Deck 16: Third Party Rights

Question 1

It is legally necessary to notify the obligor of any assignment of rights to a third party.

Answer 1

False

Question 2

The assignment of the same contract right to two different parties automatically cancels both assignments.

Answer 2

False

Question 3

A transfer of contract rights to a third person is generally prohibited.

Answer 3

False

Question 4

In an assignment, the assignee obtains only those rights that the assignor had.

Question 5

Privity of contract establishes the basic concept that third parties have no rights in contracts to which they are not parties.

Question 6

An assignee's rights are subject to the defenses that the obligor has against the assignor.

Question 7

A transfer of contractual rights to a third party is an assignment.

Question 8

An assignment of rights in real estate often cannot be prohibited.

Question 9

No contract can prohibit delegation of the duties of the contract.

Question 10

When rights under a contract are assigned unconditionally, the rights of the assignor are extinguished.

Question 11

As long as a contract is personal in nature, all rights under the contract can be assigned.

Question 12

A valid delegation of duties relieves the delegator of the obligation to perform under the contract.

Question 13

In most cases, a contract that prohibits its assignment cannot be assigned.

Question 14

In an assignment, the party receiving the rights is known as the assignor.

Question 15

Banks may not assign their loan contracts to other firms.

Question 16

Rights to receive funds can be assigned.

Question 17

An insurance policy is an example of a right that can be assigned.

Question 18

A right can be assigned even if the assignment will significantly alter the risks or duties of the obligor.

Question 19

As long as a contract is personal in nature, all rights under the contract can be assigned.

Question 20

An assignee has a right to demand performance from the obligor.

Question 21

Revenue & Sales Corporation and Software Solutions, Inc., enter into a contract for the design of custom software for which Revenue & Sales agrees to pay $4,500. Software Solutions transfers the right to payment under the contract to Creditline Company. Creditline is

A) an assignor.
B) an assignee.
C) an obligee.
D) a delegate.

Question 22

If a contract requires that performance be rendered directly to a third party, the third party is an intended beneficiary.

Question 23

An "as?signment of all rights" creates an assignment of rights but not a delegation of duties.

Question 24

A transfer of contract duties to a third party is an assignment.

Question 25

Intended beneficiaries can sue to enforce a contract.

Question 26

There are no exceptions to the rule that any duty can be delegated.

Question 27

An incidental beneficiary can sue directly to enforce a promisor's promise.

Question 28

No contract can prohibit delegation of the duties of the contract.

Question 29

The rights of a third party bene?ficiary under a contract vest if the third party materially changes his or her position in justifiable reliance on the promise.

Question 30

Regional Steel, Inc., and Overland Transport Company enter into a con?tract. Smooth Oil Corporation, which will indirectly benefit from the deal, is prevented from having rights under the contract by the principle of

A) assignment.
B) delegation.
C) privity.
D) vesting.

Question 31

Any beneficiary who is not deemed an intended beneficiary is considered incidental.

Question 32

All that a delegator needs to do to make a delegation effective is to express an intention to make the delegation.

Question 33

Vested is the condition in which rights have taken effect and cannot be taken away.

Question 34

Both intended and incidental beneficiaries acquire legal rights in a contract.

Question 35

A delegator is a party who transfers his or her obligation under a contract to another party.

Question 36

Jayson and MaryElise enter into a contract. Jayson agrees to mow MaryElise's yard every week for the summer. MaryElise is the

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

Question 37

Stephanie's sale of rights she has under a contract with Runway Retail, Inc., to buy the retailer's clothing overstock is

A) a delegation.
B) an assignment.
C) a third party beneficiary contract.
D) none of the choices.

Question 38

If a contract does not require that performance be rendered directly to a third party, the third party is an intended beneficiary.

Question 39

A life insurance contract involves an intended beneficiary.

Question 40

Robert enters into a contract with Claire. Claire agrees to paint Robert's living room for $500. Claire is the

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

Question 41

Grady and Hannah contract with Isaac to transfer the ownership of Grady and Hannah's Mesa Ranch to Isaac. This is

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

Question 42

Eli owes Martin $10,000. Martin assigns the claim to Jack. Jack does not notify Eli of the assignment. A week later, Martin assigns the same claim to Allen. Allen immediately notifies Eli of the assignment. Jack

A) has priority to payment in all states.
B) has priority to payment in states that follow the English rule.
C) does not have priority to payment in any state.
D) has priority to payment in most states.

Question 43

Animal Feed Corporation and Beneficial Trucking, Inc., enter into a contract for Beneficial to transport a truckload of hay for which Animal Feed agrees to pay. Due to schedule conflicts, Beneficial contacts Crop Transport Company, to which Beneficial "assigns all rights under the contract." This transfer is

A) an assignment and a delegation.
B) an alienation and a negotiation.
C) an obligation and a cancelation.
D) prohibited.

