Question 1

Miko and Gina enter into a written contract. If Miko assigns her part of the agreement to Teresa and Teresa tells Gina of the assignment, Miko is bound by an implied warranty that Gina will respect the assignment.

Accepted Answer

The assignor is bound by an implied warranty that the obligor will respect the assignment and make the performance, as required by the original agreement between the assignor and the obligor.

Question 2

Jackson transfers his business accounts receivable to Friendly Finance Company. Friendly would be considered the assignee.

Accepted Answer

This is an assignment. The parties to an assignment are the assignor (party who assigns rights or delegates duties), the assignee (outside third party to whom the assignment is made), and the obligor (the remaining party to the original agreement).

Question 3

If a time for performance is not stated in the contract, then the contract must be performed immediately.

Accepted Answer

When the time for performance is not stated in the contract, the contract must be performed within a reasonable time. A reasonable time is the time that may fairly, properly, and conveniently be required to do the task that is to be done, considering attending circumstances.

Question 4

A third party is an individual who is affected by a contract but who is not one of the contracting parties.

Accepted Answer

A third party is a person who may in some way be affected by a contract, but who is not one of the contracting parties.

Question 5

Quantum meruit damages are token damages awarded to parties who have experienced an injury to their legal rights, but no actual loss.

Accepted Answer

Damages awarded under quantum meruit are in an amount considered reasonable in return for the benefits the one party derived through the quasi-contract relationship. In cases where there has been no express or implied mutual agreement, a court may impose an obligation against a party who has been unjustly rewarded at the innocent expense of another.

Question 6

An incidental beneficiary is an outside party that can legally enforce the contract made by those in privity of contract.

Accepted Answer

An incidental beneficiary is an outside party for whose benefit a contract was not made but who would substantially benefit if the agreement were performed according to its terms and conditions. An incidental beneficiary, in contrast to an intended beneficiary, has no legal grounds for enforcing the contract made by those in privity of contract.

Question 7

Jackie's mortgage payment to Commerce Bank was due on June 1. On May 31, Jackie received a notice that her mortgage had been assigned to Brown Investments. Jackie is allowed a reasonable time to verify that an assignment has been truly made.

Accepted Answer

The assignee is required to give notice of the assignment to the obligor. The obligor is then allowed a reasonable time to seek assurance that an assignment has been truly made.

Question 8

If due notice has been given and the obligor makes payment to the assignor, the obligor is excused from making payment to the assignee.

Accepted Answer

If notice is not given, it would be normal practice for the obligor to render performance to the original contracting party, the assignor. If due notice has been given and the obligor makes payment to the assignor, the obligor is not excused from making payment to the assignee.

Question 9

Only two parties are associated with any assignment-the assignor and the obligor.

Accepted Answer

Three parties are associated with any assignment-the assignor, the assignee, and the obligor.

Question 10

If Ann is named as a donee beneficiary on Carl's life insurance policy, Ann can sue the insurance company if it fails to pay her when Carl dies.

Accepted Answer

The contracting parties owe the donee beneficiary the act promised; if it is not forthcoming, the donee beneficiary may bring suit. The consideration that supports this type of agreement is the consideration exchanged by the parties in privity of contract.

Question 11

When an assignment occurs, the assignee assumes the contractual obligations previously held by the assignor.

Accepted Answer

The rights and duties of the assignee are the same as those previously held by the assignor under the original contract.

Question 12

Under modern law, court-issued injunctions are typically temporary, and can never be permanent.

Accepted Answer

An injunction is an order issued by a court directing that a party do or refrain from doing something, and may be either temporary or permanent.

Question 13

Promising to pay when goods are delivered is an example of a condition subsequent.

Accepted Answer

A condition subsequent is one in which the parties agree that the contract will be terminated when a prescribed event occurs or does not occur.

Question 14

When no consideration is given for an assignment, creditors of the assignor may have the assignment rescinded on the grounds that it is a fraudulent conveyance.

Accepted Answer

A fraudulent conveyance is a transfer of property with the intent to defraud creditors. If a fraudulent conveyance occurs, the assignor's creditors could have the assignment rescinded.

Question 15

An anticipatory breach occurs when a party to a contract expresses or clearly implies an intention not to perform to contract, even before being required to act.

Accepted Answer

An anticipatory breach, also called a constructive breach, occurs when a party to a contract either expresses or clearly implies an intention not to perform the contract, even before being required to act. The repudiation must indicate a deliberate refusal to perform according to the terms of the contract.

Question 16

The satisfactory performance by a car dealer of a contract for the purchase of a new car would be judged by a subjective standard.

Accepted Answer

Satisfactory performance exists when objective standards have determined that the contracting parties have performed their contractual duties according to the agreement. When there is no express agreement, the law implies that work will be done in a skillful manner and the materials or goods will be free of defects.

Question 17

A transfer of a contract right is called a delegation.

Accepted Answer

An assignment is a transfer of a contract right, and a delegation is a transfer of a contract duty.

Question 18

Stella contracts to purchase Wilma's horse, Running Cloud, for $10,000. The horse dies soon after the contract is signed, but prior to Stella taking possession of the horse. Stella is still obligated to pay for the horse.

Accepted Answer

When the exact subject matter of an executory contract has been selected by the parties and later is destroyed, the performance obligation is discharged under the doctrine of impossibility.

Question 19

Sue is selling her home to Ben and wants to be released from her mortgage obligation to Bigger Bank. Sue, Ben, and Bigger Bank may enter a novation.

Accepted Answer

If all three parties agree, the assignor can be released from liability at the time of the assignment, and privity of contract can exist between the assignee and the obligor. Such an arrangement is called a novation, which is a mutually-agreed to substitution of a new party for one of the original parties to a contract.

Question 20

The assignee should always give notice of assignment to the obligor, to protect against subsequent assignments.

Accepted Answer

Giving notice is usually the assignee's responsibility. Once notice is received, the obligor should deal with the assignee. If no notice is given, generally the obligor should render performance to the original contracting party, the assignor.

Quiz 12: Third Parties, Discharge, and Remedies