Question 1

Which one of the following assignments would probably be prohibited by a court?
A) Mary is in debt. A credit card company calls and threatens to sue. Mary orally assigns her next bimonthly paycheck to her creditor.
B) John is a house painter. He is scheduled to paint Molly's home on Monday. John wakes up Monday morning with a stiff neck. He calls Ed, who is also a painter, to begin the job at Molly's.
C) Ron has a contract with Bonett Bank to service their coffee machines. He assigns the remainder of his contract with Bonett to Michelle, who also owns a coffee service.
D) All of these.

Accepted Answer

Assignments that involve personal services or that would significantly change the obligee's expectations are generally prohibited. In choice A, the assignment of a paycheck could be seen as involving personal rights and might be prohibited by a court, especially if it was done under duress or without proper legal formalities. Choices B and C involve substituting performance in a way that might be acceptable if the substitute performance is equivalent and does not violate the terms of the original contract.

Question 2

Barbara owes Arthur $2,000.On July 1, Arthur assigns the right to the $2,000 to Caleb.Thereafter, on July 15, Arthur assigns the same right to David, who in good faith gives value for it and knows nothing about the first assignee.In this case:
A) neither Caleb nor David can claim the $2,000.
B) The rule differs by state.
C) Caleb has the right to the payment of $2,000.
D) David has the right to the $2,000.

Accepted Answer

The rule regarding assignment of rights can vary by state, with some states following the "first in time, first in right" rule, while others may follow the "first to notify" rule.

Question 3

If Randall and Gale agree to an assignment of Randall's contract with Doug:
A) under both the Code and the Restatement, unless circumstances or language indicate the contrary, an assignment of "the contract" means the assignment of rights and a delegation of duties.
B) there is no ambiguity; this is an assignment of rights only.
C) the language is ambiguous and, therefore, the assignment is unenforceable.
D) there is no ambiguity; this is a delegation of duties only.

Accepted Answer

Under both the Uniform Commercial Code (UCC) and the Restatement of Contracts, an assignment of "the contract" typically includes both the assignment of rights and the delegation of duties, unless the contract explicitly states otherwise or the circumstances suggest a different intention.

Question 4

Anita owes Brad $75,000.Brad signs a written statement granting Carl a gratuitous assignment of his rights from Anita.If Brad delivers the signed statement to Carl before he dies:
A) the assignment is terminated upon Brad's death.
B) the delivery of the statement makes the assignment irrevocable.
C) the assignment is invalid, because it is revocable.
D) the signing of the statement makes the assignment irrevocable.

Accepted Answer

The delivery of the statement to Carl makes the assignment irrevocable because it signifies Brad's intention to transfer his rights to Carl, and once delivered, it cannot be revoked by Brad's death.

Question 5

The privilege to play tennis and socialize at the Capital City Country Club (CCCC) is obtained through application, references, resumes, and fees.Steven and Chanel want to assign the remaining 4 years of their 5-year membership to Charles and Prissy so that Steven and Chanel may join the posh Silver Hawk Tennis and Polo Club.CCCC sues to enjoin Steven and Chanel from assigning their membership.CCCC will most probably:
A) prevail because assigning the membership contract would violate public policy.
B) not prevail because all contract rights are assignable.
C) prevail because the parties intended the contract to be personal and non-assignable.
D) None of these.

Accepted Answer

The most likely reason for CCCC to prevail is that memberships to exclusive clubs like the Capital City Country Club are typically considered personal contracts based on the individual qualifications of the members. These contracts often include clauses that prevent assignment to ensure that all members meet the club's specific criteria.

Question 6

When contract terms prohibiting the assignment of rights exist, most courts will:
A) award the obligor a right to damages for the breach of the terms forbidding the assignment.
B) interpret a general term prohibiting assignments as a mere promise not to assign.
C) strictly construe them.
D) All of these.

Accepted Answer

Most courts will interpret a general term prohibiting assignments as a mere promise not to assign, strictly construe such terms, and may award the obligor a right to damages for the breach of the terms forbidding the assignment. This comprehensive approach reflects the courts' efforts to balance the contractual freedom to restrict assignments with the practical interests in allowing assignments under certain conditions.

Question 7

Which of the following is NOT true concerning the requirements for an effective assignment?
A) Consideration is required.
B) The assignment must be voluntary.
C) There must be an intention to make the assignee the owner of the right.
D) The assignment may be either written or oral.

Accepted Answer

Consideration is not required for an effective assignment. An assignment can be made without any payment or exchange of value between the assignor and the assignee. The key elements of an effective assignment include the intention to assign the right, the voluntary nature of the assignment, and the clarity that the assignee becomes the owner of the right, but consideration is not a necessity.

