Question 1

Which of the following is false regarding the rights of an assignee and assignor?

Accepted Answer

A)  Assignees essentially fill in for the assignor as the legal recipient of contractual duties. 
B)  Assignees acquire the same contractual duties as the assignor had. 
C)  Assignees are offered more protection than assignors. 
D)  The obligor may raise any of the same defenses for nonperformance against the assignee that he would have been able to raise against the assignor. 
E)  When an assignor transfers rights to an assignee, the assignor legally gives up all rights he or she previously had to collect on the contract. 
A)  Assignees essentially fill in for the assignor as the legal recipient of contractual duties. 
B)  Assignees acquire the same contractual duties as the assignor had. 
C)  Assignees are offered more protection than assignors. 
D)  The obligor may raise any of the same defenses for nonperformance against the assignee that he would have been able to raise against the assignor. 
E)  When an assignor transfers rights to an assignee, the assignor legally gives up all rights he or she previously had to collect on the contract. C

Question 2

List and discuss the tests used to determine whether a party is an intended or incidental beneficiary.

Accepted Answer

The courts ask if a reasonable person in the position of the party in question would believe that the contracting parties intended to benefit the party in question. The court also considers whether performance of the contract is done directly to the third party, the third party's ability to control the specifics of performance of the contract, and whether the contract directly states that the third party is the benefiting party.

Question 3

"Painted House." Billy had a contract to paint Jan's house for $800 including the duty to clean up any debris. The contract between Billy and Jan did not address assignment in any way. Billy, who was very busy, assigned the contract, specifying that it included the right to receive the money and the duty to paint the house, to Richard who was interested in making some extra money and had experience painting. Billy did not tell Jan about the assignment because he did not want any trouble nor did Richard mention the assignment to her. In fact, Richard never met Jan because he painted while she was at work. After Richard did a good job painting the house, Jan sent a check to Billy for $800. Billy needed the money to pay some bills, so he spent it. He thought he would have money coming in with which to pay Richard, but that did not happen. Richard asked Jan for $800 when it was not forthcoming from Billy. Jan refused. Richard said that he was going to sue her. Jan called Billy and told him that he had no right to assign the contract. Another problem involved disposal of debris. Although Richard was a good, competent painter, he forgot and left some old paint cans at Jan's house. Jan demanded that Billy come and properly dispose of the paint cans because they could not simply be put in the trash. Billy refused and told her that she would have to get Richard to dispose of the paint cans because that was his responsibility. Jan called Richard who told her that he was busy and that clearing out the paint cans was Billy's responsibility.

-Which of the following is true regarding Jan's statement to Billy that he had no right to assign the contract?

Accepted Answer

A)  Jan is correct because a personal type of service was involved. 
B)  Jan is correct because the contract did not specifically give Billy the right to assign the contract. 
C)  Jan is correct because a delegation as well as an assignment was involved. 
D)  Jan is incorrect because the contract was not a personal service, and there was no requirement that the contract specifically reference the right to assign rights and duties. 
E)  Jan is incorrect only because the contract and assignment were for an amount under $1,000. Otherwise, Billy had no right to assign the contract without her permission. 
A)  Jan is correct because a personal type of service was involved. 
B)  Jan is correct because the contract did not specifically give Billy the right to assign the contract. 
C)  Jan is correct because a delegation as well as an assignment was involved. 
D)  Jan is incorrect because the contract was not a personal service, and there was no requirement that the contract specifically reference the right to assign rights and duties. 
E)  Jan is incorrect only because the contract and assignment were for an amount under $1,000. Otherwise, Billy had no right to assign the contract without her permission. D

Question 4

"Portraits." Belinda, a famous portrait painter, agreed to paint Harry's portrait for $4,000. She also agreed to paint the portraits of Michelle's two Corgi dogs, Baby and Bree. Michelle agreed to pay Belinda $10,000 for the two Corgi portraits. Belinda charged Michelle more because dogs annoyed her. Belinda met the spoiled dogs, and they really got on her nerves. Plus, she was behind on finishing Harry's portrait. Belinda, therefore, assigned the right to receive the money for the dog portraits and delegated the duty to paint the dog portraits to her assistant, Fred. He eagerly accepted and painted the portraits. She also assigned to Fred, as payment for amounts she owed him for various duties, the right to receive payment from Harry. The contract Belinda had with Michelle did not address assignment in any way. The contract Belinda had with Harry, however, prohibited the right to assign payment for services received. Harry fancied himself as an experienced business person and insisted on that provision because he had read somewhere that such a clause was a good idea. Belinda finished the portrait of Harry and called him to come and pick it up. Meanwhile, a disgruntled secretary who disliked Belinda told both Michelle and Harry about the assignments to Fred. Michelle was furious and refused to pick up the portrait or pay anyone. Harry likewise refused to pay for his portrait.

-What would be the most likely result if Fred sues Harry for the $4,000 payment?

Accepted Answer

A)  Harry will win because he did not expressly agree to the assignment. 
B)  Fred will win because the right to receive payment could be validly assigned. 
C)  Fred will win unless Harry can prove that Fred knew that Harry did not want the benefits assigned. 
D)  Fred will lose unless Fred can prove that he was unaware that Harry did not want the benefits assigned. 
E)  Harry will win because the portrait was personal in nature and payment for it could not be assigned. 
A)  Harry will win because he did not expressly agree to the assignment. 
B)  Fred will win because the right to receive payment could be validly assigned. 
C)  Fred will win unless Harry can prove that Fred knew that Harry did not want the benefits assigned. 
D)  Fred will lose unless Fred can prove that he was unaware that Harry did not want the benefits assigned. 
E)  Harry will win because the portrait was personal in nature and payment for it could not be assigned.

Question 5

A[n] ______ beneficiary is a third party who benefits from a contract in which the promisor agrees to give a gift to the third party.

Accepted Answer

A)  Creditor 
B)  Donee 
C)  Incidental 
D)  Promised 
E)  Avowed 
A)  Creditor 
B)  Donee 
C)  Incidental 
D)  Promised 
E)  Avowed

Question 6

"Third-Party Woes." Trudy owed Sam $40 for a book she purchased from him. Trudy mowed Betty's yard for $40 and agreed with Betty that Betty would pay Sam for the book. Sam is not aware of the assignment. Betty pays no one. Trudy also mowed Bob's yard for $40. She agreed with Bob that Bob would give the payment to Sally representing Trudy's birthday present to Sally. Bob later refuses to do so saying that promises to give gifts are not enforceable. He then moves out of town. Trudy tells both Sam and Sally that she is broke and that they will have to get any amounts due from Betty and Bob respectively. Sally is very unhappy because she wanted to buy a new pair of sandals with the money.

-Which of the following is the likely result if Sam sues Betty for the $40 that Trudy owes him for the book?

Accepted Answer

A)  Sam will lose because the attempted delegation was against public policy. 
B)  Sam will lose because his only right of action is against Trudy. 
C)  Sam will lose because he was not aware of the assignment before the duties were completed. 
D)  Sam will win only if he can prove that Trudy has insufficient funds with which to pay him. 
E)  Sam will win. 
A)  Sam will lose because the attempted delegation was against public policy. 
B)  Sam will lose because his only right of action is against Trudy. 
C)  Sam will lose because he was not aware of the assignment before the duties were completed. 
D)  Sam will win only if he can prove that Trudy has insufficient funds with which to pay him. 
E)  Sam will win.

Question 7

Which of the following is true regarding the rights of an incidental beneficiary to a contract to sue to recover incidental rights?

Accepted Answer

A)  An incidental beneficiary may sue to enforce incidental contractual rights so long as those rights have vested. 
B)  An incidental beneficiary may sue to enforce incidental contractual rights only if the incidental beneficiary was once a creditor beneficiary. 
C)  An incidental beneficiary may sue to enforce incidental contractual rights only if the incidental beneficiary was once a donee beneficiary. 
D)  An incidental beneficiary may sue to enforce incidental contractual rights only if the incidental beneficiary is also a second-party beneficiary. 
E)  An incidental beneficiary cannot sue to enforce a contract which provided incidental benefits. 
A)  An incidental beneficiary may sue to enforce incidental contractual rights so long as those rights have vested. 
B)  An incidental beneficiary may sue to enforce incidental contractual rights only if the incidental beneficiary was once a creditor beneficiary. 
C)  An incidental beneficiary may sue to enforce incidental contractual rights only if the incidental beneficiary was once a donee beneficiary. 
D)  An incidental beneficiary may sue to enforce incidental contractual rights only if the incidental beneficiary is also a second-party beneficiary. 
E)  An incidental beneficiary cannot sue to enforce a contract which provided incidental benefits.

Question 8

Bill contracts with Judy to wash her car and then delegates the duty to Paul. Paul fails to wash the car. Which of the following is true regarding Bill's duty to Judy, if any?

Accepted Answer

A)  Bill has no duty to Judy so long as she did not expressly object to the delegation. 
B)  Bill has no duty to Judy regardless of whether she objected to the delegation. 
C)  Bill continues to be bound to Judy to see that her car gets washed. 
D)  Bill continues to be bound to Judy to see that her car gets washed only if the contract expressly prohibited delegation. 
E)  Bill continues to be bound to Judy to see that her car gets washed unless he already paid Paul for the job. 
A)  Bill has no duty to Judy so long as she did not expressly object to the delegation. 
B)  Bill has no duty to Judy regardless of whether she objected to the delegation. 
C)  Bill continues to be bound to Judy to see that her car gets washed. 
D)  Bill continues to be bound to Judy to see that her car gets washed only if the contract expressly prohibited delegation. 
E)  Bill continues to be bound to Judy to see that her car gets washed unless he already paid Paul for the job.

Question 9

A factor that courts consider in determining whether a party is an incidental or intended beneficiary is whether the contract directly states that the third party is the benefiting party.

Accepted Answer

A) True 
 B)False

Question 10

What is the term for the third party who receives an assignment of contract rights?

Accepted Answer

A)  Transferor 
B)  Transferee 
C)  Relator 
D)  Assignor 
E)  Assignee 
A)  Transferor 
B)  Transferee 
C)  Relator 
D)  Assignor 
E)  Assignee

Question 11

Which of the following is true regarding assignment of rights in China?

Accepted Answer

A)  Free assignment of rights is permitted. 
B)  Free assignment of rights is permitted only when a contract with a state authority is involved. 
C)  Free assignment of rights is permitted only when a contract with a private party is involved unless the contract is one considered "for the good of the people." 
D)  Assignment of rights is illegal. 
E)  When a private party is involved, the assignor must first get the obligor's approval before an assignment is made. 
A)  Free assignment of rights is permitted. 
B)  Free assignment of rights is permitted only when a contract with a state authority is involved. 
C)  Free assignment of rights is permitted only when a contract with a private party is involved unless the contract is one considered "for the good of the people." 
D)  Assignment of rights is illegal. 
E)  When a private party is involved, the assignor must first get the obligor's approval before an assignment is made.

Question 12

A donee beneficiary is a type of incidental beneficiary.

Accepted Answer

A) True 
 B)False

Question 13

Most countries do not grant third-party rights to contracts.

Accepted Answer

A) True 
 B)False

Question 14

A[n] ______ beneficiary is one who unintentionally gains a benefit from a contract between other parties.

Accepted Answer

A)  Incidental 
B)  Creditor 
C)  Donee 
D)  Vested 
E)  Accidental 
A)  Incidental 
B)  Creditor 
C)  Donee 
D)  Vested 
E)  Accidental

Question 15

A[n] ______ beneficiary is a third party who benefits from a contract in which the promisor agrees to pay the promisee's debt.

Accepted Answer

A)  Creditor 
B)  Donee 
C)  Incidental 
D)  Promised 
E)  Avowed 
A)  Creditor 
B)  Donee 
C)  Incidental 
D)  Promised 
E)  Avowed

Question 16

Which of the following is true regarding factors considered by a court in determining whether a party is an intended or incidental beneficiary?

Accepted Answer

A)  Whether performance of the contract is done directly to the third party and whether the contract directly states that the third party is the benefiting party, but not the third party's ability to control the specifics of performance of the contract. 
B)  The third party's ability to control the specifics of performance of the contract but not whether performance of the contract is done directly to the third party or whether the contract directly states that the third party is the benefiting party. 
C)  Whether the contract directly states that the third party is the benefiting party but not the third party's ability to control the specifics of performance of the contract or whether performance of the contract is done directly to the third party. 
D)  Whether performance of the contract is done directly to the third party and the third party's ability to control the specifics of performance of the contract, but not whether the contract directly states that the third party is the benefiting party. 
E)  Whether performance of the contract is done directly to the third party, the third party's ability to control the specifics of performance of the contract, and whether the contract directly states that the third party is the benefiting party. 
A)  Whether performance of the contract is done directly to the third party and whether the contract directly states that the third party is the benefiting party, but not the third party's ability to control the specifics of performance of the contract. 
B)  The third party's ability to control the specifics of performance of the contract but not whether performance of the contract is done directly to the third party or whether the contract directly states that the third party is the benefiting party. 
C)  Whether the contract directly states that the third party is the benefiting party but not the third party's ability to control the specifics of performance of the contract or whether performance of the contract is done directly to the third party. 
D)  Whether performance of the contract is done directly to the third party and the third party's ability to control the specifics of performance of the contract, but not whether the contract directly states that the third party is the benefiting party. 
E)  Whether performance of the contract is done directly to the third party, the third party's ability to control the specifics of performance of the contract, and whether the contract directly states that the third party is the benefiting party.

Question 17

Paul and Mary have an agreement that Mary will buy Paul's house. Later Mary orally assigns the right to buy the house to Ally, one of Paul's former girlfriends. When Ally shows up with the money, Paul says "No way! You ditched me to date Rick. I'm not ever letting you get anything from me!" Which of the following is true in regard to the dispute between Paul and Ally?