Question 44

Richly Merchandise, Inc., contracts with Stand-Rite Contractors to build a store. Stand-Rite assigns the contract to Town Builders, which has a poor record of completing projects. Richly could most successfully argue that the con?tract cannot be assigned because

A) Richly did not consent to the assignment.
B) Richly did not receive adequate consideration for the assignment.
C) the assignment will materially increase the risk of nonperformance.
D) Town Builders was not an original party to the deal.

Question 45

Pat, a world famous musician and composer, agrees to give ten piano les?sons to Quinn in exchange for $1,000. Pat's attempt to delegate his con?tract to Ruth, an in?experienced pianist, will probably be

A) permitted because contracts may be freely delegated.
B) permitted because the contract is concerned with music lessons.
C) prohibited because contracts may not be freely delegated.
D) prohibited because Pat and Ruth have very different skill levels.

Question 46

Will owes Jenny $1,000. Brad owes Will $1,000. Will unconditionally assigns his rights to Jenny. Will's right to the $1,000 is then

A) unchanged.
B) extinguished.
C) incidental.
D) assigned to a court.

Question 47

Jack contracts to provide lawn-mowing services to Lee. Jack can?not dele?gate this duty

A) because it is a personal service contract.
B) without continuing to be liable.
C) without Lee's consent.
D) without providing lawn-mowing services to Kim.

Question 48

Ilene and Jerry enter into a contract under which Ilene agrees to provide groundskeeping services for Jerry's Family Fun Center. Under an antidelegation clause, the contract can prohibit and prevent the transfer of

A) only duties that are personal in nature.
B) only duties that are impersonal in nature.
C) no duties under the contract.
D) all duties under the contract.

Question 49

Bonita and Chad enter into a contract for Chad to plant trees on Bonita's property for which she agrees to pay $500. When Chad's schedule conflicts, he contacts Dirk, to whom he "assigns all rights under the contract." Chad is

A) absolved of any liability under the contract.
B) in breach of the contract with Bonita.
C) liable to Bonita if Dirk does not perform.
D) liable to Dirk for inducing a prohibited contract.

Question 50

Leonardo contracts to install automatic watering troughs in Kendall's dairy barn. Leonardo then becomes seriously ill and contracts with Jake to install the troughs. Jake is unreliable and never shows up to install the troughs. Kendall can sue

A) no one.
B) Jake only.
C) Leonardo only.
D) Jake or Leonardo.

Question 51

Opportunity Market Company (OMC) and Pierce enter into a contract for Pierce to cut and trim the landscaping around OMC's building before a meeting of the company's sales staff. When Pierce's schedule conflicts, he asks Rachel to do the cutting and trimming. This transfer of duties is

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

Question 52

Merry Music Inc. and Nayda enter into a contract for Nayda to write six songs for which Merry Music agrees to pay her. Nayda transfers her right to payment under the contract to Omni Artists Agency. In the transfer of rights, Nayda is

A) a delegator.
B) an assignor.
C) an obligor.
D) an alien.

Question 53

Phillip assigns his rights under a contract with Maria to his college roommate, John. Neither Phillip nor John notifies Maria of the assignment. The assignment

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

Question 54

Michel, the owner of Nature's Refuge Café, and Olin enter into a contract under which Olin agrees to design an outdoor addition to the café for which Michel agrees to pay $3,000. This contract may not be assigned if

A) the assignment will significantly change the risk of nonperformance.
B) the assignment is expressly prohibited by the terms of the contract.
C) the contract is uniquely personal in nature.
D) any of the choices.

Question 55

Forrest makes and sells furniture. Forrest and Glenda enter into a contract for the delivery of Forrest 's products to Glenda's Gear retail locations for which she agrees to pay the invoiced price. Forrest transfers the right to payment under the contract to Haulers Trucks & Trailers. This transfer is

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

Question 56

Bill and Charlene enter into a contract for the clearing, plowing, and preparing of Charlene's 100-acre tract for which she agrees to pay $1,000. Bill transfers his duty under this contract to Dewey. Dewey is

A) a delegatee.
B) an assignee.
C) an obligee.
D) a delegator.

Question 57

Devon and Edmond enter into a contract for the closing of a sale of Devon's recording studio. When Edmond's schedule conflicts, he asks Ferdie to perform his duties at the closing. This transfer of duties is

A) a delegation.
B) an assignment.
C) prohibited.
D) a negotiation.

Question 58

A contract between Slim and Goldie may not be assigned if it

A) does not expressly permit assignment.
B) involves a sale of goods.
C) involves personal services.
D) is oral.

Question 59

A contract between Laser Maintenance, Inc., and Medical Vision Operation Corporation contains a clause stating that any assignment is "void." This ordinarily prohibits

A) any assignment.
B) no assignment.
C) only an assignment of contract rights to personal services.
D) only an assignment that would change the obligor's risk.

Question 60

Marco and Fred enter into a contract for the sale of Marco's apartment for which Fred agrees to pay him $100,000. Marco cannot prohibit Fred from transferring his right to the ownership of the apartment because such a prohibition is

A) against public policy.
B) immoral.
C) unconscionable.
D) a crime.

Question 61

App Developers, Inc. (ADI), enters into a contract with Carmen, the chief executive officer of SalesCorp, to create an app for the firm. To fulfill the contract, ADI hires Max and ten other student interns. With respect to the contract, Max is

A) an intended beneficiary.
B) an incidental beneficiary.
C) a delegatee.
D) an assignee.

Question 62

Delany & Sons, Inc., owes Evermore Bank $50,000. Delany enters into a contract with Floyd under which Delany promises to manage and oversee Floyd's Seaside Marina. Under the contract, Floyd promises to pay Evermore the amount that will be due Delany until his debt to Evermore is paid. Delany performs as promised, but Floyd does not pay the bank. Can Evermore succeed in a suit against Floyd? Why or why not?

Question 63

Mai is a third party beneficiary under a contract between Novia and Otis. Novia and Otis can modify or rescind their contract without Mai's consent

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

Question 64

Hilda signs a contract with Indemnity Insurance Company that intentionally confers a benefit on Hilda's daughter Jackie as the designated beneficiary. Jackie's rights under the contract will vest

A) automatically.
B) if she demonstrates her consent to the promise at Hilda's request.
C) if Indemnity attempts to modify the terms of the contract.
D) on the occurrence of the event for which the insurance was procured.

Question 65

Pam borrows $5,000 from Quality Auto Sales to buy a car. When Pam 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 Pam's consent? If so, and Quality committed fraud in the deal with Pam, could Pam legiti?mately refuse to pay Rapid? Explain.

Question 66

Fact Pattern 16-1
Four-Square Construction Company enters into a contract with Ben to remodel Carol's Home Store, using products from Delta Building Supplies. Eatery Café is next to Carol's Home Store. The remodeling is a gift from Ben to Carol.
Refer to Fact Pattern 16-1. Carol is

A) a delegatee.
B) an assignee.
C) an incidental beneficiary.
D) an intended beneficiary.

Question 67

Fact Pattern 16-1
Four-Square Construction Company enters into a contract with Ben to remodel Carol's Home Store, using products from Delta Building Supplies. Eatery Café is next to Carol's Home Store. The remodeling is a gift from Ben to Carol.
Refer to Fact Pattern 16-1. The value of Eatery's property will increase after Carol's store is remodeled. Eatery is

A) a delegatee.
B) an assignee.
C) an incidental beneficiary.
D) an intended beneficiary.

Question 68

Tristan promises to paint Katy's house in exchange for Lila's promise to plant trees on Tristan's property. This is

A) a delegation.
B) an assignment.
C) a third party beneficiary contract.
D) none of the choices.

Question 69

Ozzie contracts for the sale of 500 shares of stock in Premium Quality, Inc., to Ray, with payment to go to Scholar University to pay Thalia's tuition. The contract reserves to Ozzie and Ray the right to modify its terms. Scholar's right to payment is

A) not affected by the reservation.
B) subject to any change that Ozzie and Ray make.
C) limited only if Thalia agrees to any changes.
D) terminated by the reservation.

Question 70

Lyle and Miranda agree that Lyle will fix the refrigeration unit in Miranda's Buns n' Burgers in exchange for her payment of a debt that Lyle owes to New Credit Corporation. New Credit is

A) a delegate.
B) an intended beneficiary.
C) an incidental beneficiary.
D) an assignor.

Question 71

Bea takes out a life insurance policy with Vida Insurance Corporation that names her spouse Wendell as the bene?ficiary. This is

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

Question 72

Fact Pattern 16-1
Four-Square Construction Company enters into a contract with Ben to remodel Carol's Home Store, using products from Delta Building Supplies. Eatery Café is next to Carol's Home Store. The remodeling is a gift from Ben to Carol.
Refer to Fact Pattern 16-1. Delta will realize a profit from the sale of prod?ucts to Four-Square to remodel Carol's store. Delta is

A) a delegatee.
B) an assignee.
C) an incidental beneficiary.
D) an intended beneficiary.