Question 1

Which section of the Uniform Commercial Code (UCC)indicates that it is presumed that an assignment includes a delegation under contract law?
A)2-210
B)1-104
C)7-344
D)2-114

Accepted Answer

UCC section 2-210 states that the presumption is that with an assignment right in a contract comes also a delegation duty.

Question 2

A third party is categorized as a donee beneficiary when:
A)the promisee's primary purpose in contracting is to make a gift of the agreed-on performance to the third party.
B)the benefit derived by the third party was merely an unintended by-product of a contract that was created for the benefit of those who were parties to it.
C)he/she is unable to establish that the contract was made with the intent to benefit him/her.
D)the promisor's performance is intended to satisfy a legal duty that the promisee owes to the third party.

Accepted Answer

Intended beneficiaries are often classified as either creditor or donee beneficiaries.If the promisee's primary purpose in contracting is to make a gift of the agreed-on performance to a third party,that third party is classified as an intended donee beneficiary.

Question 3

Al hires Bob to move his furniture to his new house.On the day of the move,Bob does not feel like moving furniture,so he asks his friend Chuck to move the furniture.Chuck decides to leave before completing the move in order to watch a football game on TV.Al has to delay his move and hire another mover at a higher price.Al wants to sue Bob to recover for his damages.Given these facts,Al will most likely:
A)lose,because it was Chuck,not Bob,who failed to fulfill his duty to Al.
B)win,because Bob's duty to Al was not delegable.
C)win,because Bob is liable to Al.
D)lose,because he failed to insist on Bob's performance.

Accepted Answer

The delegation of a duty does not extinguish the duty owed by the delegator.In this case,Bob is still liable to Al.

Question 4

Fiona owed Lutz $5,000.As the result of an unrelated transaction,Lutz owed Bing that same amount.The three parties signed an agreement that Fiona would pay Bing instead of Lutz and Lutz would be discharged from all liability.The agreement among the parties is:
A)unenforceable for lack of consideration.
B)voidable at Bing's option.
C)an accord and satisfaction.
D)a novation.

Accepted Answer

Novation allows the original obligor to be discharged and a new obligor to be substituted in his/her place.

Question 5

Which of the following is a type of substituted contract in which the obligee agrees to discharge the original obligor and to substitute a new obligor in his/her place?
A)Assignment
B)Delegation
C)Certification
D)Novation

Accepted Answer

A novation is a particular type of substituted contract in which the obligee agrees to discharge the original obligor and to substitute a new obligor in his/her place.

Question 6

Which of the following is true of delegation?
A)It requires special,formal language.
B)It covers all duties stated in a contract.
C)It is often confused with assignment.
D)It automatically places all legal responsibilities on the delegatee.

Accepted Answer

A delegation of duties occurs when an obligor indicates his/her intent to appoint another person to perform his/her duties under a contract.Most people generally confuse delegation and an assignment.No special,formal language is necessary to create an effective delegation of duties.The mere fact that duties have been delegated does not always place legal responsibility on the delegatee to perform.

Question 7

Who performs the duty under a proper delegation?
A)Obligor
B)Obligee
C)Delegator
D)Delegatee

Accepted Answer

The person appointed to perform the duty under the contract through a valid delegation is called the delegatee.

Question 8

As a general rule,members of the public are held to be ________ of contracts entered into by their municipalities or other governmental units in the regular course of carrying on governmental functions.
A)promisees
B)incidental beneficiaries
C)donee beneficiaries
D)creditor beneficiaries

Accepted Answer

A third party is classified as an incidental beneficiary when the benefit derived by that third party was merely an unintended by-product of a contract that was created for the benefit of those who were parties to it.As a general rule,members of the public are held to be incidental beneficiaries of contracts entered into by their municipalities or other governmental units in the regular course of carrying on governmental functions.

Question 9

On August 1,Neptune Fisheries contracted in writing with West Markets to deliver to West 3,000 pounds of lobsters at $4 a pound.Delivery of the lobsters was due October 1 with payment due November 1.On August 4,Neptune entered into a contract with Deep Sea Lobster Farms which provided as follows: "Neptune Fisheries assigns all the rights under the contract with West Markets dated August 1 to Deep Sea Lobster Farms." The best interpretation of the August 4 contract would be that it was:
A)only an assignment of rights by Neptune.
B)only a delegation of duties by Neptune.
C)an assignment of rights and a delegation of duties by Neptune.
D)an unenforceable third-party beneficiary contract.

Accepted Answer

According to the UCC,the general language of an assignment,such as language indicating an assignment of "the contract" or of "all my rights under the contract," is to be interpreted as creating both an assignment and a delegation.

Question 10

Mike has a three-year lease on the apartment he occupies.He has lived there one year.He now wants to leave and go to Aspen,Colorado to be a ski instructor.However,Mike's landlord will not release him from the lease,and threatens to sue him if he breaks his lease.Mike finds Paul to take over the last two years of the lease,but Mike is worried that Paul might cause damage or in other ways inflict loss and that he,Mike,might be held financially responsible.In order to assure Mike that he will be completely discharged from all obligations under his lease,Mike should attempt to bring about:
A)an assignment.
B)a novation.
C)either an assignment or novation-it will not affect Mike's future liability.
D)neither an assignment nor a novation-both will not accomplish Mike's objective.

Accepted Answer

A novation will release Mike from any liability for the contract.It will be Paul's responsibility to fulfill it.

Question 11

Selena delegates her rights under a contract.The clause delegating her rights are termed: "All my rights under the contract are hereby effectively delegated to...." This language shows that the contract created a(n):
A)delegation only.
B)assignment only.
C)assignment and delegation.
D)a third-party beneficiary.