Accepted Answer

A)  Ally can enforce the assignment only if the agreement that Paul and Mary had was in writing. 
B)  Ally can enforce the assignment. 
C)  Ally cannot enforce the assignment because it was not in writing. 
D)  Ally cannot enforce the assignment because Paul did not specifically grant Mary the power to assign the contract. 
E)  Ally cannot enforce the assignment because assignments to purchase property cannot ever be assigned for public policy reasons. 
A)  Ally can enforce the assignment only if the agreement that Paul and Mary had was in writing. 
B)  Ally can enforce the assignment. 
C)  Ally cannot enforce the assignment because it was not in writing. 
D)  Ally cannot enforce the assignment because Paul did not specifically grant Mary the power to assign the contract. 
E)  Ally cannot enforce the assignment because assignments to purchase property cannot ever be assigned for public policy reasons.

Question 18

The state of New York does not grant a donee beneficiary the right to enforce a contract unless the promisee is connected to the donee through a ______ relationship.

Accepted Answer

A)  Valid 
B)  Recognized 
C)  Substantial 
D)  Familial 
E)  Marital 
A)  Valid 
B)  Recognized 
C)  Substantial 
D)  Familial 
E)  Marital

Question 19

Which of the following is a contractual party who agrees to do something for the other party?

Accepted Answer

A)  Obligor 
B)  Obligee 
C)  Assignor 
D)  Assignee 
E)  Boundee 
A)  Obligor 
B)  Obligee 
C)  Assignor 
D)  Assignee 
E)  Boundee

Question 20

Which of the following occurs when a party to a contract transfers his or her rights to a contract to a third party?

Accepted Answer

A)  Assignment 
B)  Referral 
C)  Disgorgement 
D)  Privity 
E)  Transfer 
A)  Assignment 
B)  Referral 
C)  Disgorgement 
D)  Privity 
E)  Transfer

Exam 19: Third-Party Rights to Contracts

Which of the following is false regarding the rights of an assignee and assignor?

List and discuss the tests used to determine whether a party is an intended or incidental beneficiary.

A[n] ______ beneficiary is a third party who benefits from a contract in which the promisor agrees to give a gift to the third party.

Which of the following is true regarding the rights of an incidental beneficiary to a contract to sue to recover incidental rights?

Bill contracts with Judy to wash her car and then delegates the duty to Paul. Paul fails to wash the car. Which of the following is true regarding Bill's duty to Judy, if any?

A factor that courts consider in determining whether a party is an incidental or intended beneficiary is whether the contract directly states that the third party is the benefiting party.

What is the term for the third party who receives an assignment of contract rights?

Which of the following is true regarding assignment of rights in China?

A donee beneficiary is a type of incidental beneficiary.

Most countries do not grant third-party rights to contracts.

A[n] ______ beneficiary is one who unintentionally gains a benefit from a contract between other parties.

A[n] ______ beneficiary is a third party who benefits from a contract in which the promisor agrees to pay the promisee's debt.

Which of the following is true regarding factors considered by a court in determining whether a party is an intended or incidental beneficiary?

The state of New York does not grant a donee beneficiary the right to enforce a contract unless the promisee is connected to the donee through a ______ relationship.

Which of the following is a contractual party who agrees to do something for the other party?

Which of the following occurs when a party to a contract transfers his or her rights to a contract to a third party?

An Introduction to Dynamic Business Law

Business Ethics

The US Legal System

Alternative Dispute Resolution

Constitutional Principles

International and Comparative Law

Crime and the Business Community

Tort Law

Negligence and Strict Liability

Product Liability

Liability of Accountants and Other Professionals

Intellectual Property

Introduction to Contracts

Agreement

Consideration

Capacity and Legality

Legal Assent

Contracts in Writing

Discharge and Remedies

Introduction to Sales and Lease Contracts

Title, Risk of Loss, and Insurable Interest

Performance and Obligations Under Sales and Leases

Remedies for Breach of Sales and Lease Contracts

Warranties

Negotiable Instruments: Negotiability and Transferability

Negotiation, Holder in Due Course, and Defenses

Liability, Defenses, and Discharge

Checks and Electronic Fund Transfers

Secured Transactions

Other Creditors Remedies and Suretyship

Bankruptcy and Reorganization

Agency Formation and Duties

Liability to Third Parties and Termination

Forms of Business Organization

Partnerships: Nature, Formation, and Operation

Partnerships: Termination and Limited Partnerships

Corporations: Formation and Financing

Corporations: Directors, Officers, and Shareholders

Corporations: Mergers, Consolidations, Terminations

Corporations: Securities and Investor Protection

Employment and Labor Law

Employment Discrimination

Administrative Law

Consumer Law

Environmental Law

Antitrust Law

The Nature of Property, Personal Property, and Bailments

Real Property

Landlord-Tenant Law

Insurance Law

Wills and Trusts

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