Question 1

Chris was indebted to Kirk for a loan of $1,000.Kirk assigned Chris' promise to pay to Bryce.The assignment must be of the entire agreement between Chris and Kirk.

Accepted Answer

Assignments of promises to pay typically need to be of the entire agreement between the original parties to be effective. In this case, Kirk assigned the entire agreement (Chris' promise to pay) to Bryce, meaning Bryce now has the right to collect the full $1,000 from Chris.

Question 2

On March 6^th,the Limestone Student Society entered into a contract with the "Stumbling Stones," a rock group,to give a performance at the Limestone U Students' Union on March 31^st.On March 29^th,the "Stumbling Stones" fell ill with the flu,and were unable to travel to Limestone City.Another rock group was contacted by the Stumbling Stones to appear in their place,and arrived at the Students' Union in time to perform.The privity of contract rule would entitle the Limestone Students' Society to reject the substitute rock group,and prevent them from performing.

Accepted Answer

The privity of contract rule states that only the parties involved in the original contract have the rights and obligations under it. Therefore, the Limestone Student Society can reject the substitute group as they were not part of the original agreement.

Question 3

Sylvia obtained a full release from the payment of her car loan when she gave the car to her friend,Victoria,who agreed to make all the remaining payments.The arrangement was acceptable to the bank that had made the loan.The bank cancelled the loan and replaced it with one in Victoria's name.This is
A)an example of a chose in possession.
B)an example of a chose in action.
C)a novation.
D)a guarantee.
E)an equitable assignment.

Accepted Answer

This is a novation because Sylvia was released from her obligation to repay the loan and Victoria took over that obligation with a new loan in her name. It is not a chose in possession because no ownership of the car changed hands, and it is not a chose in action because there was no transfer of a legal claim or right. It is not a guarantee because there is no indication that anyone else was promising to pay the loan if Victoria couldn't, and it is not an equitable assignment because no ownership of debt was transferred.

Question 4

Chris was indebted to Kirk for a loan of $1,000.Kirk assigned Chris' promise to pay to Bryce.The assignment by Kirk to Bryce must be in writing to be an effective assignment.

Accepted Answer

According to the Statute of Frauds, assignments of debts must be in writing to be valid. Therefore, Kirk's assignment of Chris' promise to pay must be in writing to be effective.

Question 5

On March 6^th,the Limestone Student Society entered into a contract with the "Stumbling Stones," a rock group,to give a performance at the Limestone U Students' Union on March 31^st.On March 29^th,the "Stumbling Stones" fell ill with the flu,and were unable to travel to Limestone City.Another rock group was contacted by the Stumbling Stones to appear in their place,and arrived at the Students' Union in time to perform.The contract,by its nature,is not subject to vicarious performance.

Accepted Answer

The contract is not subject to vicarious performance because it likely involves personal services that require the specific talents and presence of the "Stumbling Stones," and cannot be fulfilled by another party without the consent of the Limestone Student Society.

Question 6

Kathy sells her business to Lucy for $40,000 including the stock,the goodwill,and the remainder of the lease.The landlord agrees that Kathy may end her involvement with the leased premises and that Lucy may take over the remainder of the lease on the same terms,and a new lease reflecting this is drawn up and signed by the landlord and Lucy.This new lease is an example of
A)an equitable assignment.
B)a statutory assignment.
C)a novation.
D)a constructive trust.
E)a negotiable instrument.

Accepted Answer

A novation occurs when a new agreement is made between two parties, with the consent of a third party, to replace an old agreement. In this case, the new lease agreement between Lucy and the landlord replaces the old lease agreement between Kathy and the landlord. This transfers the rights and responsibilities of the lease from Kathy to Lucy, and is therefore an example of a novation.