Question 8

List the implied warranties imposed by law on an assignor who has received value for the assignment.

Accepted Answer

The answer of List the implied warranties imposed by law...

Question 9

Under the Restatement, if there are successive assignments of the same right:
A) the first assignee to notify the obligor prevails.
B) a subsequent assignee is entitled to the assigned right unless a prior assignee gave value and obtains either a judgment against the obligor or a new contract with the obligor.
C) a prior assignee is entitled to the assigned right to the exclusion of a subsequent assignee in most circumstances.
D) the latest assignee is usually entitled to the assigned right.

Accepted Answer

Under the Restatement (Second) of Contracts, the general rule is that the first assignee in time has the superior right, unless a subsequent assignee can prove that they gave value and took certain additional steps to protect their interest.

Question 10

A(n) __________ is a third party who obtains possible benefits but no rights under a contract.
A) intended beneficiary
B) assignor
C) incidental beneficiary
D) donee beneficiary

Accepted Answer

An incidental beneficiary is a third party who benefits from a contract between two other parties, but this benefit is not intentional from the standpoint of the parties in the contract, and the incidental beneficiary has no rights to enforce the contract.

Question 11

Elvia has a contract to teach sixth grade at Margena Middle School.She decided she could make more money writing a book, so she wants to assign her teaching contract to her friend, Stephanie, who is also a licensed teacher.
A) If effective, this would be both an assignment and a delegation.
B) If the school district agrees to accept Stephanie's services, a novation would occur, which would relieve Elvia of her obligation to the school district.
C) The duties which Elvia wants to delegate are personal in nature.
D) All of these are correct.

Accepted Answer

A) This is correct because assigning a contract involves transferring the rights under the contract to another party, and delegating involves transferring the duties under the contract to another party. In this scenario, Elvia is attempting to transfer both her rights (to receive compensation) and her duties (to teach) to Stephanie. B) This is correct because a novation occurs when a new contract is created, replacing the old one, and all parties agree to the new terms. If the school district agrees to accept Stephanie in Elvia's place, Elvia would be relieved of her obligations under the original contract. C) This is correct because teaching is a profession that requires specific skills, knowledge, and personal interaction, making the duties personal in nature.

Question 12

A(n) __________ is an intended beneficiary of a contract who receives the benefits of the contract as a gift.
A) intended beneficiary
B) donee beneficiary
C) incidental beneficiary
D) assignor

Accepted Answer

A donee beneficiary is someone who receives the benefits of a contract as a gift, where the contract is made with the intent to benefit the third party.

Question 13

Harold hired Blake Painters to paint his house.Blake decides he has too many jobs and delegates the duties to the Andrews Company.If Andrews does a poor job, and drips paint on Harold's flowers and windows, Harold:
A) cannot sue, because he has accepted the benefits of the assignment.
B) can sue both Blake and Andrews.
C) can sue Blake, but he cannot sue Andrews.
D) can sue Andrews, but he cannot sue Blake.

Accepted Answer

Harold can sue both Blake and Andrews because Blake, who originally contracted with Harold, remains liable for the contractual obligations and their fulfillment. Additionally, Andrews, being the party that actually performed the work and caused the damage, can also be held liable for the damages caused during the execution of the contract.

Question 14

Courts will enforce contracts for the benefit of all but which of the following?
A) Incidental beneficiaries.
B) Creditor beneficiaries.
C) Intended beneficiaries.
D) Donee beneficiaries.

Accepted Answer

Courts typically enforce contracts for the benefit of intended beneficiaries, which include creditor beneficiaries and donee beneficiaries, but not for incidental beneficiaries, who benefit from the contract unintentionally.

Question 15

Will wants to buy a new car.He goes to the bank to get a loan for the purchase, and signs an agreement to pay $10 per month in premiums on a term life insurance policy which names the bank as the recipient of the policy proceeds in the event of his death before the loan is repaid.The bank is a(n):
A) incidental beneficiary.
B) creditor beneficiary.
C) donee beneficiary.
D) assignee.

Accepted Answer

The bank is a creditor beneficiary because it will benefit from the policy to the extent of the outstanding loan balance in case of Will's death.

Question 16

Which of the following involves an invalid assignment that a court would not enforce?
A) An assignment of a savings account accompanied by the delivery of the passbook.
B) An assignment of an automobile liability insurance policy accompanied by the delivery of the policy.
C) An assignment lacking consideration.
D) An assignment in writing signed by the assignor and delivered to the assignee.

Accepted Answer

Automobile liability insurance policies are personal contracts between the insurer and the insured, designed to protect the insured against personal liability. Assignments of such policies without the insurer's consent are generally invalid because they involve personal trust and confidence in the insured, which cannot be transferred to another party without the insurer's agreement.

Question 17

Sean has a right against Tanner and assigns it for value to Megan.Later, Sean gives Tanner a release.Megan:
A) may recover damages from Tanner for breach of an implied warranty.
B) will be unaffected by Sean's action.
C) has lost her right and has no remedy.
D) may recover damages from Sean for breach of an implied warranty.

Accepted Answer

When Sean assigns his right against Tanner to Megan for value and later releases Tanner from the obligation, Megan may recover damages from Sean for breach of an implied warranty. This is because, by assigning the right to Megan, Sean implicitly warrants that he will do nothing to impair the value of the assignment. By releasing Tanner, Sean breaches this implied warranty, giving Megan a right to recover damages from Sean.

Question 18

All but which of the following is true about a delegation of duties?
A) The courts will examine an assignment more closely than a delegation.
B) A delegation will not be permitted if the nature of the duties are personal in that the obligee has a substantial interest in having the delegator perform the contract.
C) Contractual duties are generally delegable.
D) When the delegatee assumes the delegated duty, both the delegator and the delegatee are liable for performance of the contractual duty to the obligee.

Accepted Answer

The correct statement is that courts will examine a delegation more closely than an assignment, not the other way around. Assignments involve the transfer of rights, while delegations involve the transfer of duties, and the personal nature of some duties can make delegations more scrutinized to ensure the obligee's interests are protected.

Question 19

Stark enters into a contract with a contractor to build a large shopping mall in River City.Donner will greatly benefit from this contract since his convenience store is adjacent to the mall.Donner in this instance is:
A) an implied beneficiary.
B) a partial beneficiary.
C) a donee beneficiary.
D) an incidental beneficiary.

Accepted Answer

Donner is not a party to the contract and did not have any intention to benefit from the contract. He is simply incidentally benefiting from the construction of the mall because of the proximity of his convenience store. Therefore, he is an incidental beneficiary.

Question 20

In the case of Speelman v.Pascal , the court held that:
A) assignments cannot be made of sums that are not presently due but are expected to become due in the future.
B) a gratuitous assignment is terminated by the assignor's death, even if the assignor made an effective delivery of the assignment prior to his death.
C) assignments of rights to sums that are expected to become due to the assignor are enforceable.
D) personal contracts are not assignable.

Accepted Answer

In Speelman v. Pascal, the court held that assignments of rights to sums that are expected to become due to the assignor are indeed enforceable. This case is often cited to support the principle that future payments or rights expected to arise can be legally assigned to another party.

Quiz 16: Third Parties to Contracts

Which one of the following assignments would probably be prohibited by a court?

Barbara owes Arthur $2,000.On July 1, Arthur assigns the right to the $2,000 to Caleb.Thereafter, on July 15, Arthur assigns the same right to David, who in good faith gives value for it and knows nothing about the first assignee.In this case:

If Randall and Gale agree to an assignment of Randall's contract with Doug:

Anita owes Brad $75,000.Brad signs a written statement granting Carl a gratuitous assignment of his rights from Anita.If Brad delivers the signed statement to Carl before he dies:

When contract terms prohibiting the assignment of rights exist, most courts will:

Which of the following is NOT true concerning the requirements for an effective assignment?

List the implied warranties imposed by law on an assignor who has received value for the assignment.

Under the Restatement, if there are successive assignments of the same right:

A(n) __________ is a third party who obtains possible benefits but no rights under a contract.

Elvia has a contract to teach sixth grade at Margena Middle School.She decided she could make more money writing a book, so she wants to assign her teaching contract to her friend, Stephanie, who is also a licensed teacher.

A(n) __________ is an intended beneficiary of a contract who receives the benefits of the contract as a gift.

Harold hired Blake Painters to paint his house.Blake decides he has too many jobs and delegates the duties to the Andrews Company.If Andrews does a poor job, and drips paint on Harold's flowers and windows, Harold:

Courts will enforce contracts for the benefit of all but which of the following?

Will wants to buy a new car.He goes to the bank to get a loan for the purchase, and signs an agreement to pay $10 per month in premiums on a term life insurance policy which names the bank as the recipient of the policy proceeds in the event of his death before the loan is repaid.The bank is a(n) :

Which of the following involves an invalid assignment that a court would not enforce?

Sean has a right against Tanner and assigns it for value to Megan.Later, Sean gives Tanner a release.Megan:

All but which of the following is true about a delegation of duties?

Stark enters into a contract with a contractor to build a large shopping mall in River City.Donner will greatly benefit from this contract since his convenience store is adjacent to the mall.Donner in this instance is:

In the case of Speelman v.Pascal , the court held that: