Deck 12: Third Parties, Discharge, and Remedies

Question 1

Miko and Gina enter into a written contract. If Miko assigns her part of the agreement to Teresa and Teresa tells Gina of the assignment, Miko is bound by an implied warranty that Gina will respect the assignment.

Answer 1

True
Explanation: The assignor is bound by an implied warranty that the obligor will respect the assignment and make the performance, as required by the original agreement between the assignor and the obligor.

Question 2

Jackson transfers his business accounts receivable to Friendly Finance Company. Friendly would be considered the assignee.

Answer 2

True
Explanation: This is an assignment. The parties to an assignment are the assignor (party who assigns rights or delegates duties), the assignee (outside third party to whom the assignment is made), and the obligor (the remaining party to the original agreement).

Question 3

If a time for performance is not stated in the contract, then the contract must be performed immediately.

Answer 3

False
Explanation: When the time for performance is not stated in the contract, the contract must be performed within a reasonable time. A reasonable time is the time that may fairly, properly, and conveniently be required to do the task that is to be done, considering attending circumstances.

Question 4

A third party is an individual who is affected by a contract but who is not one of the contracting parties.

Question 5

Quantum meruit damages are token damages awarded to parties who have experienced an injury to their legal rights, but no actual loss.

Question 6

An incidental beneficiary is an outside party that can legally enforce the contract made by those in privity of contract.

Question 7

Jackie's mortgage payment to Commerce Bank was due on June 1. On May 31, Jackie received a notice that her mortgage had been assigned to Brown Investments. Jackie is allowed a reasonable time to verify that an assignment has been truly made.

Question 8

If due notice has been given and the obligor makes payment to the assignor, the obligor is excused from making payment to the assignee.

Question 9

Only two parties are associated with any assignment-the assignor and the obligor.

Question 10

If Ann is named as a donee beneficiary on Carl's life insurance policy, Ann can sue the insurance company if it fails to pay her when Carl dies.

Question 11

When an assignment occurs, the assignee assumes the contractual obligations previously held by the assignor.

Question 12

Under modern law, court-issued injunctions are typically temporary, and can never be permanent.

Question 13

Promising to pay when goods are delivered is an example of a condition subsequent.

Question 14

When no consideration is given for an assignment, creditors of the assignor may have the assignment rescinded on the grounds that it is a fraudulent conveyance.

Question 15

An anticipatory breach occurs when a party to a contract expresses or clearly implies an intention not to perform to contract, even before being required to act.

Question 16

The satisfactory performance by a car dealer of a contract for the purchase of a new car would be judged by a subjective standard.

Question 17

A transfer of a contract right is called a delegation.

Question 18

Stella contracts to purchase Wilma's horse, Running Cloud, for $10,000. The horse dies soon after the contract is signed, but prior to Stella taking possession of the horse. Stella is still obligated to pay for the horse.

Question 19

Sue is selling her home to Ben and wants to be released from her mortgage obligation to Bigger Bank. Sue, Ben, and Bigger Bank may enter a novation.

Question 20

The assignee should always give notice of assignment to the obligor, to protect against subsequent assignments.

Question 21

Time Zone sells Gary an iWatch for $4,000 by representing it has a real gold case and watch band. Later, Gary finds that the iWatch case and band are just polished with golden color, and the watch could be bought in the local store for $100. Gary can sue Time Zone for:

A) consequential damages.
B) exemplary damages.
C) nominal damages.
D) speculative damages.

Question 22

Which of the following is true of "time for performance"?

A) When there is nothing to indicate in the contract that time is of importance, the court will allow additional time.
B) Including the phrase "time is of the essence" in a written contract has no effect on the contract.
C) When the time for performance is not stated in the contract, the contract must be performed within a reasonable time.
D) When there is something special about the contract that indicates time is essential, additional time is allowed.

Question 23

Which of the following beneficiaries has no enforceable legal rights?

A) Donee beneficiary
B) Incidental beneficiary
C) Creditor beneficiary
D) Insurance beneficiary

Question 24

Which of the following is an equitable remedy under contract law?

A) Injunction
B) Monetary damages
C) Human servitude
D) Specific damages

Question 25

Morey and Sheryl enter into a contract in which Morey agrees to pay Sheryl $40 to collect his mail while he is on a month-long vacation. Sheryl then delegates the duty to her son, Greg. In this delegation, Sheryl is the:

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

Question 26

____________ occurs when one party makes false statements or commits some sort of false action that causes another party to rely on those falsehoods and then experience an injury or loss as a result.

A) Abandonment of contractual obligation
B) Fraudulent misrepresentation
C) Anticipatory breach
D) Constructive breach of contract

Question 27

____________ performance occurs when a party, in good faith, executes all promised terms and conditions with the exception of minor details that do not affect the real intent of their agreement.

A) Complete
B) Satisfactory
C) Partial
D) Substantial

Question 28

Joe pays for his food at the drive-thru window as he receives it. The payment and the receipt of the food are ____________ conditions.

A) precedent
B) concurrent
C) subsequent
D) spontaneous

Question 29

John, a highly skilled mechanic specializing in Jabooti motorcycles, agrees to repair Gladys' Jabooti's motorcycle, but when he becomes ill, he transfers that responsibility to Clark, a friend of his. The transfer to Clark is called a(n):

A) assignment.
B) delegation.
C) novation.
D) conveyance.

Question 30

____________ occurs when a party to a contract either expresses or clearly implies an intention not to perform the contract, even before being required to act.

A) Frustration-of-purpose
B) Abandonment of contractual obligations
C) Commercial impracticability
D) Anticipatory breach

Question 31

Which of the following is true of consequential damages?

A) They result from a breach due to special circumstances that exist with a particular contract.
B) They are the sum of money equal to the real financial loss suffered by the injured party.
C) They cover any expenses paid out by the innocent party to prevent further loss.
D) They are awarded as a measure of punishment for the defendant's wrongful acts.

Question 32

Better Houses, Inc. has been contracted to build an addition on the Joyners' house. It built half of the addition and then unexpectedly announced that it was not going to finish the job. Better Houses' decision to stop the job is called a(n):

A) constructive breach of contract.
B) substantial performance.
C) abandonment of contractual obligations.
D) repudiation of contract.

Question 33

____________ requires that both the parties return to the other any consideration already received or pay for any services or materials already rendered.

A) Termination by waiver
B) Novation
C) Mutual rescission
D) General release

Question 34

Tom and Nancy enter into a written contract for the sale of a dollhouse that Tom will custom-make for Nancy. In the contract, Nancy agrees to pay $350 if she breaks the contract. This sum of money is known as:

A) mitigation of damages.
B) speculative damages.
C) equitable remedy.
D) liquidated damages.

Question 35

Aspen assigns his right to receive payment from Donna to Henry. Later, Aspen assigns this same right to Doris. Doris gives notice to Donna on May 1, and Henry gives notice to Donna on May 2. Which of the following is most likely to be the court's ruling?

A) Since Henry was the first assignee, he will be given the superior right to claim Aspen's benefits.
B) Since Doris was the first to notify Donna, she will be given the right to claim the assigned benefits.
C) Henry and Doris are joint assignees and will be given equal rights to claim the assigned benefits from Donna.
D) Donna will be required to pay to Aspen, who in turn will be asked to make respective payments to Doris and Henry.

Question 36

A(n) ____________ is a new agreement resulting from a bona fide dispute between the parties as to the terms of their original agreement.

A) mutual rescission
B) accord and satisfaction
C) novation
D) termination by waiver

Question 37

Satisfactory performance:

A) is either an express or implied condition of every contract.
B) exists when parties fully accomplish every term, condition, and promise to which they agreed.
C) exists when a party executes all the terms, except minor details that do not affect the contract's real intent.
D) terminates an agreement, freeing the parties of any further obligation or liability.

Question 38

Jo is duly notified that her mortgage with Fund All Savings has been transferred to Big Loan Co. and that she should, henceforth, pay Big Loan Co. Jo continues to pay Fund All Savings and Big Loan Co. sues Jo for nonpayment. Which of the following is most likely to be the court's judgment?

A) Jo is not liable to Big Loan Co., since she has already paid to Fund All Savings.
B) Jo is liable to Fund All Savings and to Big Loan Co., since her mortgage has been transferred.
C) Jo is liable to Fund All Savings, since her mortgage was processed by them.
D) Jo is liable to Big Loan Co., since she received a notice from them about the assignment.

Question 39

Henry borrows money from Commerce Bank to purchase a house. However, he moves to another city to attend graduate school and sells the house to Maria. Henry wants to be released from his payment obligations to Commerce Bank. Which of the following would release Henry from his liability to Commerce Bank?

A) A delegation of the payment obligation by Henry to Maria will release Henry from liability.
B) The sale of the house by Henry to Maria involuntarily releases his payment obligation.
C) A delegation of the payment obligation to Maria along with a written notice to Commerce Bank can release Henry from the liability.
D) A novation in which Commerce Bank agrees to substitute Maria for Henry will release Henry.

Question 40

Claudia contracts with Friendly Paving Co. to install a new driveway. To pay for this work, Claudia transfers to Friendly Paving Co. her right to receive payment from Clifford for a loan she made him. Friendly Paving Co. is now a(n):

A) creditor beneficiary.
B) donee beneficiary.
C) executor.
D) fiduciary.

Question 41

Alphonse owes huge debts to many creditors. A month before filing for bankruptcy, he distributes all of his assets to his church. Discuss the case.

Question 42

Roxta Biscuits and Seven Eleven Supermarkets enter a contract where the biscuit-making company will supply 1,000 biscuit packs a day at $50 each to the supermarket chain for the next six months. However, Roxta Biscuits stops their supplies to the supermarkets mid-way, claiming that the prices of each biscuit pack, due to severe inflation, are $80. If Roxta continued to deliver at $50, it would lose $20 per biscuit pack it delivered. Seven Eleven Supermarkets sues Roxta, saying that it has to oblige by the contract signed. Evaluate the case.

Question 43

Jennifer contracts to purchase Allison's house when Allison is transferred out of the state. The contract calls for monthly payments, but allows Jennifer to pay the remaining balance at any time. Jennifer, on June 1, sends Allison an offer to pay the balance. Allison receives the offer on June 2, but sets it aside until October 1. When Allison realizes that Jennifer has not made any payments for four months, she threatens to sue Jennifer for breach of contract. Discuss the legal rules governing this situation.

Question 44

The City of Newburyport contracted with Ace Paint Contractors for the repainting of a steel bridge. The contract specifically called for the use of a particular brand of paint called Nopeel Paint. It was later discovered that Ace used another brand of paint. Discuss the situation if Nopeel Paint decides to bring a lawsuit against Ace Paint Contractors.

Question 45

Norbert receives an official-looking written notice which states that Mountain Mortgage Inc., from whom he had borrowed money to purchase his house, has assigned Walter all rights to receive payment and that Norbert should make all future mortgage payments to Walter. Discuss Norbert's rights and duties.

Question 46

Tibbetts left a television with Quick Fix, Inc. for repair. Quick Fix made tests and diagnosed the problem, but never began the actual repairs. Nothing was done on the set for more than three months. After repeated telephone calls demanding that the work be done, Tibbetts asked for the return of the set. Quick Fix refused to give up the set unless Tibbetts paid for the time spent on making the tests. Discuss the case.

Question 47

Basic Carpet contracts to install stain-resistant carpet in Alice's house for $6,000. Basic Carpet then assigns the right to receive payment from Alice to Home Finance Company. When payment comes due, Alice refuses to pay more than $2,000, asserting that the installed carpet was not stain-resistant. Home Finance asserts that Alice must pay $6,000, since Home Finance was not responsible for installing the carpet. Alice decides to sue Basic Carpet. Discuss the case.

Question 48

Martin entered into a written contract to sell Anna his football card collection for $10,000, payable in five installments. Martin then orally told Cathy that she could collect the proceeds of his sale. Discuss Cathy's legal rights.

Question 49

Dash's auto insurance policy requires that he file a written notice of a claim with the insurance company within ten days of any damage in an auto accident or the insurance company may refuse to pay the damage claim. Dash has several accidents and always simply orally reports the damage to the insurance agent, and the insurance company pays the claim; however, on this occasion, after his failure to file a written notice of the claim, the company refuses to pay the claim. They cite the express language of the insurance policy. Is the insurance company correct? Discuss.

Question 50

Lisa did not deliver goods in 1992 as her contract with Jozell required, but Jozell took no legal action for fifteen years and then sued Lisa for breach of contract. Discuss the suit.