Deck 17: Third Parties Contract Rights

Question 1

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

Answer 1

False

Question 2

Which of the following statements is true about assignment of contracts?

A) An assignment represents the transfer of duties to assignees.
B) An assignment cannot be done orally.
C) An assignee is not entitled to the performance that the assignor had a right to under the original contract.
D) A promisor must render all performance to the assignee.

Answer 2

D
Explanation: 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

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 3

False

Question 4

Public policy can prevent the delegation of duties.

Question 5

Life insurance contracts give the insured the right to change the beneficiary,but only with the beneficiary's consent.

Question 6

Assignors who are paid for making an assignment are potentially liable to assignees for certain implied guarantees.

Question 7

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

Question 8

The term delegation refers to the transfer of:

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

Question 9

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 10

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

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

Question 11

Employment contracts are generally assignable.

Question 12

To make a third party a donee beneficiary,making a gift of the contracted performance must be the promisee's primary purpose in contracting.

Question 13

The promisor who delegates duties is not liable to the promisee if the party to whom the duties were delegated fails to satisfactorily perform them.

Question 14

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.

Question 15

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

Question 16

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 17

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

Question 18

A promisor who renders performance to the assignor without notice of the assignment bears liability under the contract.

Question 19

As a general rule,assignments that do not involve personal relationships or increase the promisor's burden are enforceable.

Question 20

If a third party only incidentally benefits from a contract and was not an intended beneficiary,he or she is an incidental beneficiary and cannot enforce it.

Question 21

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 22

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 23

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 24

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 25

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 26

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 27

Assignments of future wages are not effective because:

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

Question 28

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 29

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 30

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 31

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 32

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 33

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 34

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 35

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 36

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 37

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) cannot be sued by the assignee for nonperformance.

Question 38

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 39

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 40

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 41

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 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

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 44

What is an implied guarantee?

Question 45

Explain what types of contracts are assignable and name the types of contracts that are not assignable.

Question 46

Ford owned an apartment complex and was converting the complex to a cooperative by selling individual units.Each purchaser was required to pay Ford an extra $30 per month for utilities,taxes,and insurance.Ford sold all his rights in the complex to Roberts and assigned the purchasers' contracts to him.Roberts failed to pay the applicable property tax,and Crowe,a purchasing tenant,sued him to compel payment of the tax.Roberts argued that in purchasing Ford's interest,all he bought was the right to collect the payments made by tenants and that he assumed no duties.Is Roberts liable for the property tax?

Question 47

Who is a creditor beneficiary? Can he/she enforce a contract?

Question 48

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?

Question 49

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 50

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.