Deck 16: Third Parties to Contracts

Question 1

When the assignee gives consideration in exchange for an assignment, there is a contract between the assignor and the assignee that prevents the assignor from revoking the assignment without the assent of the assignee.

Answer 1

True

Question 2

In some states, the vesting of a third party's rights occurs only when the third party learns of the contract and assents to it.

Answer 2

True

Question 3

A delegation still leaves the one who delegated the duty responsible for performance of the duty.

Answer 3

True

Question 4

If a contract explicitly provides that it may be assigned, then rights under it are assignable even if the assignment would change the duty, risk, or burden of performance on the obligor.

Question 5

After an assignment, only the assignee has a right to the obligor's performance.

Question 6

Rights under an option contract are assignable.

Question 7

In general, an assignment includes an implied warranty that the assignor who receives value will do nothing to defeat or impair the assignment once it is delivered.

Question 8

An incidental beneficiary has a right to enforce a contract.

Question 9

To protect the obligor or the public interest, some contract rights are not assignable.

Question 10

A contract in which a party promises to render a certain performance not to the other party but to a third person is called a third-party beneficiary contract.

Question 11

Some states have statutes prohibiting an employee from assigning his future wages.

Question 12

When a partial assignment is made, the obligor may require all the parties entitled to the promised performance to litigate in one action any issues concerning the contract performance.

Question 13

The general rule is that an assignee stands in the shoes of the assignor.He acquires the rights of the assignor but acquires no new or additional rights.

Question 14

A gratuitous assignment is revocable by the assignor.

Question 15

In a third-party beneficiary contract, the third party's rights arise after the original contract is formed.

Question 16

A person who owes a duty under a contract is an obligee.

Question 17

UCC Article 9 requires certain assignments to be in writing.

Question 18

An intended donee beneficiary may enforce the contract against the promisor only.

Question 19

The person who makes an assignment is the assignee.

Question 20

A party delegating his duty to a third party is known as a delegator.

Question 21

Donee beneficiaries and incidental beneficiaries are called intended beneficiaries.

Question 22

A gratuitous assignment is revocable even after the assignor has made an effective delivery of the assignment to the assignee.

Question 23

An implied warranty is an obligation imposed by law upon the transferor of property or contract rights.

Question 24

A duty may not be delegated if there is an express provision in a contract against delegation.

Question 25

The State Opera Company has a contract with a famous tenor to perform in its production of La Boheme.If the singer chooses, he may delegate his duties under the contract to an equally well-known tenor.

Question 26

UCC Article 2 provides that, unless circumstances indicate otherwise, a contract term prohibiting "assignment of the contract" bars both the assignment of rights and the delegation of duties.

Question 27

An obligor may assert rights of setoff arising out of entirely separate matters that he might have against the assignor, as long as the matters arose before he had notice of the assignment.

Question 28

When the rights under a contract are highly personal, they are not assignable.

Question 29

Contract rights are generally assignable.

Question 30

Article 9 of the UCC makes ineffective any term in a contract prohibiting the assignment of any right to payment for goods sold.

Question 31

The UCC prohibits assignments of $5,000 or more.

Question 32

The Code prohibits waiver of defense clauses against assignees in contracts for the sale of goods.

Question 33

In England and in a minority of states, the first of two or more assignees to give notice to the obligor is entitled to the assigned performance.

Question 34

The student government of State University has a contract with a famous rock band to perform at the university on homecoming weekend.The band cannot assign its rights and delegate its duties under this contract.

Question 35

Consideration must be received for an assignment to be effective.

Question 36

Third party rights in contracts can arise by assignment of rights, delegation of duties, or in third party beneficiary contracts.

Question 37

The obligor must receive notice in order for an assignment to be valid.

Question 38

Assignment of rights may be a voluntary or involuntary transfer to a third party of the rights arising from a contract.

Question 39

Assignments that materially increase the risk, duty, or burden on the obligor will nonetheless remain effective and enforceable.

Question 40

In an assignment or delegation, the third parties' rights or duties arise after the contract is made.

Question 41

The transfer of a contract duty to a third party is known as a(n):

A)implied warranty.
B)assignment.
C)delegation.
D)novation.

