Question 1

A rock group assigns its payment under a performance contract to the Costume Shop,a business that has supplied the group with outrageous stage outfits,and to which the group owes a great sum of money.Under this arrangement the rock group is the

Accepted Answer

The rock group is assigning their payment to the Costume Shop, making them the assignor. The assignee would be the entity receiving the assigned payment, which in this case would be the Costume Shop. Delegation involves transferring authority and responsibility to someone else to perform a specific task, which is not happening in this scenario.

Question 2

Which statement regarding assignment is accurate?

Accepted Answer

An assignment for consideration is irrevocable because the assignor has received something of value in exchange for the assignment, creating a binding obligation.

Question 3

Generally,in comparison to a donee beneficiary,a creditor beneficiary has

Accepted Answer

A donee beneficiary and a creditor beneficiary generally have about the same legal rights in terms of their ability to enforce the contract made for their benefit.

Question 4

A rock group assigns its payment under a performance contract to the Costume Shop,a business that has supplied the group with outrageous stage outfits,and to which the group owes a great sum of money.This is a(n)

Accepted Answer

This is a valid assignment because it is a transfer of the right to receive money and does not increase the burden of the payor. The fact that it is for payment under a performance contract does not make it an invalid assignment. Also, the fact that the contract is for personal services does not necessarily make it invalid, as long as the assignment does not alter the nature of the services to be performed by the group.

Question 5

Which of the following duties can probably be delegated?

Accepted Answer

Delegating a duty means assigning it to someone else to perform on your behalf. Out of the given options, painting a house is a task that can be easily delegated to a contractor or a painter. However, performing an operation, painting a picture, or drafting a contract typically require specific skills and expertise that cannot be easily delegated to someone else.

Question 6

Johann,a well-known musician,agrees to give ten guitar lessons to Elton for $2,000.Nothing in the contract itself prohibits a delegation.If Johann delegates his obligation to Eugene,a second-year musical student and enthusiastic guitar player,then the delegation will probably be

Accepted Answer

Contracts that involve personal services, especially from someone with a unique skill set or reputation, generally cannot be delegated to another party without the original party's consent. In this case, since Johann is a well-known musician, the contract for guitar lessons is likely based on his personal skills and reputation, making delegation to Eugene, a second-year musical student, inappropriate without Elton's consent.

Question 7

The status of a third party is determined by

Accepted Answer

The status of a third party in a contract is primarily determined by the intent of the contracting parties to benefit that third party. This intent is what gives the third party the potential rights or benefits under the contract.

Question 8

Lincoln has a $100,000 life insurance policy and names his daughter Venus as the beneficiary.When Lincoln dies,the insurance company refuses to pay Venus the $100,000.Can she sue them to recover the money?

Accepted Answer

Venus is an intended beneficiary because she was specifically named as the beneficiary in the life insurance policy. As such, she has the legal right to enforce the contract and sue the insurance company for the amount due to her.

Question 9

Meyer's Grocery signed a contract to build a store in Richmond,Kentucky.Soon afterward,Meyer's breached the contract.Which of the following can sue Meyer's to enforce the contract?

Accepted Answer

Only parties directly involved in the contract can sue to enforce it. None of the choices listed fall under this category.

Question 10

Ted and Alice own their recreational vehicle subject to a security agreement to Third U.S.Bank to secure the repayment of the purchase money loan.Ted and Alice sell their RV to Bob and Carol,who agree to take over the loan payments to the bank.There is no novation with the bank.Under these facts,if Bob and Carol do not make the loan payments,Third U.S.Bank

Accepted Answer

Bob and Carol are liable on the contract because they agreed to take over the loan payments. Ted and Alice are also liable because they are the original borrowers. The bank can sue all four parties if the loan payments are not made.

Question 11

Harris,who owes Nathan $4,000,sells Bethany a used car for $5,000,payable in 30 days.Harris immediately tells Nathan that she doesn't have the money she owes him,but she is willing to give him her claim to Bethany's $5,000.Nathan agrees and gives up his claim against Harris for $4,000,and Harris notifies Bethany of the assignment.In this case,Bethany is best described as the

Accepted Answer

Bethany is best described as the obligor because she is the one who owes the duty to pay the $5,000 to Harris (and, after the assignment, to Nathan).

