Question 1

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

Accepted Answer

As per the principle of intended donee beneficiary, the third party beneficiary has the right to enforce the contract against the promisor. However, the beneficiary cannot enforce the contract against the promisee or any other party involved. Therefore, the intended donee beneficiary may only enforce the contract against the promisor.

Question 2

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

Accepted Answer

A promisor and a promisee may include a provision in their contract that prevents any third person from obtaining benefits under the contract. This is often seen in contracts that involve personal services or highly confidential information.

Question 3

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

Accepted Answer

Some states have laws in place that prevent employees from assigning (which means giving away or transferring) their future wages to someone else. These laws are meant to protect employees from being taken advantage of by creditors or others who might try to collect their wages before they receive them. However, not all states have these types of statutes in place.

Question 4

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

When consideration is given in exchange for an assignment, it creates a contractual relationship between the assignor and the assignee. This means that the assignor cannot revoke the assignment without the consent of the assignee, as it would be a breach of their contract.

Question 5

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

Accepted Answer

In a novation, the original obligor (delegator) is discharged and a new party (third party) assumes the obligation directly with the obligee, thus becoming bound upon their promise to the obligee.

Question 6

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 7

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 concept is known as "vesting upon knowledge and assent" and is recognized in some states as a way for a third party to acquire rights under a contract. The third party's rights only vest once they become aware of the contract and provide their agreement (assent) to it.

Question 8

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 and interest in the debt to the assignee. It is the obligor's responsibility to continue making payments to the assignee, not the assignor.

Question 9

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

This statement is true. Though contractual duties generally are delegable, there are certain circumstances where a delegation will not be permitted, such as when the nature of the duties is personal and the obligee has a substantial interest in having the delegator perform the contract.

Question 10

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 11

Arthur enters into a contract with Bob as a result of Bob's fraud in the inducement.Under the contract, Bob has the right to the payment of $100.Bob 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, as an assignee, stands in the shoes of Bob and is subject to the same defenses that Arthur could assert against Bob.

Question 12

An incidental beneficiary has no right to enforce a contract.

Accepted Answer

An incidental beneficiary is not intended to benefit from the contract and therefore has no legal rights to enforce it.

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

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

Accepted Answer

This is because the assignee is the new owner of the assigned right, and therefore only they can enforce it against the obligor.

Question 15

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.

Question 16

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 17

A contract 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) is called a third party beneficiary contract.

Accepted Answer

A third party beneficiary contract involves a promisor agreeing to perform a duty for the benefit of a third person, who is not the original promisee in the contract.

Question 18

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

Accepted Answer

Even though a duty may be delegated to another person, the delegator remains responsible for ensuring that the duty is performed properly. This means that if the delegatee does not fulfill the duty, the delegator may still be held accountable.

Question 19

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

This is the principle of the doctrine of privity of contract which applies to assignments. The assignee takes over the rights and obligations of the assignor under the original contract and does not acquire any new rights.

Question 20

A gratuitous assignment is generally valid and enforceable.

Accepted Answer

A gratuitous assignment, or a gift, is a transfer of property without consideration. It is generally valid and enforceable as long as the required formalities are met, such as delivery of the gift and acceptance by the recipient.

Quiz 16: Third Parties to Contracts