are completely relieved from all of
your rights and all of your duties and the new person takes your place in the contract.
That's a novation.
It differs a little bit from an assignment delegation,
in that they take your place entirely and you are freed
from all rights and all obligations under the contract.
So, that's assignment and delegation.
The quick and dirty of the rules about how to
transfer your rights and duties under a contract.