Question 12

Garth's Imports sold a car to Wally on credit for $30,000.Garth assigned to Cassandra all of his rights to receive money from Wally.Cassandra did not inform Wally of the assignment.Therefore,Wally continued to make the next three payments directly to Garth.Shortly thereafter,Garth left the country with the money.If Cassandra sues Wally for the missing three payments

Accepted Answer

Cassandra cannot collect the money from Wally because Wally was not notified of the assignment and therefore was not obligated to make payments to Cassandra. The assignment of rights without notification is generally not valid against the debtor. However, Cassandra may still be able to pursue Garth for the missing payments.

Question 13

A donee beneficiary

Accepted Answer

A donee beneficiary is someone who is intended to receive a gift or benefit under a contract, but does not provide consideration in return. They can enforce the contract against the promisor (one who makes the promise to give the gift), but not against the promisee (one who receives the promise of the gift). Therefore, A is incorrect. A donee beneficiary does not become a creditor beneficiary, so C is also incorrect. An incidental beneficiary is someone who is unintentionally benefited by the contract, so D is also incorrect.

Question 14

Which statement most accurately describes third party beneficiary rights?

Accepted Answer

Third party beneficiaries may enforce a contract if the parties intended to benefit them and if enforcing the promise will satisfy a duty of the promisee to the beneficiary. This means that the intended beneficiary has enforceable rights in a contract. However, if the promisee intended to make a gift to the beneficiary, the beneficiary may not enforce the contract. Additionally, incidental beneficiaries do not have enforceable rights in a contract.

Question 15

Susan took out a life insurance policy on herself,paying all of the premium payments.She named her daughter,Jessica,as the beneficiary under the policy.Jessica has not given anything in consideration for the policy.Jessica is a(n)

Accepted Answer

Jessica is a donee beneficiary because she is the named beneficiary in the policy and has not given anything in consideration for it. As a donee beneficiary, she has rights to enforce the policy once Susan dies.

Question 16

Linda assigns to Ben a right to receive rent payments.In terms of Linda's warranty as the assignor,the law implies which of the following?

Accepted Answer

The implication of a warranty in an assignment implies that the assignor (Linda) has the right to assign the rent payments to Ben. The warranty does not cover the solvency of the tenant or whether the tenant will pay the rent. However, the warranty implies that Linda has the right to assign the rent payments.

Question 17

Molly and Craig are the original parties to a contract.Craig is obligated to design a Website for Molly.They subsequently make an agreement with Eric that Eric should take the place of Craig and assume all of Craig's rights and duties under the contract.The agreement releases Craig from his obligations under the contract.This agreement is

Accepted Answer

The agreement between Molly, Craig, and Eric meets the requirements for a novation. A novation occurs when the original parties to a contract agree to substitute a new party for one of the original parties, and the new party assumes all of the rights and obligations of the original party. In this case, Eric is taking the place of Craig and assuming all of Craig's rights and duties under the contract, and Craig is being released from his obligations under the contract. This meets the requirements for a novation.

Question 18

Jerry purchased a laptop computer for his personal use from Computer City on an installment loan contract.The sales contract stated that in the event the contract is assigned to a third party,the purchaser (Jerry)promises he will not assert any claim or defense against the assignee which he might have against Computer City.Computer City immediately assigns the contract rights to Finance USA.The computer stops working within two weeks of the purchase.

Accepted Answer

Waiver of defense clauses are generally not permitted in consumer contracts, and Jerry may still raise his claim against Finance USA, regardless of the clause in the sales contract. This is to protect consumers from being forced to give up their legal rights and defenses.

Question 19

When is an assignment valid and enforceable against an obligor?

Accepted Answer

An assignment is valid and enforceable against the obligor only when the obligor is notified of the assignment. Until the obligor is notified, the assignment is not effective and the obligor may continue to perform the obligation to the original assignor. Once the obligor is properly notified, the obligor can no longer perform the obligation to the assignor and must perform the obligation to the assignee. Therefore, option D is the correct answer.

Question 20

Cheryl enters into a contract with Gabe.In this contract,Cheryl asks Gabe to pay the money he owes her from the contract to her friend Leah because Leah is having financial troubles.Leah is

Accepted Answer

Leah is a third party donee beneficiary because she is not a party to the contract but Cheryl intends for Gabe to make the payment to Leah as a gift or benefit to her.

Quiz 17: Third Parties