Question 42

A transfer to a third party of a contractual obligation is known as a(n):

A)assignment of rights.
B)delegation of duties.
C)revocability of assignment.
D)partial assignment.

Question 43

Which of the following duties would not be delegable?

A)John has a contractual duty to pay Isaac $50.
B)Karl has a contractual duty to deliver 50 bushels of corn to Michael by October 1.
C)Jeffrey has a duty to mow Georgia's lawn at least once a week.
D)Arthur has a duty to teach an accounting class at a community college during the fall semester.

Question 44

A(n) __________ is a third party who obtains possible benefits but no rights under a contract.

A)incidental beneficiary
B)intended beneficiary
C)assignor
D)donee beneficiary

Question 45

Anita owes Brad $75,000.Brad signs a written statement granting Carl a gratuitous assignment of his rights from Anita.If Brad delivers the signed statement to Carl before he dies:

A)the delivery of the statement makes the assignment irrevocable.
B)the assignment is terminated upon Brad's death.
C)the signing of the statement makes the assignment irrevocable.
D)the assignment is invalid, because it is revocable.

Question 46

A(n) __________ is an intended beneficiary of a contract who receives the benefits of the contract as a gift.

A)incidental beneficiary
B)intended beneficiary
C)assignor
D)donee beneficiary

Question 47

Theresa has a contract to teach eighth grade at Washington Middle School.She decided she could make more money writing a book, so she assigns her teaching contract to her friend, Stephanie, who is also a licensed teacher.

A)This is both an assignment and a delegation.
B)The duties, which Theresa has delegated, are personal in nature.
C)If the school district agrees to accept Stephanie's services, a novation would occur, which would relieve Theresa of her obligation to the school district.
D)All of the above are correct.

Question 48

Courts will enforce contracts for the benefit of all but which of the following?

A)Donee beneficiaries.
B)Creditor beneficiaries.
C)Incidental beneficiaries.
D)Intended beneficiaries.

Question 49

Will wants to buy a new car.He goes to the bank to get a loan for the purchase, and signs an agreement to pay $10.00 per month in premiums on a term life insurance policy which names the bank as the recipient of the policy proceeds in the event of his death before the loan is repaid.The bank is a(n):

A)incidental beneficiary.
B)creditor beneficiary.
C)donee beneficiary.
D)assignee.

Question 50

A partial assignment is a transfer of a portion of the contractual rights to one or more assignees.

Question 51

The party to whom a contractual duty of performance is owed is known as the:

A)obligee.
B)obligor.
C)assignee.
D)assignor.

Question 52

Professor Doright has a life insurance policy on his own life that provides that in the event of his death, his mother will receive the proceeds.Professor Doright's mother is a(n):

A)incidental beneficiary.
B)creditor beneficiary.
C)donee beneficiary.
D)assignee.

Question 53

According to the Restatement, unless circumstances indicate the contrary, a contract term prohibiting assignment of the contract bars both the assignment of rights and the delegation to the assignee of the assignor's duty of performance.

Question 54

Stark enters into a contract with a contractor to build a large shopping mall in River City.Donner will greatly benefit from this contract since his convenience store is adjacent to the mall.Donner in this instance is:

A)an implied beneficiary.
B)a partial beneficiary.
C)a donee beneficiary.
D)an incidental beneficiary.

Question 55

A(n) __________ is a method of discharging a contract in which a third party becomes bound upon a promise to the obligee.

A)assignment
B)delegation
C)partial assignment
D)novation

Question 56

Unless otherwise provided by statute, an assignment may be made orally.

Question 57

Jeff's promise to marry Margaret cannot be transferred to a third party.

Question 58

Marlene owes Bailey $750 due June 1.Bailey assigns the debt to Greg on May 1, but neither Bailey nor Greg informs Marlene.On June 1, Marlene pays Bailey.Marlene must still pay Greg if Bailey does not turn over the money to Greg.

Question 59

When contract terms prohibiting the assignment of rights exist, most courts will:

A)strictly construe them.
B)interpret a general term prohibiting assignments as a mere promise not to assign.
C)award the obligor a right to damages for the breach of the terms forbidding the assignment.
D)All of the above.

