Exam 17: Third Party Rights

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A-One Landscapers, Inc., owes Finance Company $5,000. A-One enters into a contract with Office Park under which A-One promises to maintain the landscaping on Office Park's property. Under the contract, Office Park promises to pay Finance the amount that will be due A-One until A-One's debt to Finance is paid. A-One performs as promised, but Office Park does not pay Finance. Can Finance succeed in a suit against Office Park? Why or why not?

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Question 1

Correct Answer:

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Finance could succeed in a suit against Office Park. When a party promises to perform under a contract with the express intent that the other party's payment benefit a third party, the third party is an intended beneficiary. Assuming a contract is otherwise enforceable, an intended beneficiary can successfully sue to enforce the contract under which he or she will benefit.
The contract between A-One and Office Park expressly states that Office Park's payment for A-One's performance is to go directly to Finance. Thus, it is a third party beneficiary contract. Finance, the third party beneficiary, is, under the terms of the contract, an intended beneficiary. As such, Finance can successfully sue Office Park to enforce its promise to pay A-One's debt.

The rights under a contract for personal services can normally be assigned

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Question 2

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Mesa County contracts with New Construct Inc. to build a courthouse. New Construct hires Odell to excavate the site. Odell's work damages adjacent properties. Mesa files a suit against the excavator, who argues that the county is not named in his contract with New Construct. Most likely, the court will hold that Odell is

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Question 3

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Music Masters Inc. enters into a contract to pay Nag for a dozen original songs. Nag transfers the right to payment under the contract to Omni Artists. After the transfer, Nag's contract right to the payment is

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Question 4

The rights under an insurance policy can normally be assigned

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Question 5

Commercial Rebuild LLC enters into a contract to remodel Dockside Marina, agreeing to use only products from Eagle Supplies. Halfway through the project, Commercial refuses to finish the job. The contract can be enforced against Commercial by

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Question 6

Elin owes Floyd $10,000. Floyd assigns the claim to Gary. Gary does not notify Elin of the assignment. Later, Floyd assigns the same claim to Holly. Holly immediately notifies Elin of the assignment. Holly has priority to payment in

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Question 7

Once the obligor receives proper notice, only performance to the assignee can discharge the obligor's obligation.

(True/False)

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Question 8

Any beneficiary to a contract who is not deemed an intended beneficiary is an incidental beneficiary.

(True/False)

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Question 9

A surgeon can delegate his or her contractual duty to operate on a certain patient because the rendering of medical services is not personal performance.

(True/False)

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Question 10

Rendering contract performance directly to a third party does not indicate whether that party is an incidental or an intended beneficiary.

(True/False)

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Question 11

No special form is required to make a delegation of duties-as long as the delegator expresses an intention to make the delegation, it is effective.

(True/False)

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Question 12

Under a contract, an assignment of negotiable instruments

(Multiple Choice)

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Question 13

Jan is obligated under a contract to pay Katie $500. Katie assigns the right to receive the funds to Loren. If Jan does not pay the debt, the obligee can

(Multiple Choice)

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Question 14

Harry assigns his rights under a contract with Irma to his college roommate, Jake. Neither Harry nor Jake notifies Irma of the assignment. The assignment

(Multiple Choice)

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Question 15

A creditor beneficiary cannot sue a promisor directly to enforce a contract.

(True/False)

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Question 16

Fez makes and sells camping gear. Fez and Gobi enter into a contract for a delivery of the gear to Gobi's Outfitters retail locations for an invoiced price. Fez transfers the right to payment under the contract to Haulers Distribution Inc. This transfer is

(Multiple Choice)

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Question 17

Following a transfer by a lender of a right to receive payments on a mortgage, the homebuyer must continue to make those payments to the original lender.

(True/False)

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Question 18

A contracting party's transfer of the contract rights or duties to another person is an exception to the rule of privity of contract.

(True/False)

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Question 19

The unconditional assignment of rights under a contract extinguishes the rights of the assignee.

(True/False)

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Question 20

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Exam 17: Third Party Rights

The rights under a contract for personal services can normally be assigned

Music Masters Inc. enters into a contract to pay Nag for a dozen original songs. Nag transfers the right to payment under the contract to Omni Artists. After the transfer, Nag's contract right to the payment is

The rights under an insurance policy can normally be assigned

Commercial Rebuild LLC enters into a contract to remodel Dockside Marina, agreeing to use only products from Eagle Supplies. Halfway through the project, Commercial refuses to finish the job. The contract can be enforced against Commercial by

Elin owes Floyd $10,000. Floyd assigns the claim to Gary. Gary does not notify Elin of the assignment. Later, Floyd assigns the same claim to Holly. Holly immediately notifies Elin of the assignment. Holly has priority to payment in

Once the obligor receives proper notice, only performance to the assignee can discharge the obligor's obligation.

Any beneficiary to a contract who is not deemed an intended beneficiary is an incidental beneficiary.

A surgeon can delegate his or her contractual duty to operate on a certain patient because the rendering of medical services is not personal performance.

Rendering contract performance directly to a third party does not indicate whether that party is an incidental or an intended beneficiary.

No special form is required to make a delegation of duties-as long as the delegator expresses an intention to make the delegation, it is effective.

Under a contract, an assignment of negotiable instruments

Jan is obligated under a contract to pay Katie $500. Katie assigns the right to receive the funds to Loren. If Jan does not pay the debt, the obligee can

Harry assigns his rights under a contract with Irma to his college roommate, Jake. Neither Harry nor Jake notifies Irma of the assignment. The assignment

A creditor beneficiary cannot sue a promisor directly to enforce a contract.

Fez makes and sells camping gear. Fez and Gobi enter into a contract for a delivery of the gear to Gobi's Outfitters retail locations for an invoiced price. Fez transfers the right to payment under the contract to Haulers Distribution Inc. This transfer is

Following a transfer by a lender of a right to receive payments on a mortgage, the homebuyer must continue to make those payments to the original lender.

A contracting party's transfer of the contract rights or duties to another person is an exception to the rule of privity of contract.

The unconditional assignment of rights under a contract extinguishes the rights of the assignee.

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