Deck 19: Third-Party Rights to Contracts

Question 1

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

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

Answer 1

Obligor

Question 2

Which of the following is a contractual party who agrees to receive something from the other party?

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

Answer 2

Obligee

Question 3

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.

Answer 3

True

Question 4

Creditor beneficiaries can enforce their rights under a contract whenever the contract is valid.

Question 5

Parties not in ______ usually do not have rights to a contract.

A) Acknowledged contract
B) Diverse contract
C) Privity of contract
D) Close contract
E) Privileged contract

Question 6

A donee beneficiary is a type of incidental beneficiary.

Question 7

An intended beneficiary is a third party to a contract who is intended to be directly benefited from the contract made by the contracting parties.

Question 8

Alice owned a condominium directly above Sam. Alice failed to take proper care of some plumbing problems, and on several occasions Alice's plumbing problems caused leaking into Sam's apartment resulting in property damage. Both Alice and Sam had signed a condominium association agreement providing that each tenant would pay for any damage caused; that the agreement could be enforced by the management of the association or, in a proper case, by an aggrieved owner; and that adherence to the agreement was required "for the benefit of the Association and any person acquiring or owning an interest in the property." The association itself refused to sue Alice in order to recover damages with which to reimburse Sam. Therefore, Sam sued Alice himself. She claimed that he had no standing to sue. Which of the following is the most likely result of the dispute if the court follows Allan v. Nersesova, the case in the text involving a similar issue?

A) That Sam could proceed but only if he could convince the association to join the lawsuit with his.
B) That Sam was an intended beneficiary of the agreement between Alice and the association; that he had standing to sue; and that under the terms of the agreement, the association's failure to act gave him the right to proceed.
C) That the agreement between Alice and the association addressed issues involving intentional wrongdoing, such as out-of-control parties, not issues involving utilities and that Sam, therefore, could not sue.
D) That Sam was an intended beneficiary of the agreement between Alice and the association but that he had no right to sue because he nevertheless lacked standing.
E) That Sam had standing based on the association's failure to act but that he nevertheless had no right to bring suit because he was not an intended beneficiary of the agreement between Alice and the association.

Question 9

Assignment of personal duties is generally permitted.

Question 10

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

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

Question 11

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

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.

Question 12

Which of the following was the result on appeal in Forest Commodity Corp. ("FCC") v. Lone Star Industries Inc., the case in the text in which the Forest Commodity Corp. denied that it violated a contractual nonassignability clause and claimed that it was entitled to recover on a breach of contract claim because the defendant did not fully perform?

A) The court ruled that FCC did not violate a nonassignability clause and that it was entitled to recover.
B) The court ruled that even though FCC violated the nonassignability clause, the nonassignability clause was against public policy; and FCC was allowed to recover.
C) The court ruled that even though FCC violated the nonassignability clause, the other party also violated a nonassignability clause resulting in FCC being able to recover its full claim.
D) The court ruled that FCC violated a nonassignability clause and was therefore unable to recover on its claim.
E) The court ruled that FCC violated a nonassignability clause but that because the other party also violated a nonassignability clause, FCC's recovery would be reduced by 50%, not completely barred.

Question 13

In Australia a third party can sue for breach of contract.

Question 14

There is no legally required wording to be used or forms to be filled out for assignments to be valid.

Question 15

Russia has modified the Russian Civil Code to reflect the freedom of assignments found in the American Uniform Commercial Code.

Question 16

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

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

Question 17

A donee beneficiary is a third party that benefits from a contract in which the promisor agrees to pay the promisee's debt in return for compensation plus interest.

Question 18

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

Question 19

What is the term for the party to a contract who transfers his or her rights to a contract to a third party?

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

Question 20

A contract stating "I assign all of my rights under the contract" will generally be construed to be an assignment of rights but not duties.

Question 21

A[n] ______ occurs when a party to a contract transfers his or her duty to perform to a third party who is not part of the original contract.

A) Transfer
B) Assignment
C) Delegation
D) Performance
E) Unenforceable occurrence

Question 22

The ______ in a third-party beneficiary contract is the party to the contract who made the promise that benefits the third party.

A) Promisee
B) Promisor
C) Obligor
D) Obligee
E) Assignor

Question 23

A[n] ______ is created when two parties enter into a contract with the intended end purpose of benefiting a third party.

A) Third-party beneficiary
B) Second-party beneficiary
C) First-party beneficiary
D) Assignment
E) Creditor Beneficiary

Question 24

Which of the following is a type of intended beneficiary?

A) Creditor, donee, and incidental
B) Donee and creditor, but not incidental
C) Incidental and creditor, but not donee
D) Creditor but not donee or incidental
E) Donee but not creditor or incidental

Question 25

Which of the following was the result in the case in the text Wesley Locke v. Ozark City Board of Education, in which an umpire was injured by an angry parent and sued claiming that he was an intended third-party beneficiary under a contract the defending board of education had with the Alabama High School Athletic Association requiring police protection which was not provided?

A) The umpire won as a matter of law because he was an intended third-party beneficiary to the contract between the defending school board and the athletic association, and the defendant had an absolute nondelegable duty to provide protection ensuring that no one was hurt.
B) The umpire won as a matter of law because although he was not an intended third-party beneficiary to the contract between the defending school board and the athletic association, the defendant had an absolute nondelegable duty to provide protection ensuring that no one was hurt.
C) The defending school board won as a matter of law because although the umpire was an intended third-party beneficiary to the contract, only the athletic association could proceed with a lawsuit.
D) The defending school board won as a matter of law because the umpire was not an intended third-party beneficiary to the contract.
E) The case was remanded for trial on the issue of whether adequate police protection was provided in view of the fact that the plaintiff was an intended third-party beneficiary to the contract between the school board and the athletic association.

Question 26

When parties include a[n] ______ clause in their contract, the parties are attempting to limit their ability to assign their rights under the contract.

A) Antiobligation
B) Antiassignment
C) Anticontract
D) Severability
E) Integration

Question 27

Which of the following is an exception to the general rule that rights to a contract cannot be assigned when a contract is personal in nature?

A) When the only part of a contract left to be fulfilled is the payment.
B) When nothing has been done on the contract at all.
C) When no more than half the contractual duties have been performed.
D) When no more than three-fourths of the contractual duties have been performed.
E) There is no exception because rights to a contract that is personal in nature may generally be assigned.

Question 28

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) 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 29

A[n] ______ beneficiary is a third party to a contract who is intended to be benefited directly from the contract made by the contracting parties.

A) Intended
B) Incidental
C) Preferred
D) Collateral
E) Ancillary

Question 30

Which of the following states that in the case of multiple assignments of the same right, the first assignee to give notice of assignment to the obligor is the party with rights to the contract?

A) The first-assignment-in-time rule
B) The last-assignment-in-time rule
C) The English rule
D) The French rule
E) The American rule

Question 31

Which of the following is true regarding oral assignments?

A) In some cases, assignments may be made orally.
B) Assignments, regardless of the terms, are not covered by the statute of frauds.
C) The UCC requires that assignments be in writing when the amount being assigned is greater than $1,000.
D) The UCC requires that assignments be in writing when the amount being assigned in greater than $1,500.
E) The UCC requires that assignments be in writing when the amount being assigned is greater than $2,000.

Question 32

Sally agrees to mow Paul's yard for $300 for the summer. Paul wishes to assign the contract to his grandmother. Sally objects because Paul's yard is very small while his grandmother's yard is over an acre. Which of the following is the correct legal outcome for the dispute between Sally and Paul?

A) Sally will win because Paul's attempted assignment would increase the duties to which she agreed.
B) Sally will win because all assignments are invalid without the obligor's consent.
C) Sally will win unless Paul paid her the $300 in advance in which case Paul will win.
D) Paul will win because he may validly assign the contract without Sally's consent.
E) Paul will win so long as he tells Sally about the assignment prior to the time she begins any performance whatsoever.

Question 33

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?

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 34

Which of the following states that in the case of multiple assignments of the same right, the first party granted the assignment is the party correctly entitled to the contractual right?

A) The first-assignment-in-time rule
B) The last-assignment-in-time rule
C) The English rule
D) The French rule
E) The American rule

Question 35

Which of the following, if any, is needed in order for an assignment to be valid?

A) UCC 2-301 Form
B) UCC 4-305 Form
C) Business 2-547 Form
D) Business 4-298 Form
E) No form is required.

Question 36

The ______ in a third-party beneficiary contract is the party to the contract who owes something to the promisor in exchange for the promise made to the third-party beneficiary.

A) Promisee
B) Promisor
C) Obligor
D) Obligee
E) Assignee

Question 37

A third party, who is not part of an original contract, but to whom duty to perform contained in the original contract is transferred is called a[n] _____.

A) Delegatee
B) Delegator
C) Assignor
D) Assignee
E) Transferor

Question 38

Which of the following is true regarding whether a contract may be assigned even in the presence of an antiassignment clause?

A) Assignments made by operation of law may be assigned, but no other assignments may be made in the presence of an antiassignment clause.
B) Assignments for the right to receive monetary payments may be assigned, but no other assignments may be made in the presence of an antiassignment clause.
C) Assignments made by operation of law, assignments for the right to receive monetary payments, and assignments for the right to receive damages for a breach of contract to sell goods or services may be assigned even in the presence of an antiassignment clause.
D) No contractual rights or duties may be assigned in the presence of an antiassignment clause.
E) Antiassignment clauses are void as against public policy and have no effect on the right of assignment.

Question 39

A party to a contract who transfers his or her duty to perform to a third party who is not part of the original contract is called a[n] _____.

A) Delegatee
B) Delegator
C) Assignor
D) Assignee
E) Transferor

Question 40

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

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 41

Which of the following is a consideration of courts in determining whether a person is an incidental or intended beneficiary?

A) The courts ask if a reasonable person in the position of the party in question would believe the contracting parties intended to benefit the party in question.
B) The courts ask if it is substantially certain that the contracting parties intended to benefit the party in question.
C) The courts ask if it can be proven beyond a reasonable doubt that the contracting parties intended to benefit the party in question.
D) The courts ask if the party in question paid something for the rights.
E) The courts ask if the party in question paid at least $500 for the rights.

Question 42

Which of the following is true regarding an assignee's acceptance of assigned rights?

A) A creditor beneficiary must accept assignment of rights, but there is no requirement that a donee beneficiary do so.
B) A donee beneficiary must accept assignment of rights, but there is no requirement that a creditor beneficiary do so.
C) An assignee must agree to accept assigned rights, and there is a strict protocol for doing so.
D) An assignee may decline an assignment if he has not agreed to it and declines in a timely fashion after learning of it.
E) An assignee may only decline an assignment if a delegation of duties is also involved.

Question 43

Creditor beneficiaries can enforce their rights under a contract whenever the contract is _____.

A) Fair
B) Incidental
C) Valid
D) Substantial
E) Recognizable

Question 44

Which of the following references the maturing of rights such that a party can legally act on the rights?

A) Absoluting
B) Gelling
C) Forming
D) Vesting
E) Finishing

Question 45

"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 Belinda sues Michelle for the $10,000 payment?

A) Belinda will win only if Fred did a good job on the portraits.
B) Belinda will win regardless of what type of job Fred did on the portraits so long as he was a qualified portrait painter.
C) Belinda will win because Fred was employed as her assistant.
D) Belinda will win because the contract did not contain an express provision prohibiting assignment or delegation of contractual rights and duties.
E) Michelle will win because the portrait was personal in nature and could not be assigned.

Question 46

"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?

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 47

"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 Michelle for the $10,000 payment?

A) Fred will win only if Fred did a good job on the portraits.
B) Fred will lose because Michelle's only obligation is to pay Belinda.
C) Fred will win unless Michelle can prove that Fred knew that she did not want him to do the portraits.
D) Fred will lose unless Fred can prove that he was unaware that Michelle did not want him to do the portraits.
E) Michelle will win because the portrait was personal in nature and could not be assigned.

Question 48

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

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

Question 49

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

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 50

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

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 51

"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?

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.

Question 52

When a donee beneficiary may enforce rights under a contract, it may be done so only against the ____.

A) Promisee
B) Promisor
C) Obligor
D) Initial contracting parties
E) Assignee

Question 53

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.

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

Question 54

What was the ruling of the court in the Case Opener involving a lawsuit by fans seeking a refund based upon the Tyson and Holyfield fight being stopped in the third round because Tyson bit off a piece of Holyfield's ear?

A) The fans were not allowed to recover because they were incidental beneficiaries.
B) The fans were not allowed to recover because they were donee beneficiaries.
C) The fans were not allowed to recover because they were assigned donees.
D) The fans were allowed to recover because they were creditor beneficiaries.
E) The fans were allowed to recover because they were intended third-party beneficiaries.

Question 55

"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 Billy's claim that he had no duty to pick up the paint cans?

A) Billy is correct because he validly delegated that duty to Billy.
B) Billy is incorrect because the job was a personal service, and he had no right to assign either rights or duties under the contract.
C) Billy is incorrect but only because the job was for under $1,000.
D) Billy is correct only because Richard properly painted the house and was, therefore, responsible for ancillaries. If Richard had improperly painted the house, Billy would have had remaining duties.
E) Billy is incorrect because his delegation did not affect his obligation to Jan.

Question 56

"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?

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 57

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.

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

Question 58

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

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

Question 59

"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.



-What would be the likely result of a lawsuit brought by Richard against Jan to recover the $800?

A) Richard will win because Jan accepted the risk that the contract would be assigned.
B) Richard will win only so long as Billy has not been declared bankrupt because Jan will be able to recover the amounts at issue from Billy.
C) Richard will win only so long as the assignment was for an amount under $1,000.
D) Jan will win because she had no notice that the contract had been assigned and could, therefore, legally pay Billy.
E) Jan will win only so long as the assignment was for an amount over $500.

Question 60

"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 would be the likely result if Sam sues Trudy for the $40 she owes him for the book?

A) Sam will win because Trudy cannot avoid her obligations through a delegation.
B) Sam will win but only because he was not aware of the assignment.
C) Sam will win but only because the contract was for an amount under $1,000.
D) Sam will win only if Betty cannot be found for service of process.
E) Trudy will win because she delegated the duty of payment to Betty.

Question 61

Lists four situations under which contractual rights cannot be assigned.

Question 62

List and discuss two reasons why notice of assignment should be given.

Question 63

"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.



-What type of third-party beneficiary is Sally?

A) Intended and donee
B) Creditor and incidental
C) Intended and creditor
D) Donee and incidental
E) Creditor and donee

Question 64

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

Question 65

Assuming the parties live in a jurisdiction that allows donee beneficiaries to enforce rights under a contract, against whom may a donee beneficiary enforce rights and why?

Question 66

Maurice is excited because a developer plans a subdivision full of high priced homes that will adjoin his property. Maurice is so pleased that he puts in a new swimming pool to celebrate. Maurice believes that the subdivision will significantly increase the value of his property. The developer, however, changes his mind and decides not to develop the subdivision. Maurice is angry and asks if he can sue the developer, particularly since he can establish reliance. What would you tell Maurice and why? Discuss whether you agree with the law on this issue and why or why not.

Question 67

"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 would be the likely result if Sally sues Trudy and Bob for the $40 promised to her for her birthday?

A) Sally will win as to both because they are equally liable to provide the funds.
B) Sally will win as to Bob but win as to Trudy only if she can prove that Bob is insolvent and unable to pay.
C) Sally will win as to Bob but win as to Trudy only if she can prove that she cannot find Bob in order to serve process on him.
D) Sally will lose as to both Trudy and Bob because promises to give gifts are unenforceable in the absence of reliance.
E) Sally will lose as to Trudy because Trudy had no obligation to go through with the gift, but she will win as to Bob.

Question 68

"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.



-What type of third-party beneficiary is Sam?

A) Intended and donee
B) Creditor and incidental
C) Intended and creditor
D) Donee and incidental
E) Creditor and donee