Deck 15: Third-Party Rights and Discharge

Question 1

Which of the following is an illustration of the possession of tangible token rule?

A) An obligee who is owed $10,000 assigns the right of collecting $5,000 each to two assignees.
B) The right of collecting $10,000 is recorded in the assignee's savings account passbook.
C) The assignee can re-assign the right only to a subassignee selected by the obligee.
D) An obligee cannot assign a right to collection more than once.

Answer 1

B

Question 2

A party who owes a duty of performance under a contract is called the ________.

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

Answer 2

A

Question 3

A famous actor signs a contract with a movie studio where she agrees to star in a comedy. Which of the following is true of assignment of such a contract?

A) The movie studio can assign the contract to another movie studio.
B) The movie studio is at liberty to include the actor in a different movie.
C) If the actor is injured, she can assign the contract to another popular actor.
D) Both the actor and the studio can agree that their contract can be assigned.

Answer 3

D

Question 4

Ellen, who has a good driving record, purchases automobile insurance from an insurance company. Ellen cannot assign her rights to be insured to another driver for which of the following reasons?

A) The assignment would materially alter the risk and duties of the insurance company.
B) Claiming insurance is a future right and hence cannot be assigned.
C) Insurance is a personal service contract and hence cannot be assigned.
D) Personal contracts like insurance are assignable only with the agreement of all parties involved in the contract.

Question 5

What does the American Rule for successive assignments provide?

A) The last assignment in time prevails, regardless of notice.
B) The first notified assignment prevails.
C) The first assignment in time prevails, regardless of notice.
D) Only notified assignments prevail.

Question 6

An obligee who transfers the right to receive performance is called the ________.

A) subsequent assignor
B) obligor
C) assignor
D) assignee

Question 7

Which of the following is true in the event an assignee does not provide a notice of assignment to the obligor?

A) The assignee's only course of action is to sue the obligee for damages.
B) The assignee cannot sue the assignor for damages.
C) The obligor's only recourse is to sue the assignee for damages.
D) The assignee cannot sue the obligor to recover payment.

Question 8

Which of the following rights is generally assignable in the United States?

A) personal service contract
B) a future right
C) legal action
D) recovery of debt

Question 9

Mr. Jacob, who is terminally ill, writes a will transferring all his assets to his daughter Silvia, in the event of his death. The doctors say that Mr. Jacob will live for about six months. A day after the will is written, Silvia wishes to transfer her expected inheritance to her son, Jacob Jr. This assignment will be ________.

A) valid
B) conditionally valid
C) invalid
D) re-assignable by Jacob Jr.

Question 10

A(n) ________ is used if the obligor does not want to deal with or render performance to an unknown third party.

A) anti-assignment clause
B) approval clause
C) novation agreement
D) anti-delegation clause

Question 11

Approval clauses require that the ________ approve any assignment of a contract.

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

Question 12

What does the English rule for successive assignments provide?

A) The first assignment in time prevails, regardless of notice.
B) The first assignment in time prevails, pending notice.
C) The first assignee to give notice to the obligor prevails.
D) The first assignee who receives a tangible token prevails.

Question 13

Kimlon Informatics has to recover $5000 from a client for its services. The recovery period is 100 days but Kimlon needs the money immediately. It sells the right of collecting money from its client to Quikcollect, a collection agency. Here, Kimlon Informatics is the ________.

A) obligor
B) assignor
C) subassignee
D) assignee

Question 14

Which of the following is used to resolve a case where the obligee fraudulently makes successive assignments of the same right to a number of assignees, providing that the first assignee to give notice to the obligor prevails?

A) the English rule
B) an approval clause
C) an anti-assignment clause
D) a novation agreement

Question 15

Howard is injured by Penny in a car accident, caused due to Penny's negligence. Which of the following statements holds true for Howard's right to assign?

A) Howard cannot assign the recovery of punitive damages from Penny.
B) Howard can only assign the recovery of his medical expenses from Penny.
C) Howard's right to sue Penny cannot be assigned.
D) Howard can only assign his right to take the case to the appellate court.

Question 16

Karen borrows $10,000 from Celeste. Karen is to pay Celeste the principal amount, with 8 percent interest, over the next five years in 60 equal monthly payments. After one year of receiving proper payments from Karen, Celeste assigns this right to receive future payments to Larry. Who has the duty to notify Karen about the assignment?

A) Celeste
B) Larry
C) Karen's attorney
D) the authority who drafted the contract

Question 17

Who should provide a notice of assignment to the obligor?

A) an assignee
B) an assignor
C) an obligee
D) a facilitator

Question 18

The party to whom a duty is owed is the ________.

A) delegator
B) delegatee
C) obligor
D) obligee

Question 19

Which of the following is true of an assignment of a right?

A) Unconditional assignment of a contract right retains all the assignor's rights.
B) The obligor is entitled to performance from the assignor.
C) The assignor loses the right to sue the obligor directly for nonperformance in an unconditional assignment.
D) The obligor cannot raise personal defenses against the assignee.

Question 20

A legal right that arises out of a breach of contract is ________.

A) assignable
B) not assignable
C) subject to approval clause
D) considered a future right

Question 21

Under the possession of tangible token rule, the first assignee who receives delivery of the tangible token prevails over subsequent assignees.

Question 22

An obligee who transfers the right to receive performance is called an assignor.

Question 23

Approval clauses require that the assignee approve any assignment of a contract.

Question 24

A party who is owed a right under a contract is called an obligor.

Question 25

In the United States, sales contracts and contracts for the payment of money are not assignable.

Question 26

Terms such as "sell," "convey," and "give" indicate the intent to transfer a contract right.

Question 27

Privity of contract refers to the transfer of contractual rights by an obligee to another party.

Question 28

If the assignee fails to provide notice of assignment to the obligor and the obligor continues to render performance to the assignor, the assignee can sue the obligor.

Question 29

Anti-assignment clause in a contract prohibits the assignment of rights under the contract.

Question 30

The American rule provides that the first assignment in time prevails, regardless of notice.

Question 31

The English rule provides that the final assignment in time prevails, regardless of notice.

Question 32

What happens when an obligor does not get a notice of assignment?

Question 33

Which of the following contractual duties CAN be delegated?

A) a professional, well-known singer hired to perform at a concert delegates to an unknown singer
B) a plastic surgeon hired to perform a complex surgery delegates to a new surgeon
C) a law firm hired to represent a client delegates to a new but qualified lawyer in the firm
D) an artist hired to paint a portrait delegates to his art student

Question 34

Contracts for the provision of personal services are generally not assignable.

Question 35

A legal right that arises out of a breach of contract may be assigned.

Question 36

Where there is a valid delegation of duties but the delegatee has not assumed the duties under a contract, the delegation is called a(n) ________.

A) condition precedent
B) declaration of duties
C) express condition
D) discharge

Question 37

Explain assignment of rights.

Question 38

The right to sue another party for a violation of personal rights can be assigned.

Question 39

A person is permitted to assign a currently nonexistent right that he or she expects to have in the future.

Question 40

An obligor can raise any personal defenses he or she may have directly against an assignee.

Question 41

Distinguish between conditions and covenants.

Question 42

The promisee is the contracting party who agrees to confer performance for the benefit of the third person.

Question 43

In a case of assumption of duties, the delegatee is not liable for nonperformance.

Question 44

A covenant is an unconditional promise to perform.

Question 45

What could the parties to a contract include in the language of the contract to indicate that the duties required cannot be delegated? Are such efforts to prevent delegation always effective?

Question 46

The term ________ refers to a third party who is not in privity of contract but who has rights under the contract and can enforce the contract against the promisor.

A) third-party contractor
B) third-party assignee
C) subassignee
D) intended third-party beneficiary

Question 47

A(n) ________ refers to a contracting party who directs that the benefit be conferred on another person.

A) assignee
B) promisor
C) promisee
D) donee beneficiary

Question 48

Harry's grandmother leaves him a house and a Rolls Royce in her will. What rights does Harry have, in the context of his new inheritance?

Question 49

An assignment and delegation occurs when there is a transfer of both rights and duties under a contract.

Question 50

Which of the following phrases describes the term covenant?

A) an unconditional promise to perform
B) a breach of contract
C) mutual rescission of a contract
D) successive assignments of a right

Question 51

An incidental beneficiary has no rights to enforce or sue under other people's contracts.

Question 52

Which of the following is true of third-party beneficiaries?

A) A creditor beneficiary is an unintended beneficiary.
B) An intended third-party beneficiary cannot enforce the contract against the promisor.
C) An incidental beneficiary cannot sue under other people's contracts.
D) Incidental beneficiary is a third party who is benefitted intentionally.

Question 53

A(n) ________ is an original creditor who becomes a beneficiary under the debtor's new contract with another party.

A) donee beneficiary
B) creditor beneficiary
C) incidental creditor
D) subsequent assignee

Question 54

Nonperformance of a covenant is not considered a breach of contract because a covenant is an unconditional promise.

Question 55

A creditor beneficiary refers to an original creditor who becomes a beneficiary under the debtor's new contract with another party.

Question 56

The party to whom the duty is owed is the delegatee.

Question 57

A third party who is not in privity of contract but who has rights under the contract and can enforce the contract against the promisor is called an incidental beneficiary.

Question 58

Which of the following is true of covenants and conditions?

A) A covenant is a conditional promise to perform.
B) A conditional promise becomes a covenant if the condition is met.
C) A contract cannot contain conditions to excuse performance.
D) A party cannot sue over breach of a covenant by the other party.

Question 59

A(n) ________ occurs when there is a transfer of both rights and duties under a contract.

A) assignment and delegation
B) declaration of duties
C) assumption of duties
D) discharge

Question 60

If a delegatee has not assumed the duties under a contract, the delegatee is not liable to the obligee for nonperformance.

Question 61

KnockKnock is a manufacturer of stainless steel locks that are well-known for their durability. The company contacts a new stainless steel supplier and enters into a supply contract. The contract states that KnockKnock would purchase only if the steel from the supplier was high-grade Type 102 stainless steel. This is an instance of a ________.

A) condition subsequent
B) concurrent condition
C) covenant
D) condition precedent

Question 62

A substituted contract substitutes a new party for one of the original contracting parties.

Question 63

Which of the following refers to an agreement that substitutes a new party for one of the original contracting parties and relieves the existing party of liability on the contract?

A) novation
B) substituted contract
C) mutual rescission
D) accord

Question 64

The reasonable person test is used to judge contracts involving mechanical fitness.

Question 65

In which of the following conditions is a party's absolute duty to perform conditioned on the other party's absolute duty to perform?

A) condition precedent
B) condition subsequent
C) concurrent condition
D) implied condition

Question 66

A(n) ________ refers to a condition whose occurrence or nonoccurrence of a specific event automatically excuses the performance of an existing contractual duty to perform.

A) condition precedent
B) condition subsequent
C) concurrent condition
D) implied condition

Question 67

In concurrent conditions, each party's duty to perform is conditioned on the other party's duty to perform.

Question 68

James hires Franco for a painting job. Their contract explicitly states that Franco's employment can be terminated if he is employed by another party during the contract period. Two weeks into the job, James finds out that Franco is also working for a painting agency two blocks away and terminates his employment. This is an instance of ________.

A) condition precedent
B) condition subsequent
C) concurrent condition
D) implied condition

Question 69

A reasonable person test is a subjective test that applies to contracts involving personal taste and comfort.

Question 70

The ________ is an objective test that applies to commercial contracts and contracts involving mechanical fitness.

A) reasonable person test
B) personal satisfaction test
C) express condition test
D) cognitive inventory test

Question 71

________ is a clause in a contract in which the parties specify certain events that will excuse nonperformance.

A) Approval clause
B) Express condition
C) Force majeure
D) Implied-in-fact condition

Question 72

Condition precedent refers to a condition that requires the occurrence of an event before a party is obligated to perform a duty under a contract.

Question 73

If the conditions are met, a qualified promise becomes a covenant.

Question 74

A contract between a retailer and a supplier provides that payment is due upon delivery of goods by the supplier. The retailer's duty to pay and the supplier's duty to deliver constitutes ________.

A) an implied condition
B) a condition precedent
C) a condition subsequent
D) concurrent conditions

Question 75

Lionel Richmond is a soccer player who has a six-year contract with the Christshire United soccer team. Two years into the contract, he meets with an accident which results in the complete amputation of his right leg. On what basis is Richmond discharged from further performance of the contract?

A) novation
B) substituted contract
C) accord and satisfaction
D) discharge by impossibility

Question 76

A(n) ________ refers to a condition that requires the occurrence of an event before a party is obligated to perform a duty under a contract.

A) condition precedent
B) condition subsequent
C) concurrent condition
D) implied condition

Question 77

Condition subsequent exists when the parties to a contract must render performance simultaneously.

Question 78

Which of the following is true of discharge of performance by agreement?

A) A partially executed contract cannot be rescinded.
B) Mutual rescission requires parties to enter into a second agreement that expressly terminates the first one.
C) A party is allowed to rescind a contract without the consent of the other party.
D) Unilateral rescission is not regarded as breach of contract.

Question 79

Unilateral rescission of a contract constitutes a breach of that contract.

Question 80

Explain the difference between a condition precedent and a condition subsequent. Give an example of each.