Deck 17: Third Party Rights

Question 1

The assignment of the same contract right to two different persons creates parallel and equal rights and obligations.

Answer 1

False

Question 2

Until the obligor has notice of assignment, the obligor can discharge his or her obligation by performance to any party.

Answer 2

False

Question 3

As a general rule, any duty can be delegated.

Answer 3

True

Question 4

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

Question 5

A transfer of contract rights to a third party is an incidental benefit .

Question 6

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

Question 7

An insurance policy cannot be assigned if the assignment will significantly alter the risks to, or the duties of, the insurer.

Question 8

On an assignment to a loan broker by an auto dealer of the payments due on an auto loan, the broker obtains only those rights that the dealer originally had.

Question 9

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

Question 10

Personal services are unique to the person rendering them, but the right to receive those services is not and can therefore be assigned.

Question 11

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

Question 12

After a transfer to a creditor by an investor of a right to receive payments on a business loan, the creditor can demand those payments from the borrower.

Question 13

If a statute expressly prohibits assignment, the particular right in question cannot be assigned.

Question 14

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

Question 15

If it were not possible to assign contract rights, many businesses could not continue to operate.

Question 16

In a contract for a sale of goods, the right to receive payment on an account may be assigned unless the sales contract prohibits such an assignment.

Question 17

In most states, the assignment of ownership rights in real estate cannot be prohibited because that would be contrary to public policy.

Question 18

Privity of contract establishes the basic principle that contracting parties have a right to privacy in the information expressed in their contracts.

Question 19

A bank's sale of its right to receive payment on a loan to a third party is a transfer but not an assignment.

Question 20

The unconditional assignment of rights under a contract extinguishes any defenses that the obligor had against the assignor.

Question 21

An obligee can legally refuse performance from a delegatee only if the duty delegated is one that cannot be delegated.

Question 22

Lau enters into a contract to mow Macy's yard every week for the summer. Macy sells her house and yard to Nona, and assigns the right to receive Lau's services to Nora. Macy is

A)the obligor.
B)a third party beneficiary.
C)the assignee.
D)the assignor.

Question 23

An accountant can delegate his or her contractual duty to another accountant, even if the contract expressly prohibits it, because accounting is a delegable skill.

Question 24

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

A)a delegation.
B)an assignment.
C)a third party beneficiary contract.
D)prohibited.

Question 25

Steel Mill Inc. and Transport Delivery LLC enter into a contract. UniOil Corporation will indirectly benefit from the deal. Under the principle of privity, UniOil has the right to

A)sue Steel Mill for breach.
B)require Transport to perform.
C)none of the choices.
D)demand performance from both original parties.

Question 26

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

Question 27

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

Question 28

Under an assignment of "all rights" on a contract, the assignor is absolved from any liability for performance under the contract.

Question 29

On a delegation of contract duties, the delegator is absolved from any liability for performance under the contract.

Question 30

When the performance of a contract depends on the personal skill of the obligor, a delegation of the duty is prohibited.

Question 31

Expressly designating a third party as a beneficiary in a contract indicates that the beneficiary is intended.

Question 32

A third party's right to control the details of performance of a contract indicates that the third party is an intended beneficiary.

Question 33

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

Question 34

A debt collector who is delegated the right to payments on a student loan owes no obligation to the debtor arising under the original terms of the loan.

Question 35

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

Question 36

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

A)extinguish the contract rights of the obligor.
B)demand performance of the deal from any of the original parties.
C)enforce the payment in court.
D)none of the choices.

Question 37

An incidental third party beneficiary cannot sue to enforce the contract because the benefit is unintentional.

Question 38

When the original parties to a contract agree that its performance should directly benefit a third party, that party can sue the promisor directly for breach.

Question 39

An investor cannot effectively object to the delegation of the selection of his or her investments under a contract with one financial advisor to another.

Question 40

Beau borrows $15,000 from Credit Center to buy a car. The lender assigns the right to receive the loan payments to Debt Collections Inc. If Beau does not pay the debt, the assignee can

A)extinguish the contract rights of the assignor.
B)demand performance of the deal from any of the original parties.
C)enforce the payment in court.
D)none of the choices.

Question 41

In a state in which a statute prohibits an employee from assigning the right to receive workers' compensation benefits, the employee can assign the right

A)if all interested parties consent.
B)if the employee is fully advised of his or her rights.
C)if there is no significant change to the obligor's risk or duties.
D)under no circumstances.

Question 42

If a contract stipulates that it cannot be assigned, then it cannot be assigned unless the assignment

A)involves ownership rights in real estate.
B)is contrary to public policy in most states.
C)is pursuant to a contract for a sale of goods.
D)operates only in favor of the concerned parties.

Question 43

Marlo and Nita enter into a contract for the sale of Marlo's apartment for which Nita agrees to pay $250,000. Nita assigns her right to buy the apartment to Owen. Owen is

A)the obligor.
B)a third party beneficiary.
C)the assignee.
D)the assignor.

Question 44

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

A)all states.
B)states that follow the English rule.
C)no state.
D)most states.

Question 45

Generally, the duties under a contract can be delegated

A)unless the contract expressly prohibits delegation.
B)unless the delegation involves only a payment of money on the deal.
C)unless the rights under the contract have previously been assigned.
D)under no circumstances.

Question 46

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

A)will not be effective until notice is given to Irma.
B)will become effective after thirty days even if no notice is given to Irma.
C)is effective immediately.
D)is invalid.

Question 47

Under a contract, an assignment of negotiable instruments

A)cannot be prohibited.
B)can be prohibited only by an anti-assignment clause.
C)can be prohibited only by the obligor.
D)is prohibited under any circumstances.

Question 48

For a price, Recycle LLC agrees to empty the dumpster behind Sushi Café. Recycle delegates this duty to Trash Inc. Sushi is

A)the obligor.
B)a third party beneficiary.
C)the obligee.
D)the delegatee.

Question 49

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

A)if all that remains on the deal is a payment of money.
B)if the contract is executory.
C)if the personal services are unique to the party rendering them.
D)under no circumstances.

Question 50

Retail LLC contracts with Paving Inc. to grade and pave a parking lot. The contract provides that it cannot be assigned without Retail's consent. Later, Paving assigns the contract to Roadwork Company without obtaining Retail's consent. Retail could most successfully argue that the contract cannot be assigned because

A)the assignment is prohibited by statute.
B)the contract is personal.
C)the assignment will materially change a risk.
D)the contract prohibits assignment.

Question 51

Laminate LLC agrees to buy factory equipment from Metalwork Company on the seller's misrepresentation that it meets certain specifications. Metalwork assigns the right to payment on the deal to Nations Credit Corporation. When the buyer discovers the fraud, the firm returns the equipment and cancels their contract. Laminate

A)must pay the entire contract price to Nations Credit.
B)need not pay any of the contract price to Nations Credit.
C)must reimburse Nations Credit for costs with respect to the assignment.
D)must pay a prorated amount of the contract price to Nations Credit.

Question 52

For a price, Rose agrees to unload the catch from fishing boats that dock at Seafood Shipping. Rose delegates this duty to Tina, who then owes performance of the duty to the warehouse. Tina is

A)the obligor.
B)a third party beneficiary.
C)the obligee.
D)the delegatee.

Question 53

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

A)unaffected.
B)extinguished.
C)conditional.
D)secondary.

Question 54

Ira owes Jess $1,000. Kerr owes Ira $1,000. Ira unconditionally assigns to Jess the right to Kerr's payment. Jess's right to the $1,000 is subject to the defenses that

A)Jess had against Ira.
B)Kerr had against Ira.
C)Ira had against Kerr.
D)none of the choices.

Question 55

Lew and Mavis enter into a contract for the clearing and plowing of Mavis's 350-acre tract for which she agrees to pay $1,000. Lew transfers his duty under this contract to Nye. With respect to the duties under the original contract, this transfer

A)does not relieve Lew of the potential obligation to perform.
B)extinguishes Lew's obligation to perform.
C)is an invalid transfer of a non-transferable obligation.
D)requires a special form to constitute a valid transfer.

Question 56

For a price, Ray agrees to unload trucks that make deliveries to Shoppers Warehouse. Ray delegates this duty to Tim, who then owes performance of the duty to the warehouse. Ray is

A)the obligor.
B)a third party beneficiary.
C)the obligee.
D)the delegatee.

Question 57

Beck and Call enter into a contract under which Beck agrees to cater Call's wedding. The contract expressly prohibits any transfer of rights without the assignee's consent. Call may transfer the right to receive Beck's services to Dion

A)if Beck consents.
B)if Call decides to use a different caterer.
C)if Dion is also getting married.
D)under no circumstances.

Question 58

If performance under a contract will vary materially on a delegation of its duties to a third party from that expected by the obligee, the delegation is

A)prohibited.
B)permitted on sufficient notice by the obligor.
C)permitted if the performance does not require the obligor's personal skill.
D)permitted if special trust has been place in the obligor.

Question 59

The rights under an insurance policy can normally be assigned

A)if the assignment involves only a payment of benefits.
B)if the assignment significantly changes the risk to the insurer.
C)if the assignment significantly alters the duties of the insurer.
D)under no circumstances.

Question 60

To create a valid delegation of duties requires

A)a special form.
B)the delegator's expressed intent to make the delegation.
C)the delegator's use of the word delegate .
D)none of the choices.

Question 61

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

A)not liable because Mesa is not named in Odell's contract.
B)not liable because Odell's contract was with New Construct, not Mesa.
C)liable on the ground that Mesa is an incidental third-party beneficiary.
D)liable on the ground that Mesa is an intended third-party beneficiary.

Question 62

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

A)Dockside only.
B)Eagle only.
C)Dockside or Eagle.
D)any interested third party, including a contracting party's employee.

Question 63

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

Question 64

Molly is a third party beneficiary under a contract between Ned and Otis. Ned and Otis can modify or rescind their contract to take away Moly's rights under the contract without her consent

A)at any time.
B)at no time.
C)after Molly's rights have vested.
D)before Molly's rights have vested.

Question 65

Apps LLC enters into a contract with Birk, the chief executive officer of Corporate Sales Inc., to create an app for the firm. To fulfill the contract, Apps hires Dave as a student intern. With respect to the app contract, Dave is

A)an intended beneficiary.
B)an incidental beneficiary.
C)a promisee.
D)a promisor.

Question 66

Desu, an accountant, and Engineers PA enter into a contract under which Desu agrees to perform audits for Engineers. Desu can delegate the duty to perform the audits to

A)any reputable accountant.
B)any accountant working at Desu's firm.
C)any accountant performing other financial services for Engineers.
D)no other party.

Question 67

Kip enters into a contract with Life Insurance Company for a policy that designates Mia as the beneficiary. Kip reserves the right to change the designated beneficiary. Mia's rights under the policy are

A)not affected by the reservation.
B)subject to any change that Kip makes.
C)subject to the first-in-time rule.
D)terminated by the reservation.

Question 68

Paolo borrows $5,000 from Quality Auto Sales to buy a car. When Paolo does not pay the loan or return the car, Quality wants to transfers the right to the payment to Rapid Collection Agency. Rapid agrees to pay Quality for this right, but for a price that is less than the amount owed. Can Quality transfer this right to Rapid without Paolo's consent? If so, and Quality committed fraud in the deal with Paolo, could Paolo legitimately refuse to pay Rapid? Explain.

Question 69

A contract between Max and Nye provides for an "assignment of all rights." Max "assigns the contract" to Olin. Because a court will normally construe this wording as implying both an assignment of rights and a delegation of duties, if Olin fails to perform

A)the contract is void.
B)the contract is discharged.
C)Nye is liable.
D)Max is liable.

Question 70

Beta contracts to design and deliver marketing materials to Cesar. Beta cannot delegate this duty to Devon

A)if performance depends on Beta's personal skill.
B)if the delegatee's performance will match the obligee's expectations.
C)if special trust has not been placed in the obligor.
D)under any circumstances.

Question 71

Jim and Kiel agree that Jim will fix the refrigeration unit in Kiel's Food Truck in exchange for payment of a debt that Jim owes to Lenders Bank. Under this contract, the intended beneficiary is

A)Kiel's Food Truck.
B)Lenders Bank.
C)Jim.
D)any customer, client, or employee of Kiel's Food Truck or Lenders Bank.

Question 72

Leo contracts to install watering troughs in Ken's dairy barn. When Leo becomes seriously ill, he contracts with Jay to do the work. Jay is unreliable and never shows up. Ken hires Ike to do the installation. To recover for any loss on the deal, Ken can sue

A)no one.
B)Jay or Ike.
C)Leo only.
D)Jay or Leo.