Question 60

Which of the following is true about the vesting of an intended beneficiary's rights?

A)The promisor and promisee may provide that the benefits will never vest.
B)States are consistent in their rules as to when vesting occurs.
C)Vesting cannot require the third party to change position in reliance on the promise made for his benefit.
D)Regardless of whether an intended beneficiary's rights have vested, the promisor and promisee may, by later agreement, vary those rights.

Question 61

Heather owes Joe $2,000.On July 1, Joe assigns the debt to Noah.Thereafter on July 15, Joe assigns the same right to Deb, who in good faith gives value for it and knows nothing about the first assignee.Deb immediately notifies Heather of the assignment.Under:

A)the majority rule, Deb has priority.
B)the English Rule, a second assignment of the same claim can never be effective.
C)the English Rule, Deb has priority.
D)all of the rules, Noah has priority since he was the first assignee in time.

Question 62

Harold hired Blake Painters to paint his house.Blake decides he has too many jobs and delegates the duties to the Andrews Company.Andrews does a poor job, and drips paint on Harold's flowers and windows.Harold:

A)can sue both Blake and Andrews.
B)can sue Blake, but he cannot sue Andrews.
C)can sue Andrews, but he cannot sue Blake.
D)cannot sue, because he has accepted the benefits of the assignment.

Question 63

Which of the following involves a creditor beneficiary relationship?

A)A contract where the insured names a bank with which he has a loan as the beneficiary of a life insurance policy.
B)A contract between an employer and a union representing the employees which contract is made for the benefit of the employees.
C)A contract between the owner of a building and the contractor stating that the contractor will pay the contractor's employees at a specified rate.
D)A contract between a governmental unit and business for services to be rendered to area citizens.

Question 64

Which of the following involves an invalid assignment that a court would not enforce?

A)An assignment of a savings account accompanied by the delivery of the passbook.
B)An assignment lacking consideration.
C)An assignment of an automobile liability insurance policy accompanied by the delivery of the policy.
D)An assignment in writing signed by the assignor and delivered to the assignee.

Question 65

All but which of the following is true about a delegation of duties?

A)When the delegatee assumes the delegated duty, both the delegator and the delegatee are liable for performance of the contractual duty to the obligee.
B)Contractual duties are generally delegable.
C)The courts will examine an assignment more closely than a delegation.
D)A delegation will not be permitted if the nature of the duties are personal in that the obligee has a substantial interest in having the delegator perform the contract.

Question 66

Mary goes to her stockbroker, purchases 50 shares of stock, and instructs the broker to register the shares in her husband Warren's name.If this stock is intended as a Valentine's gift, Warren becomes:

A)a donee beneficiary.
B)a transferee.
C)a delegatee.
D)an assignee.

Question 67

Darrell owns a parcel of land that is encumbered by a mortgage held by the First National Bank.Darrell agrees to sell the land to Paul for $50,000.Darrell and Paul together go to the First National Bank to discuss the sale and purchase with the banker.Darrell, Paul, and the banker sign an agreement stating that Paul will assume the mortgage and that Darrell will be discharged from all further liability on the mortgage.In this case:

A)the bank is a third party donee beneficiary.
B)the bank can collect from Darrell if Paul defaults.
C)Darrell is a third party beneficiary of the agreement between Paul and the bank.
D)the agreement among the three is a novation.

Question 68

Which one of the following assignments would probably be prohibited by a court?

A)Mary is in debt.A credit card company calls and threatens to sue.Mary orally assigns her next bimonthly paycheck to her creditor.
B)John is a house painter.He is scheduled to paint Molly's home on Monday.John wakes up Monday morning with a stiff neck.He calls Ed, who is also a painter, to begin the job at Molly's.
C)Ron has a contract with Bonett Bank to service their coffee machines.He assigns the remainder of his contract with Bonett to Michelle, who also owns a coffee service.
D)All of the above.

