Question 1

Susan wanted to give a diamond pendant to Lucy, her daughter. Susan entered into a contract with Andrew, a dealer who specializes in diamond jewelry. Susan had promised to pay him if he delivered the pendant to Lucy. Andrew withdrew from the contract and Lucy wanted to sue him. Which of the following statements is true in this scenario?

Accepted Answer

In this scenario, Lucy can sue Andrew as she is a donee beneficiary of the contract. A third person is a donee beneficiary if the promisee's primary purpose in contracting was to make a gift of the contracted performance to the third party. Either the promisee or the donee beneficiary can sue the promisor for not performing the promise. The beneficiary can recover the value of the promised performance, while the promisee can recover damages resulting from nonperformance (usually only nominal damages).

Question 2

When a promisor appoints another person to perform his duties under a contract, _____.

Accepted Answer

When a promisor appoints another to perform his duties under a contract, this is called a delegation. Like assignments, not all duties are delegable.

Question 3

Assignees should promptly notify the promisor of an assignment because the promisor who renders performance to the assignor without notice of the assignment:

Accepted Answer

Assignees should promptly notify the promisor of the assignment. This is necessary because the promisor who renders performance to the assignor without notice of the assignment has no further liability under the contract. Promisors with notice of the assignment who render performance to the assignor or to any third party remain liable to the assignee under the assigned contract.

Question 4

A promisor who delegates duties is _____ if the party to whom the duties were delegated fails to satisfactorily perform them.

Accepted Answer

A promisor who delegates duties is still liable to the promisee if the party to whom the duties were delegated fails to satisfactorily perform them. This rule is necessary to make contracts truly binding; otherwise, a promisor could avoid virtually all liability by merely delegating duties she did not want to perform.

Question 5

A creditor beneficiary:

Accepted Answer

If a promisor's performance will satisfy a legal duty that the promisee owes a third party, the third party is a creditor beneficiary. The creditor beneficiary has rights against both the promisee and the promisor.

Question 6

Which of the following statements is true of delegation of duties?

Accepted Answer

Like assignments, not all duties are delegable. If the duty to be performed could be performed fully by many different persons, it is delegable. If performance depends on the personal skill, character, or judgment of the promisor, however, it may not be delegated.

Question 7

Zeta is contracted to perform a violin solo for Pat. Zeta assigns the contract to Roy. Which of the following statements is true about delegation of duty in this case?

Accepted Answer

Like assignments, not all duties are delegable. If performance depends on the personal skill, character, or judgment of the promisor, however, it may not be delegated. Thus, in Zeta's case, her duty to play the violin is not delegable because it involves her personal skill.

Question 8

For an assigned claim to be valid, _____.

Accepted Answer

Assignors who are paid for making an assignment are potentially liable to assignees for certain implied guarantees. These guarantees are imposed by law unless the assignment agreement clearly indicates to the contrary. One such guarantee is that the assigned claim is valid, which implies that the contract is not illegal, and it is not voidable for any other reason known to the assignor.

Question 9

Which of the following is true of employment contracts?

Accepted Answer

Contracts involving personal rights are generally nonassignable. These are contracts in which some element of personal skill, credit, character, or judgment is an essential part of the agreement. In such a case, the substitution of the assignee for the assignor would materially change the nature of the performance required of the promisor. Employment contracts are therefore generally held nonassignable.

Question 10

Which of the following is an implied guarantee when an assignor is paid for making an assignment?

Accepted Answer

Assignors who are paid for making an assignment are potentially liable to assignees for certain implied guarantees. These guarantees are imposed by law unless the assignment agreement clearly indicates to the contrary. One such guarantee is that the assignor has good title to the rights assigned.

Question 11

Why are contracts prohibiting competition with a buyer of a business or an employer generally assignable with the sale of the business?

Accepted Answer

Contracts not to compete with a buyer of a business or an employer are generally assignable with the sale of the business. The purpose of such contracts is to protect the goodwill of the business (the value of the business as a going concern), an asset that can be sold with the business.

Question 12

Which of the following statements is true of assignors?

Accepted Answer

Assignors who wrongfully assign the same claim more than once are liable to an assignee who is later held to have acquired no rights against the promisor. The assignor does not impliedly warrant the solvency of the promisor.

Question 13

Assignments of future wages are not effective because they:

Accepted Answer

Any assignment that would materially alter the duties of the promisor is unenforceable, since the promisor cannot be required to do something significantly more than, or different from, what he or she originally agreed to do. Assignments contrary to public policy are also not effective. Assignments of future wages are an example. In order to protect wage earners from unwisely impoverishing themselves, some states prohibit wage assignments by statute.

Question 14

Once a donee or creditor beneficiary has accepted a contract, the original parties:

Accepted Answer

If the parties to a contract intended to benefit a third party, the third party can enforce the contract. There are two classes of third-party beneficiaries that have such enforcement rights-donee beneficiaries and creditor beneficiaries. Once a donee or creditor beneficiary has accepted the contract, or relied on it, the original parties cannot cancel or modify the contract without the third party's consent, unless the original contract gives them the right to do so.

Question 15

Rocky was voted the most valuable player of his university's basketball team. Rocky:

Accepted Answer

Like assignments, not all duties are delegable. If performance depends on the personal skill, character, or judgment of the promisor, however, it may not be delegated. Thus, in Rocky's case, his duty as a player is not delegable.

Question 16

A(n) _____ is a new, separate agreement by the promisee to release the original promisor from liability in exchange for a third party's agreement to assume the promisor's duties.

Accepted Answer

A novation is a new, separate agreement by the promisee to release the original promisor from liability in exchange for a third party's agreement to assume the promisor's duties. To have a novation requires more than the obligee's consent to having the delegate perform the duties.

Question 17

Lydia's father has named Lydia in his will as the inheritor of his farm. He has also named her as a beneficiary in his insurance policy. Lydia is:

Accepted Answer

A third person is a donee beneficiary if the promisee's primary purpose in contracting was to make a gift of the contracted performance to the third party. Life insurance contracts are a common form of donee beneficiary contract. In this scenario, Lydia is a donee beneficiary.

Question 18

Unless an assignment agreement clearly indicates a contrary intent, courts today tend to interpret assignments as including a delegation of the assignor's duties. A promise on the part of the assignee to perform these duties:

Accepted Answer

Unless an assignment agreement clearly indicates a contrary intent, courts today tend to interpret assignments as including a delegation of the assignor's duties. A promise on the part of the assignee to perform these duties is implied, and this implied promise is enforceable by either the promisor or the assignor. Both the Code and the Restatement support this interpretation.

Question 19

A donee beneficiary:

Accepted Answer

A third person is a donee beneficiary if the promisee's primary purpose in contracting was to make a gift of the contracted performance to the third party. The beneficiary can recover the value of the promised performance, while the promisee can recover damages resulting from nonperformance (usually only nominal damages).

Question 20

Assignees:

Accepted Answer

An assignee is entitled to all the rights his or her assignor had under the assigned contract, including the right to the promisor's performance. If the promisor does not perform, the assignee can sue for nonperformance.

Quiz 17: Third Parties Contract Rights