Question 7

The Four Guys Garage advertised automobile repairs by "Licensed Mechanics." Terry,a car owner,took his automobile to the Four Guys Garage for repairs.The garage owner,Todd,examined the car,and indicated that extensive repairs were required.Terry left his car with Todd,and the repairs were carried out by another licensed mechanic,Rod,an employee.Terry paid $150 for the repairs,but on his way home discovered that the repairs had been negligently made,and had ruined the engine.The Four Guys Garage is liable to Terry under the vicarious performance rule for Rod's negligence.

Accepted Answer

The Four Guys Garage is responsible for the actions of its employees, including Rod the licensed mechanic who negligently made the repairs. This is known as the vicarious performance rule, which holds an employer responsible for the acts of its employees that are done within the scope of their employment. Therefore, the garage is liable for the damage caused to Terry's car and must compensate him accordingly.

Question 8

Businesses may raise capital by assigning its existing accounts receivable to a collections company or bank in return for an immediate lump-sum percentage payment.What is this method of raising capital called?
A)Bonds
B)Factoring
C)Indemnification
D)Novation
E)Assignment

Accepted Answer

This method of raising capital is called factoring where a company assigns its accounts receivable to a collection company or bank in exchange for an immediate payment of a percentage of the total value of the accounts receivable. This allows the company to free up cash flow and receive funds for its outstanding invoices. Bond is a form of long-term debt financing where investors lend money to the business for a fixed period of time at a fixed interest rate. Indemnification is a form of protection against loss or damage. Novation is a contractual agreement to transfer rights and obligations to another party. Assignment is a legal transfer of rights from one party to another. None of these terms fit the description of this method of raising capital.

Question 9

Carten Printing receives an unexpectedly large order for shipping envelopes from one of its regular clients,a major Canadian CD-ROM retailer.In order to meet the order delivery date,Carten farms out part of the printing to another firm,Serger Printing.Serger,in an attempt to raise its own profit margin on the deal,uses lower grade adhesive and cuts corners on printing quality.The faulty shipping envelopes show up as returns made to the retailer from dissatisfied customers.The retailer takes action against Carten for damages.What is the most likely outcome?
A)The retailer will not succeed against Carten,but will have a right of recovery against Serger.
B)The retailer will succeed against Carten,and Carten will have no right of recovery against Serger.
C)a novation.
D)The retailer will succeed against Carten,and Carten will have a similar right of recovery against Serger.
E)The retailer will have a right of recovery against both Carten and Serger.

Accepted Answer

The retailer's contract is with Carten, making Carten responsible for the quality of the product delivered, regardless of whether Carten subcontracted part of the work. Carten, in turn, can seek recovery from Serger for not meeting the agreed-upon standards, assuming there was an agreement on the quality of work between Carten and Serger.

Question 10

The party who holds property for the benefit of another under a trust agreement or arrangement is known as the
A)beneficiary.
B)trustee.
C)rights holder.
D)guarantor.
E)principal.

Accepted Answer

The party who holds property for the benefit of another under a trust agreement or arrangement is known as the trustee. The beneficiary is the party who receives the benefits of the trust, while the guarantor is someone who guarantees the performance of another party, and the principal is the original amount of money borrowed or invested. The term "rights holder" does not specifically apply to the context of a trust.

Question 11

On March 6^th,the Limestone Student Society entered into a contract with the "Stumbling Stones," a rock group,to give a performance at the Limestone U Students' Union on March 31^st.On March 29^th,the "Stumbling Stones" fell ill with the flu,and were unable to travel to Limestone City.Another rock group was contacted by the Stumbling Stones to appear in their place,and arrived at the Students' Union in time to perform.The Limestone Student Society must allow the substitute rock group to perform by virtue of the legal doctrine of vicarious performance.

Accepted Answer

The legal doctrine of vicarious performance does not apply here. Vicarious performance typically involves an obligation being fulfilled by a third party, but in contracts for personal services, such as a specific band's performance, the original party is usually required to perform unless the contract allows for substitution.

Question 12

Mr.Black enters into a contract with Build-It Construction Ltd.for the construction of a house.The house is not built in accordance with the contract.Mr.Black sues Build-It Construction Ltd.seeking $200,000 in damages.He is successful,but discovers that Build-It Construction Ltd.has insufficient assets to satisfy the judgment as it regularly transfers its assets to its parent company Build-It Holding Company Inc.Can Mr.Black collect the $200,000 from Build-It Holding Company Inc.
A)Yes,according to the doctrine of promissory estoppel.
B)Yes,according to the Statute of Frauds.
C)Yes,this is a statutory novation.
D)No,according to the doctrine of privity of contract.
E)No,according to the parol evidence rule.

Accepted Answer

The doctrine of privity of contract limits the parties to the contract and prevents a third party from enforcing the terms of the contract. As Build-It Holding Company Inc. was not a party to the contract entered into by Mr. Black and Build-It Construction Ltd., Mr. Black cannot collect the $200,000 from Build-It Holding Company Inc.

Question 13

The Block furniture store granted credit to many customers for the purchase of furniture and appliances.It had separate categories for furniture credit and appliance credit.It statutorily assigned its furniture credit to Prestige Financing Inc.and its appliance credit to Gold Stream Financing Ltd.Karim purchased a bed for $700 and a stove for $700 from The Block and received financing for both purchases on the same contract.When The Block's contracts were assigned,Karim's was assigned to both assignees.On Monday it received a notice of assignment from Prestige Financing Inc.and on Tuesday from Gold Stream Financing Ltd.To whom should Karim make his next payment?
A)The Block
B)Gold Stream Financing Ltd.
C)Prestige Financing Inc.
D)50% to Gold Stream Financing Ltd.and 50% to Prestige Financing Inc.
E)Karim should not make a payment.

Accepted Answer

Since The Block statutorily assigned its furniture credit to Prestige Financing Inc., Karim should make his payment to Prestige Financing Inc. Gold Stream Financing Ltd. cannot claim the payment for the purchase of the bed since it was assigned to Prestige Financing Inc.

Question 14

The Four Guys Garage advertised automobile repairs by "Licensed Mechanics." Terry,a car owner,took his automobile to the Four Guys Garage for repairs.The garage owner,Todd,examined the car,and indicated that extensive repairs were required.Terry left his car with Todd,and the repairs were carried out by another licensed mechanic,Rod,an employee.Terry paid $150 for the repairs,but on his way home discovered that the repairs had been negligently made,and had ruined the engine.Terry may only sue Rod,the mechanic that negligently performed the service.

Accepted Answer

Terry may have a claim not only against Rod, but also against the Four Guys Garage and its owner Todd, as they advertised licensed mechanics and were responsible for the work carried out by their employee.

Question 15

Luxury Homes Ltd.contracts with Eliza to build her house.The electrical work is completed by Firefly Electric Ltd.under a contract it entered into with Luxury Homes Ltd.The electrician was Wilbur,an employee of Firefly.Eliza moves into the house and three months' later it burns to the ground as a result of faulty wiring.Who can Eliza sue for breach of contract?
A)Luxury Homes Ltd.
B)Firefly Electric Ltd.
C)Wilbur
D)Luxury Homes Ltd.,Firefly Electric Ltd.and Wilbur
E)Firefly Electric Ltd.and Wilbur

Accepted Answer

Eliza can sue Luxury Homes Ltd. for breach of contract because her contract was directly with Luxury Homes Ltd., not with the subcontractor (Firefly Electric Ltd.) or the employee (Wilbur).

Question 16

The Four Guys Garage advertised automobile repairs by "Licensed Mechanics." Terry,a car owner,took his automobile to the Four Guys Garage for repairs.The garage owner,Todd,examined the car,and indicated that extensive repairs were required.Terry left his car with Todd,and the repairs were carried out by another licensed mechanic,Rod,an employee.Terry paid $150 for the repairs,but on his way home discovered that the repairs had been negligently made,and had ruined the engine.Money damages awarded by the court for the negligence would be approximately equal to Terry's loss

Accepted Answer

Since the Four Guys Garage advertised their services as being carried out by licensed mechanics, Terry had a reasonable expectation that the repairs would be done competently. The fact that the repairs were negligently made and resulted in damage to his car means that the garage breached their duty of care to Terry. As a result, Terry would likely be able to recover damages from the garage in court that would be approximately equal to his loss, which in this case would be the cost of repairing or replacing the ruined engine.

Question 17

Precision Engineering receives a contract to design and build a sewage treatment plant from the town of WaWa.It designs the project and assigns the construction to Dynamic Construction Ltd.The contract has no provisions regarding assignment.Can Precision make the assignment to Dynamic?
A)No,it can only do a novation.
B)Yes,if it obtains the approval of WaWa.
C)Yes,if it notifies WaWa.
D)Yes.
E)No.

Accepted Answer

Since the contract has no provisions regarding assignment, Precision Engineering is free to make the assignment to Dynamic Construction Ltd without obtaining approval or notifying WaWa. Therefore, Choice D is the correct answer.

Question 18

On March 6^th,the Limestone Student Society entered into a contract with the "Stumbling Stones," a rock group,to give a performance at the Limestone U Students' Union on March 31^st.On March 29^th,the "Stumbling Stones" fell ill with the flu,and were unable to travel to Limestone City.Another rock group was contacted by the Stumbling Stones to appear in their place,and arrived at the Students' Union in time to perform.The contract,by its nature,is not subject to assignment.

Accepted Answer

The contract is not subject to assignment, meaning that the Stumbling Stones cannot transfer their obligations under the contract to another party.

Question 19

Hammond sells her house to Mendoza for $165,000 subject to a mortgage from Imperial Bank for $90,000.Hammond's mortgage had been arranged at a time when interest rates were low,and prevailing interest rates are now much higher.Mendoza would very much like to assume Hammond's obligation to pay under the existing mortgage,rather than arrange a more costly replacement from his own banker.Imperial Bank is indifferent as to who is repaying the debt as Mendoza is just as acceptable a credit risk as was Hammond.Mendoza pays Hammond the $75,000 difference and takes over both the house and her mortgage.This arrangement is an example of
A)a statutory assignment.
B)a chose in possession.
C)an equitable assignment.
D)a constructive trust.
E)a novation.

Accepted Answer

This arrangement is an example of a novation, which occurs when a new party takes over an existing obligation and the original party is released from all liability. In this case, Mendoza is assuming Hammond's mortgage obligation to Imperial Bank and paying Hammond the difference in the sale price. This constitutes a novation, as Mendoza is now solely responsible for repaying the debt to Imperial Bank.

Question 20

Transfer of rights can be accomplished through which of the following:
A)novation,equitable and statutory assignment,and by operation of law
B)novation,equitable and statutory assignment,vicarious performance,and by operation of law
C)novation,by operation of law,and vicarious performance
D)equitable and statutory assignment,vicarious performance,and by operation of law
E)novation,vicarious performance,and by operation of law

Accepted Answer

The answer of Transfer of rights can be accomplished through...

Quiz 12: The Extent of Contractual Rights

Chris was indebted to Kirk for a loan of $1,000.Kirk assigned Chris' promise to pay to Bryce.The assignment must be of the entire agreement between Chris and Kirk.

Chris was indebted to Kirk for a loan of $1,000.Kirk assigned Chris' promise to pay to Bryce.The assignment by Kirk to Bryce must be in writing to be an effective assignment.

Businesses may raise capital by assigning its existing accounts receivable to a collections company or bank in return for an immediate lump-sum percentage payment.What is this method of raising capital called?

The party who holds property for the benefit of another under a trust agreement or arrangement is known as the

Precision Engineering receives a contract to design and build a sewage treatment plant from the town of WaWa.It designs the project and assigns the construction to Dynamic Construction Ltd.The contract has no provisions regarding assignment.Can Precision make the assignment to Dynamic?

Transfer of rights can be accomplished through which of the following: