Deck 17: Third Parties Contract Rights

Question 1

Annie buys a car from Bob's Motors. She then sells the car to Michael, who agrees to make the remaining payments Annie owes Bob's Motors. Bob's Motors is a creditor beneficiary of Annie, and can therefore recover the balance due only from her, and not from Michael.

Answer 1

False

Question 2

Edward owes Frank $100, payable in six months. Frank, who is leaving the country, gives his rights to the payment to Marge for $80. Which of the following is true about the scenario?

A) Frank is the obligor.
B) Edward owes Marge $80.
C) Edward owes Marge $100.
D) Frank will get $100 from Edward.

Answer 2

C
Explanation: The person who makes an assignment is called the assignor, and the person who accepts the assignment is called the assignee. After an assignment, the assignee is entitled to whatever performance the assignor had a right to under the original contract. The other original party to the contract (called the promisor or obligor) must render all performance to the assignee.

Question 3

Which of the following is a correct statement regarding the assignment of contractual rights?

A) Formalities are required to create an assignment.
B) The law does not recognize an oral assignment.
C) Consideration is generally required to create an assignment.
D) Contractual rights can be given away as well as sold.

Answer 3

D
Explanation: No particular formalities are required to create an assignment. It can be done orally or in writing, so long as the assignor's intent to assign is clear. In addition, consideration is generally not required. Rights can be given away as well as sold.

Question 4

Life insurance contracts are a common form of incidental beneficiary contract.

Question 5

Ronny contracted Smiths to supply a dress for his niece, Lucie, on her birthday. Since the dress was intended for Lucie, Ronny cannot modify the contract without her consent.

Question 6

The transfer of rights under a contract is referred to as a(n) _____.

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

Question 7

A remediation is a new, separate agreement by the promisee to release the original promisor from liability in exchange for a third party's agreement to assume the promisor's duties.

Question 8

A creditor beneficiary has rights against the promisee, but not the promisor.

Question 9

After an assignment, the assignee is entitled to whatever performance the assignor had a right to under the original contract.

Question 10

Which of the following contracts can generally be assigned in all states in the U.S.?

A) Assignment of future wages
B) Employment contracts
C) Contracts promising to deliver goods
D) Contracts involving personal rights

Question 11

Any assignment that would materially alter the duties of the promisor is unenforceable, because the promisor cannot be required to do something significantly more than, or different from, what he or she originally agreed to do.

Question 12

Only certain specified individuals, and not members of the general public, can be incidental beneficiaries of contracts.

Question 13

Incidental beneficiaries acquire no rights under the contract and so cannot sue for nonperformance.

Question 14

The person who makes an assignment is called the delegator.

Question 15

If the promisor's performance will satisfy a legal duty that the promisee owes a third party, the third party is a creditor beneficiary.

Question 16

A third person is a donee beneficiary if the promisee's primary purpose in contracting was to make a gift of the contracted performance to the third party.

Question 17

The term delegation refers to the transfer of:

A) personal rights.
B) duties.
C) property rights.
D) securities.

Question 18

Contracts involving personal rights are generally assignable.

Question 19

The transfer of duties under a contract is called an assignment.

Question 20

When rights under a contract are transferred, this is called a delegation.

Question 21

Susan wanted to give a diamond pendant to Lucy, her daughter. Susan entered into a contract with Andrew, a dealer who specializes in diamond jewelry. Susan had promised to pay him if he delivered the pendant to Lucy. Andrew withdrew from the contract and Lucy wanted to sue him. Which of the following statements is true in this scenario?

A) Lucy can sue Andrew as she is a creditor beneficiary of the contract.
B) Lucy can sue Andrew as she is a donee beneficiary of the contract.
C) Lucy cannot sue Andrew as she is an incidental beneficiary of the contract.
D) Lucy cannot sue Andrew as Susan's promise was gratuitous and therefore unenforceable.

Question 22

When a promisor appoints another person to perform his duties under a contract, _____.

A) it is called an assignment
B) it is called a delegation
C) it creates an incidental beneficiary
D) it creates a donee beneficiary

Question 23

Assignees should promptly notify the promisor of an assignment because the promisor who renders performance to the assignor without notice of the assignment:

A) is still liable under the contract.
B) has no further liability under the contract.
C) creates a novation.
D) can be sued by the assignee for nonperformance.

Question 24

A promisor who delegates duties is _____ if the party to whom the duties were delegated fails to satisfactorily perform them.

A) liable to the promisee
B) not liable to the promisee
C) liable for novation
D) liable to the creditor beneficiary

Question 25

A creditor beneficiary:

A) has rights against both the promisee and the promisor.
B) is the promisor in a performance that satisfies a legal duty.
C) acquires no rights under a contract and therefore cannot sue for nonperformance.
D) is the promisee who owes a legal duty to a third party.

Question 26

Which of the following statements is true of delegation of duties?

A) A promisor who delegates duties is not liable to the promisee if the party to whom the duties were delegated fails to satisfactorily perform them.
B) If the duty to be performed could be performed fully by many different persons, it is delegable.
C) All duties are delegable, like assignments.
D) If performance depends on the personal skill, it can be delegated.

Question 27

Zeta is contracted to perform a violin solo for Pat. Zeta assigns the contract to Roy. Which of the following statements is true about delegation of duty in this case?

A) This is a valid delegation of Zeta's duty as Zeta has entered into a novation with Roy.
B) This is a valid delegation of Zeta's duty because Zeta does not want to play for Pat.
C) This is not a valid delegation of Zeta's duty to play because all delegations must be expressly stated in the assignment contract.
D) This is not a valid delegation of Zeta's duty to play because the contract is one in which Zeta's personal skill as a musician is an essential part of the agreement.

Question 28

For an assigned claim to be valid, _____.

A) the assignor need not have the capacity to contract
B) the contract must not be voidable for any other reason known to the assignor
C) the contract must have been discharged once prior to the assignment
D) the assignee must have a good title to the rights assigned

Question 29

Which of the following is true of employment contracts?

A) They are generally assignable.
B) They are contrary to public policies.
C) They involve personal rights.
D) They involve the transfer of duties.

Question 30

Which of the following is an implied guarantee when an assignor is paid for making an assignment?

A) The promisor himself or herself does not have the capacity to contract.
B) The assignor has good title to the rights assigned.
C) The contract has been discharged two months prior to assignment.
D) Any oral statement representing the claim is genuine.

Question 31

Why are contracts prohibiting competition with a buyer of a business or an employer generally assignable with the sale of the business?

A) To protect the goodwill of the business
B) To protect the employees from losing their jobs
C) To protect the interest of the public
D) To protect wage earners from unwisely impoverishing themselves

Question 32

Which of the following statements is true of assignors?

A) An assignor who is paid for making an assignment is not liable to assignees for implied guarantees.
B) An assignor who wrongfully assigns the same claim more than once is not liable to an assignee as the assignee is later held to have acquired rights against the promisor.
C) An assignor does not impliedly warrant the solvency of a promisor.
D) An assignor who accepts performance from the promisor after the assignment does not hold any benefits he or she receives as trustee for his or her assignee.

Question 33

Assignments of future wages are not effective because they:

A) involve personal relationships.
B) are contrary to public policy.
C) materially alter the duties of the promisor.
D) involve personal rights.

Question 34

Once a donee or creditor beneficiary has accepted a contract, the original parties:

A) can cancel the contract if the original contract gives them the right to do so.
B) can cancel the contract without the third party's consent.
C) can modify the contract without the third party's consent.
D) can cancel only monetary contracts.

Question 35

Rocky was voted the most valuable player of his university's basketball team. Rocky:

A) can delegate his duties to another player.
B) cannot delegate his duties due to public policy.
C) cannot delegate his duties since they involve his personal skill.
D) can assign his duties to another player.

Question 36

A(n) _____ is a new, separate agreement by the promisee to release the original promisor from liability in exchange for a third party's agreement to assume the promisor's duties.

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

Question 37

Lydia's father has named Lydia in his will as the inheritor of his farm. He has also named her as a beneficiary in his insurance policy. Lydia is:

A) a donee beneficiary.
B) an incidental beneficiary.
C) the assignee by novation.
D) a creditor beneficiary.

Question 38

Unless an assignment agreement clearly indicates a contrary intent, courts today tend to interpret assignments as including a delegation of the assignor's duties. A promise on the part of the assignee to perform these duties:

A) is not implied.
B) is enforceable by either the promisor or the assignor.
C) depends on the policy followed by the public.
D) is not enforceable by the assignor.

Question 39

A donee beneficiary:

A) is a third-party beneficiary to whom a gift of the contracted performance is given.
B) is a third-party beneficiary who is no longer a part of an agreement.
C) is a third-party beneficiary who incidentally benefits from a contract.
D) is a third party beneficiary who cannot recover the value of the promised performance.

Question 40

Assignees:

A) are not entitled to the rights to a promisor's performance.
B) are not required to notify the promisor of the assignment.
C) can sue a promisor for nonperformance.
D) can acquire greater rights than an assignor.

Question 41

If a promisor's performance will satisfy a legal duty that the promisee owes a third party, the third party is a(n) _____.

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

Question 42

An incidental beneficiary can:

A) enforce a contract.
B) acquire rights under a contract.
C) be a member of the general public.
D) sue for nonperformance.

Question 43

Assignors who are paid for making an assignment are potentially liable to assignees for certain implied guarantees. These guarantees are imposed by law unless the assignment agreement clearly indicates to the contrary. What are these implied guarantees?

Question 44

With regard to contract law, what is an assignment?

Question 45

With regard to contract law, what is a delegation?

Question 46

The municipality of College Town enters into a contract with Wooster Inc. to have the town's roads repaired. Katie is a resident of College Town and will be considered a(n):

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

Question 47

GP Corp. had been contracted by the public services department of Kingston to install monitoring systems at all public places. This was to be done in two phases and the city had the right to terminate the contract. GP had plans to use a subcontractor, Rex, whom they usually hired for the last phases of projects executed by them. After two weeks of the work, the city of Kingston found that things were not going according to plan and terminated GP's contract. Under these circumstances:

A) Rex can sue the public services department of Kingston because he is a third-party donee beneficiary.
B) Rex cannot sue the public services department of Kingston because he is only an incidental beneficiary.
C) Rex can sue the public services department of Kingston because he is involved in a novation.
D) Rex cannot sue the public services department of Kingston because he is a creditor beneficiary.

Question 48

Nick, a builder, contracts with the city of Chicago to build a new convention center. Jack, a hotel owner, stands to benefit once the convention center is built. Jack decides to sue Nick if Nick backs out of the contract. Which of the following statements is true of this scenario?

A) Jack cannot sue Nick because he is an incidental beneficiary.
B) Jack can sue Nick because he is a donee beneficiary.
C) Jack can sue Nick because Jack is a citizen of Chicago.
D) Jack cannot sue Nick because he is a creditor beneficiary.

Question 49

Who is a donee beneficiary? Does he or she have the right to enforce a contract?

Question 50

An underground water main burst in Manhattan and flooded the building where Acme Inc. has an electricity supply substation. A fire resulted and disrupted electric power for four days. This occurred during the biannual "Buyers Week," when merchandisers from around the world were in town to visit fashion showrooms and place orders for future seasons. Around 200 merchandisers brought suit against Acme. Some of the businesses had no direct contractual relationship with Acme. They argued that their lease agreements with their landlords, who were the direct contracting entities with Acme, obligated them to pay a share of the electricity expenses and therefore they could sue under the contract agreement between the landlords and Acme. Are the demands of the businesses with no direct contractual relationship with Acme justified?