Question 1

An incidental beneficiary to a contract does not have the right to enforce the contract.

Accepted Answer

An incidental beneficiary is someone who may benefit from a contract but was not intended to be a party to the contract. Therefore, they do not have the right to enforce the contract. Only intended beneficiaries have the right to enforce a contract.

Question 2

Alma sells her car to Ervin.Since she still has four months left on her automobile insurance policy,she tells Ervin he will be covered for this four-month period under the policy.This purported assignment of her policy is effective as long as she notifies her insurance company about the change of insureds.

Accepted Answer

Automobile insurance policies typically cannot be transferred to a new owner without the consent of the insurer, and simply notifying the insurance company of a change in ownership does not guarantee the continuation of coverage for the new owner.

Question 3

An assignor normally guarantees that the obligor will pay the assigned debt.

Accepted Answer

An assignor does NOT guarantee that the obligor will pay the assigned debt. The assignor simply transfers their rights to the debt to the assignee. It is the assignee's responsibility to collect the debt from the obligor.

Question 4

In some states,the vesting of a third party's rights occurs only when the third party learns of the contract and assents to it.

Accepted Answer

This is known as the doctrine of "novation by notice" or "novation by assent". In these states, the third party's rights are not vested until they have actual knowledge of the contract and agree to be bound by it.

Question 5

Some states have statutes which prohibit an employee from assigning his future wages.

Accepted Answer

Some states have laws that prohibit employees from assigning their future wages. This means that employees cannot sign over or sell their rights to receive their future earnings to another party. The purpose of these laws is to protect employees from predatory lending practices and ensure that they receive the full amount of their earned wages.

Question 6

The delegation of a duty still leaves the delegator responsible for the performance of the duty.

Accepted Answer

Delegating a duty does not absolve the delegator from their ultimate responsibility for ensuring that the duty is performed correctly. The delegator may be held accountable if the delegated person fails to fulfill the duty.

Question 7

A valid assignment requires that notice be given to the obligor.

Accepted Answer

A valid assignment does not necessarily require that notice be given to the obligor for the assignment to be effective between the assignor and assignee, though notice can affect the obligor's obligations and protections.

Question 8

Arthur enters into a contract with Brennon as a result of Brennon's fraud in the inducement.Under the contract,Brennon has the right to the payment of $100.Brennon assigns the right to the $100 to Carl.Arthur may assert the defense of fraud in the inducement to avoid paying Carl the $100.

Accepted Answer

Arthur can assert the defense of fraud in the inducement against Carl because Carl is standing in Brennon's shoes and therefore takes the assignment subject to any defenses that Arthur could assert against Brennon.

Question 9

The general rule is that an assignee stands in the shoes of the assignor.He acquires the rights of the assignor but no new or additional rights.

Accepted Answer

An assignee only acquires the rights of the assignor and does not obtain any new or additional rights. This is known as the principle of 'privity of contract' which means that only parties to a contract can be bound by its terms.

Question 10

A party beneficiary contract is one in which a party (the promisor)promises to render a certain performance not to the other party (the promisee)but to a third person (the beneficiary).

Accepted Answer

A party beneficiary contract is also known as a third-party contract, where the promisor promises to perform a certain obligation to a third person (beneficiary) who is not a party to the original contract.

Question 11

When the assignee gives consideration in exchange for an assignment,there is a contract between the assignor and the assignee that prevents the assignor from revoking the assignment without the assent of the assignee.

Accepted Answer

This statement is true. The consideration given by the assignee creates a contract between the assignor and the assignee that makes the assignment irrevocable without the assignee's consent.

Question 12

Though contractual duties generally are delegable;a delegation will not be permitted if the nature of the duties is personal in that the obligee has a substantial interest in having the delegator perform the contract.

Accepted Answer

The statement is true. Though contractual duties generally are delegable;a delegation will not be permitted if the nature of the duties is personal in that the obligee has a substantial interest in having the delegator perform the contract.

Question 13

The right to property other than money,such as goods or land,is not assignable.

Accepted Answer

The right to property, including goods and land, is generally assignable unless restricted by law, contract, or the nature of the property right itself.

Question 14

In a novation,the delegator is discharged and the third party becomes directly bound upon his promise to the obligee.

Accepted Answer

This statement accurately describes the effect of a novation. By replacing the original obligor with a new one through a novation agreement, the original obligor (delegator) is discharged from their obligations and the new obligor (third party) becomes directly bound to the obligee.

Question 15

After an assignment,only the assignee has a right to the obligor's performance.

Accepted Answer

This is because the assignee has assumed the rights and responsibilities of the original assignor, and therefore is the only party entitled to receive performance from the obligor.

Question 16

An intended donee beneficiary may enforce the contract only against the promisor.

Accepted Answer

This is known as the principle of privity of contract, which means that a third party (the intended beneficiary) cannot enforce the contract against the promisee (the person for whom the promise was made), but only against the promisor (the person who made the promise).

Question 17

Consideration is required in order to have a valid assignment.

Accepted Answer

Consideration is not required for an assignment to be valid; an assignment can be made without consideration, as it primarily involves the transfer of rights from one party to another.

Question 18

A gratuitous assignment is generally valid and enforceable.

Accepted Answer

A gratuitous assignment, where one party transfers rights or property to another party without receiving anything in return, is generally considered valid and enforceable as long as it meets the legal requirements for a valid contract, such as intent and acceptance.

Question 19

A promisor and a promisee may provide that the benefits under a contract will never vest in a third person.

Accepted Answer

A contract can be drafted to specifically state that the benefits will only accrue to the promisor or the promisee, and not to any third party. This is commonly seen in clauses related to assignment and delegation of contractual obligations.

Question 20

Ben promises to sell five acres of his land to Tomas for $8,000.If Ben transfers his right to the $8,000 to Firewood Financial,Ben is the assignee and Tomas is the obligor.

Accepted Answer

In this scenario, Ben is the assignor because he is transferring his right to receive $8,000 to Firewood Financial. Tomas is the obligor because he is obligated to perform under the contract, which in this case means paying the $8,000. Firewood Financial becomes the assignee, as it is receiving the rights from Ben.

Quiz 16: Third Parties to Contracts