Question 69

Wendell owes Liz $75,000.Liz signs a written statement granting Troy a gratuitous assignment of her rights from Wendell.If Liz dies prior to delivering the statement to Troy:

A)Liz's death has no effect on the assignment.
B)the assignment is terminated upon Liz's death.
C)the signing of the statement makes the assignment irrevocable.
D)the assignment is invalid, because it is gratuitous.

Question 70

Give an example of an assignment of rights and explain the relationship of the parties.

Question 71

The privilege to play tennis and socialize at the Capital City Country Club (CCCC) is obtained through application, references, resumes, and fees.Steven and Chanel want to assign the remaining 4 years of their 5-year membership to Charles and Prissy so that Steven and Chanel may join the posh Silver Hawk Tennis and Polo Club.CCCC sues to enjoin Steven and Chanel from assigning their membership.CCCC will probably:

A)not prevail because all contract rights are assignable.
B)prevail because the parties intended the contract to be personal and non-assignable.
C)not prevail because the membership contract constitutes a lease.
D)None of the above.

Question 72

List the implied warranties imposed by law on an assignor who has received value with respect to the assignee and the assigned right.

Question 73

Carlos, a contractor, and Lyle, a landowner, have a contract whereby Carlos is to perform routine construction services according to the blueprints that Lyle has provided.Carlos assigns the contract to David, a developer.As a result of this assignment:

A)Lyle can bring suit based upon detrimental reliance.
B)Carlos has no more rights or responsibilities with regard to the contract.
C)Carlos no longer has any rights under the contract, but he remains responsible for the duties he agreed to perform.
D)Carlos has all of his rights under the contract, but he has no responsibility for the performance of the duties.

Question 74

The Speelman v.Pascal case held that:

A)a gratuitous assignment is terminated by the assignor's death, even if the assignor made an effective delivery of the assignment prior to his death.
B)assignments of rights to sums that are expected to become due to the assignor are enforceable.
C)assignments cannot be made of sums that are not presently due but are expected to become due in the future.
D)personal contracts are not assignable.

Question 75

Which of the following is NOT true concerning the requirements for an effective assignment?

A)The assignment must be voluntary.
B)Consideration is required.
C)There must be an intention to make the assignee the owner of the right.
D)The assignment may be either written or oral.

Question 76

Under the Restatement, if there are successive assignments of the same right:

A)the first assignee to notify the obligor prevails.
B)the latest assignee is usually entitled to the assigned right.
C)a prior assignee is entitled to the assigned right to the exclusion of a subsequent assignee in most circumstances.
D)a subsequent assignee is entitled to the assigned right unless a prior assignee gave value and obtains either a judgment against the obligor or a new contract with the obligor.

Question 77

Discuss defenses available to the promisor in an action by an intended third-party beneficiary to enforce the promise.

Question 78

In which of the following situations is there a third party incidental beneficiary who would be unable to enforce the agreement?

A)Wholesalers, when the buyer of a business promises the seller that he will pay outstanding debts to wholesalers who have supplied inventory for the business.
B)Workers, where a contractor agrees to post a performance bond to assure payment of workers and material men.
C)A debtor, where a new partner enters an accounting firm and agrees to pay a share of debts incurred prior to his admission to the firm.
D)A doctor, when an automobile accident policy states that the insurance company will reimburse the insured for medical expenses incurred as a result of an automobile accident.

Question 79

Kellie owes a duty to Grant.Kellie delegates the duty to Hank.Hank:

A)is not obligated to either Kellie or Grant to perform the duty unless Hank agrees to do so.
B)becomes liable for nonperformance to both Kellie and Grant only if Hank promises both Kellie and Grant that he will perform Kellie's duty.
C)cannot create contractual rights in Grant.
D)All of the above.

Question 80

Barbara owes Arthur $2,000.On July 1, Arthur assigns the right to the $2,000 to Maud.Thereafter, on July 15, Arthur assigns the same right to Derek, who in good faith gives value for it and knows nothing about the first assignee.In this case:

A)Maud has the right to the payment of $2,000.
B)Derek has the right to the $2,000.
C)neither Maud nor Derek can claim the $2,000.
D)the rule differs in different states.Depending on which rule a state follows, the answer will vary.