Question 1

A negotiable instrument is
A)valuable documents that can be pledged as security to another.
B)an instrument that can be given in exchange for a promise of another.
C)an instrument that is used in negotiations.
D)a written promise by a party given in exchange for a promise of another.
E)a written contract containing a promise,express or implied,to pay a specific sum of money to the order of a designated person or to bearer.

Accepted Answer

A negotiable instrument is a written contract that contains a promise, express or implied, to pay a specific sum of money to the order of a designated person or to bearer. It can be transferred by delivery and/or endorsement, and it constitutes a legally binding obligation on the part of the issuer to make payment. Examples of negotiable instruments include checks, promissory notes, and bills of exchange.

Question 2

The effect of the doctrine of privity of contract is that
A)a person who is not a party to a contract cannot obtain benefits or rights under it.
B)a unilateral contract is unenforceable against parties who have privity.
C)parties to a contract are protected by the law.
D)a bilateral contract is unenforceable against a promisee.
E)a person can obtain rights under a contract to which he or she is not a party.

Accepted Answer

The doctrine of privity of contract means that a person who is not a party to a contract cannot obtain benefits or rights under it. This means that only the parties to a contract can enforce its terms and receive its benefits. Third parties who are not party to the contract have no legal rights or obligations under it.

Question 3

A Co.is a carrier of goods.A Co.uses a standard form contract that contains a provision which states that the risk of loss is to be borne by the owner of the goods and that A Co.will not be held liable for its negligence or the negligence of its employees.In the course of carrying B's goods,one of A Co.'s employees is negligent and the goods are damaged.In this situation,
A)only the employee who was negligent will get the benefit of the provision in the contract.
B)both A Co.and the employee who is negligent will get the benefit of the provision in the contract.
C)neither A Co.nor the employee will get the benefit of the provision in the contract.
D)only A Co.gets the benefit of the provision in the contract.
E)the provision in the contract is void as against public policy.

Accepted Answer

EB) A Co. and its employees are typically covered under the contract's provisions, including those limiting liability for negligence, as the contract is between A Co. and the owner of the goods. The provision is designed to protect the company and by extension, its employees acting within the scope of their employment.E) Provisions that absolve a party from liability for its own negligence, especially in contracts of carriage, can be considered void against public policy in many jurisdictions. This is because they can unfairly limit the recourse of individuals or businesses that suffer losses due to the carrier's negligence.

Question 4

A Company contracts to build a house for B,and the contract expressly states that the contractor may from time to time use the services of subcontractors.In the course of performing the contract,one of the subcontractors negligently builds a wall,which falls over,destroying B's car.In this situation,
A)the damage to the car is too remote and neither A Company nor the subcontractor can be sued.
B)only the subcontractor can be sued.
C)only the contractor,A Company,can be sued.
D)both the subcontractor and A Company can be sued.
E)none of the above

Accepted Answer

Both the subcontractor and the contracting party (A Company) can be sued. This is because the contractor is ultimately responsible for the work done by their subcontractors, and the contract expressly allows them to use such subcontractors. Therefore, B can bring a claim against both the subcontractor and A Company for the damage to their car.

Question 5

Which of the following is NOT an example of an exception to the privity of contract rule?
A)a life insurance policy
B)collateral contracts
C)the trust
D)bilateral contracts
E)the undisclosed principal in an agency

Accepted Answer

Bilateral contracts are not exceptions to the privity of contract rule. Privity of contract means that only parties to a contract have obligations and rights under that contract. Bilateral contracts simply involve a promise for a promise between two parties, but this does not allow for third parties to be involved or have rights under the contract. Life insurance policies, collateral contracts, the trust, and undisclosed principals in an agency are all examples of exceptions to the privity of contract rule, where third parties are allowed to have rights under the contract.

Question 6

Dunlop sold a number of their tires to Dew & Co.on the terms that Dew & Co.would not resell them below certain listed prices and that,in the event of a sale to trade customers,Dew & Co.would get a similar undertaking not to sell below the listed prices.Dew & Co.sold the tires to Selfridge,who agreed to observe the restrictions and to pay Dunlop the sum of $5.00 for each tire sold in breach of this agreement.Selfridge in fact supplied tires to two of their own customers below the listed price.Dunlop now sues Selfridge to recover the two sums of $5.00 as liquidated damages and asks for an injunction to restrain further breaches of the agreement.In this situation,
A)there is a no contract between Dew & Co.and Dunlop.
B)Dunlop has no contractual connection to the contract between Selfridge and Dew & Co.
C)Selfridge is not in breach of the contract between Dew & Co.and Dunlop.
D)Selfridge has a contract with Dunlop.
E)there is a contract between Dunlop and Selfridge.

Accepted Answer

The answer of Dunlop sold a number of their tires...

Question 7

Mary wants to be able to take care of her sons when she is away.She decides to give an amount of money to a friend,Melanie,with the instructions that she is to use that money to care for the children when she is away.The money given to Melanie is called ________ and Melanie is a ________.
A)deposit;trustee
B)trust;trustee
C)fund;trustee
D)endowment;money caretaker
E)fund;constructive trust

Accepted Answer

The situation described fits the definition of a trust, which is an arrangement where one person (the settlor) gives assets to another person (the trustee) to hold and manage for the benefit of a third person (the beneficiary). In this case, Mary is the settlor, Melanie is the trustee, and the beneficiaries are Mary's sons who will receive care using the money entrusted to Melanie. Therefore, choice B (trust;trustee) is the best answer.

Question 8

Parker owes money to both Gregory and Williams.He agrees with Williams to assign to him the whole of his property if Williams will pay the debt due to Gregory.The property is duly assigned,but Williams fails to pay Gregory.Gregory and Parker sue in equity to compel performance of William's promise.In this situation,
A)the lawsuit by Parker and Gregory will succeed.
B)Gregory acquired an equitable right through the mediation of Parker's agreement.
C)Parker will be regarded as trustee for Gregory.
D)Parker need not have joined Gregory in the law suit.
E)all of the above

Accepted Answer

- The lawsuit by Parker and Gregory will succeed because Williams failed to fulfill his promise to pay the debt to Gregory.
- Gregory acquired an equitable right through the mediation of Parker's agreement because Parker assigned his property to Williams in order to pay off his debt to Gregory.
- Parker will be regarded as a trustee for Gregory because Parker agreed to assign his property to Williams in order to pay off his debt to Gregory, making Parker a trustee for Williams and Gregory.
- Parker needed to join Gregory in the lawsuit because they both had a claim to the debt owed by Williams.

Question 9

When it comes to a manufacturer who negligently manufactures goods,
A)only the consumer who purchased the goods and suffered harm may sue the manufacturer.
B)only the family members who suffer harm can sue the manufacturer.
C)both the consumer and his or her family members who suffer harm can sue the manufacturer.
D)the family members cannot sue the manufacturer because there is no privity between them and the manufacturer.
E)none of the above

Accepted Answer

Both the consumer who purchased the goods and suffered harm and their family members who suffered harm can sue the manufacturer for negligent manufacturing. The consumer has a direct relationship with the manufacturer through the purchase of the goods, while the family members can bring a claim for loss of consortium or other damages stemming from the harm suffered by the consumer.

Question 10

Which of the following is true?
A)A trustee is not the legal owner of the property that she or he is administering.
B)A constructive trust is a relationship that exists between a trustee and beneficiary.
C)The legal owner of trust property is the true owner of the property.
D)A trustee is the legal owner of the property that she or he is administering.
E)The beneficiary of a trust cannot enforce the trust in his or her favour.

Accepted Answer

A trustee is the legal owner of the property they administer, holding it for the benefit of the beneficiaries.

Question 11

The right to intangible property is known as
A)intangible property right.
B)equitable assignment of property.
C)a chose in action.
D)a chose of property.
E)a chose in possession.

Accepted Answer

The right to intangible property is known as a "chose in action," which refers to the right to sue to enforce a contractual obligation or to recover an indebtedness. Choices A, B, D, and E are not accurate terms for this concept.

Question 12

Peter was a coal merchant.In March 1962,he contracted to sell the business to his nephew John in consideration (1)that for the rest of Peter's life John should pay him $20.00 a week and (2)that if Peter's wife survived him,John should pay her an annual annuity of $15.00 a week.John took over the business and paid Peter the agreed sum until Peter died in November 1963.He then paid Peter's widow $15.00 for one week and refused to pay any more.The widow in both her personal capacity and as administratrix of Peter's estate brought an action against John in which she claimed all arrears under the annuity not paid her and asked for specific performance of the contract regarding the annuity.In this case,
A)the widow will succeed,but in her capacity as administratrix of Peter's estate only.
B)the widow will succeed,but in her personal capacity only.
C)the widow will not succeed because only Peter could enforce the contract with John.
D)the widow will not succeed because there is no privity between her and John.
E)none of the above

Accepted Answer

The answer of Peter was a coal merchant.In March 1962,he...

Question 13

Where an assignment of a debt is equitable only,
A)the assignee alone can sue the debtor to enforce payment.
B)both the assignor and assignee must sue together to enforce the payment.
C)the assignor alone can sue the debtor to enforce payment.
D)none of the above
E)all of the above

Accepted Answer

When an assignment of a debt is equitable only, both the assignor (the original party owed the debt) and the assignee (the party to whom the debt has been assigned) must sue together to enforce payment. This is because the legal title has not been transferred to the assignee; thus, the assignor's involvement is necessary for legal action.

Question 14

A policy of life insurance provided that the insurers would pay to the insured or his assignees the sum of $1000.00 if he died before July 31,1926.The insured assigned the benefit of the policy to his wife and gave written notice of the assignment to the insurers.The policy was later extended,on the payment of an additional premium,for a further three months,but the benefit of the extension was not assigned to the wife.The insured died within the three-month extension period and the matter went to court on the issue of whether or not the wife benefited from the extension of the policy so as to be entitled to the insurance money.In this case,
A)the rule regarding notice of an assignment was not followed.
B)the extension of the policy was for the benefit of the wife and a trust had been created in her favour so as to entitle her to the insurance money.
C)the intention of the insured was not to benefit his wife,so she gets nothing.
D)the normal rule of privity applies and the wife gets nothing.
E)none of the above

Accepted Answer

The insured assigned the benefit of the policy to his wife and gave written notice of the assignment to the insurers. Therefore, the wife had a right to the insurance money if the insured died before July 31, 1926. The policy was later extended for a further three months, but the benefit of the extension was not assigned to the wife. However, since the wife had already been assigned the benefit of the policy, a trust was created in her favour, and she would still be entitled to the insurance money even if the extension was not assigned to her. Therefore, the correct answer is B.

Question 15

The right to tangible property that can be possessed is known as
A)assignment of rights.
B)a chose in action.
C)chattel property rights.
D)a chose in possession.
E)equitable assignment.

Accepted Answer

The right to tangible property that can be possessed is known as a chose in possession. This refers to ownership of physical objects such as cars, furniture, and jewelry that can be physically possessed and controlled. The other options refer to different types of property rights such as rights to intangible assets or rights that can be transferred.

Question 16

H owes C $700.00.By agreement between H and R,R promises to pay this debt in return for H's undertaking to convey a house to him.C now sues R on his promise.In this situation,
A)there is no contract between H and C.
B)there is a contract between H and R.
C)privity of contract prevents C from succeeding.
D)there is no contract between R and C.
E)all of the above

Accepted Answer

In this scenario, there is no direct contract between H and C regarding the new agreement, nor is there a direct contract between R and C. The contract exists between H and R, where R agrees to pay H's debt to C in exchange for a house. However, because C was not a party to this agreement, the principle of privity of contract applies, preventing C from enforcing R's promise directly. This principle states that a contract cannot confer rights or impose obligations arising under it on any person except the parties to it.

Question 17

A enters into a contract with B whereby in consideration of the intended marriage of A's daughter to B's son,each of A and B will pay B's son a sum of money.A fails to pay the money and now B's son sues A.In this situation,
A)B's son will succeed because he is a party to the contract between A and B.
B)B's son will not succeed because there is no privity between B's son and A.
C)B's son will not succeed because an intended marriage is no consideration at all.
D)B's son will succeed because a trust relationship was created.
E)B's son will succeed because the consideration was the marriage of B's son to A's daughter.

Accepted Answer

B's son will not succeed because there is no privity between B's son and A. While the contract between A and B may exist, B's son does not have a direct relationship or agreement with A and therefore cannot enforce the contract or claim the money owed. The fact that the consideration was the intended marriage does not change this lack of privity.

Question 18

Which of the following best demonstrates the concept of vicarious liability?
A)Jack is employed by Jim as a trainee mechanic.Jack goes to a party on the weekend and is asked by a friend,Mary,to check her car that won't start.Jack checks the car.A few minutes after Mary drives away,the car's ignition explodes injuring Mary.
B)A man's dog runs out of the house and mauls a letter carrier.
C)A cow leaves its pasture,walks into the garden of another farmer and destroys all the farmer's crops.
D)Jack is employed by Jim as a trainee mechanic.Jim's sister,Maggie,brings her car to the shop.It has an engine problem.Jack has never worked on a car's engine before.Jim asks Jack to work on the engine.Jack works on the engine.Later when Maggie drives off in the car,the engine explodes injuring Maggie.
E)Jack is injured on the job as a result of slipping on oil in the shop.

Accepted Answer

Vicarious liability holds an employer responsible for the negligent acts of an employee performed within the scope of their employment. In this case, Jack was an employee of Jim and was asked to work on Maggie's car, which was within the scope of his employment. Therefore, Jim can be held vicariously liable for Jack's negligence. Choices A, B, C, and E do not involve the relationship between an employer and employee, and therefore do not demonstrate the concept of vicarious liability.

Question 19

Mary wants to be able to take care of her sons when she is away.She decides to give an amount of money to a friend,Melanie,with the instructions that she is to use that money to care for the children when she is away.Melanie is called a ________ and the children are called ________.
A)guardian;trustees
B)caretaker;trustees
C)money caretaker;beneficiaries
D)trustee;beneficiaries
E)constructive trust;beneficiaries

Accepted Answer

Melanie is acting as a trustee by managing the money given to her by Mary for the benefit of the children, who are the beneficiaries of that money. A guardian would have legal custody of the children and be responsible for their overall care, which is not the case here. A caretaker is too broad of a term and does not specifically refer to managing the money given by Mary. Money caretaker is not a commonly used term and is not accurate. A constructive trust is a legal concept that is not relevant to the scenario described.

Question 20

Vicarious performance is where
A)a third party performs an obligation in place of another person who is ultimately liable for proper performance.
B)an employee performs an obligation in place of another employee and the performing employee is liable for proper performance.
C)parties to a contract enter into another agreement that has the effect of transferring the liability to perform to a third party.
D)an employer performs an obligation in place of its employee and is liable for proper performance.
E)parties to a contract agree to terminate a contract and substitute a new contract in place of the old one.

Accepted Answer

Vicarious performance refers to a situation where a third party performs an obligation on behalf of another person who is ultimately liable for proper performance. This means that the performing party is not liable for any breach or non-performance, and the responsibility falls on the person who should have performed the obligation in the first place.

Quiz 11: Privity of Contract and the Assignment of Contractual Rights

A negotiable instrument is

The effect of the doctrine of privity of contract is that

Which of the following is NOT an example of an exception to the privity of contract rule?

Mary wants to be able to take care of her sons when she is away.She decides to give an amount of money to a friend,Melanie,with the instructions that she is to use that money to care for the children when she is away.The money given to Melanie is called and Melanie is a .

When it comes to a manufacturer who negligently manufactures goods,

Which of the following is true?

The right to intangible property is known as

Where an assignment of a debt is equitable only,

The right to tangible property that can be possessed is known as

H owes C $700.00.By agreement between H and R,R promises to pay this debt in return for H's undertaking to convey a house to him.C now sues R on his promise.In this situation,

A enters into a contract with B whereby in consideration of the intended marriage of A's daughter to B's son,each of A and B will pay B's son a sum of money.A fails to pay the money and now B's son sues A.In this situation,

Which of the following best demonstrates the concept of vicarious liability?

Mary wants to be able to take care of her sons when she is away.She decides to give an amount of money to a friend,Melanie,with the instructions that she is to use that money to care for the children when she is away.Melanie is called a and the children are called .

Vicarious performance is where