Accepted Answer

According to the UCC,the general language of assignment such as language indicating an assignment of "the contract" or of "all my rights under the contract" is to be interpreted as creating both an assignment and a delegation.

Question 12

Edna is a leading brain surgeon in the United States.She enters into a contract to perform a complicated brain surgery on Ben.However,since Edna is very busy,she wants to assign this contract to a less experienced surgeon,Charles.This would be Charles's first operation of this type.Ben can object to this assignment and prevent it because the contract between Ben and Edna is a(n):
A)contract for services to be performed in the future.
B)contract involving personal skill.
C)services contract.
D)employment contract.

Accepted Answer

The UCC and Section 318(2)of the Restatement (Second)of Contracts take the position that a party to a contract may delegate his/her duty to perform to another person unless the parties have agreed to the contrary or unless the other party has a substantial interest in having the original obligor perform the acts required by the contract.The "substantial interest" is determined by is the degree to which performance is dependent on the individual traits,skill,or judgment of the person who owes the duty to perform.In this case, Edna must perform the duty;she cannot delegate it to anyone else.

Question 13

A contract may be enforced by a third-party beneficiary if that beneficiary:
A)is an incidental beneficiary.
B)is a witness to the contract.
C)is the intended beneficiary.
D)has given some consideration.

Accepted Answer

For a third person (other than an assignee)to have the right to enforce a contract,he/she must be able to establish that the contract was made with the intent to benefit him/her.Such a person is called an intended donee beneficiary.

Question 14

In a novation:
A)the original obligor is completely discharged from his/her obligations under the contract.
B)the original obligee is completely discharged from his/her obligations under the contract.
C)the original obligor remains secondarily obligated.
D)both the original obligee and the original obligor remain obligated.

Accepted Answer

A novation is a particular type of substituted contract in which the obligee agrees to discharge the original obligor and to substitute a new obligor in his/her place.The effects of a novation are that the original obligor has no further obligation under the contract and the obligee has the right to look to the new obligor for fulfillment of the contract.

Question 15

Jada owned an insurance policy on her life,on which she paid all the premiums.Shaun was named the beneficiary.Jada died and the insurance company refused to pay the insurance proceeds to Shaun.An action by Shaun against the insurance company for the insurance proceeds will be:
A)successful because Shaun is a third-party donee beneficiary.
B)successful because Shaun is a proper assignee of Jada's rights.
C)unsuccessful because Shaun is not the owner of the policy.
D)unsuccessful because Shaun did not pay any of the premiums.

Accepted Answer

If the promisee's primary purpose in contracting is to make a gift of the agreed-on performance to a third party,that third party is classified as a donee beneficiary.Shaun is explicitly named as the intended beneficiary of the policy and therefore,has the right to claim the insurance amount.

Question 16

In an assignment/delegation,which party remains secondarily liable on the obligation that has been delegated?
A)Assignor/delegator
B)Assignee/delegatee
C)Third party
D)Obligee

Accepted Answer

The mere fact that duties have been delegated does not always place legal responsibility on the delegatee to perform.In case the delegatee fails to do so,secondary liability falls on the delegator.

Question 17

Denise contracts with Long Life Insurance Co. ,agreeing to pay premiums in return for which the company agrees to pay $500,000 to Denise's husband Barn when Denise dies.Barn is a(n):
A)creditor beneficiary.
B)donee beneficiary.
C)incidental beneficiary.
D)delegatee.

Accepted Answer

If the promisee's primary purpose in contracting is to make a gift of the agreed-on performance to a third party,that third party is classified as a donee beneficiary.Here,Barn is the donee beneficiary because the contract is made with the objective to give him the insurance money.

Question 18

Stella buys a car from Marble Sales for $10,000 on credit.Joel's daughter likes the car and so Joel buys the car from Stella.Joel also agrees to pay the balance due to Marble Sales,on behalf of Stella.Joel defaults.Marble Sales can bring a suit for breach of contract against:
A)Stella only.
B)Joel only.
C)Stella and Joel.
D)Joel and his daughter.

Accepted Answer

If the promisor's performance is intended to satisfy a legal duty that the promisee owes to a third party,the third party is a creditor beneficiary.The creditor beneficiary has rights against both the promisee (because of the original obligation)and the promisor.Marble Sales is the creditor beneficiary in this case,and as such,has rights against both Stella and Joel if Joel defaults.

Question 19

For a third person to have the right to enforce a contract,he/she must necessarily prove that:
A)he/she was the party to the contract.
B)he/she had been given a promise.
C)the contract was made to benefit him.
D)the contract provides him/her incidental benefit.

Accepted Answer

A third party can enforce a contract only if he/she can prove that he/she is the intended beneficiary of the contract;in other words,the contract was formed to benefit him/her.

Question 20

Ted Nix purchased two acres of land from Sally Pine.Nix paid 15 percent at the closing and gave his note for the balance secured by a 30-year mortgage.Five years later,Nix found it increasingly difficult to make payments on the note and finally defaulted.Pine threatened to accelerate the loan and foreclose if Nix continued in default.Pine told Nix either to get the money or obtain an acceptable third party to assume the obligation.Nix offered the land to Quick Co.for $4,000 less than the equity Nix had in the property.This was acceptable to Pine and at the closing,Quick paid the arrearage,executed a new mortgage and note,and had title transferred to its name.Pine surrendered Nix's note and mortgage to him.The transaction in question is a(n):
A)third-party beneficiary contract.
B)novation.
C)purchase of land subject to a mortgage.
D)assignment and delegation.

Accepted Answer

Novation allows the original obligor to be discharged and a new obligor to be substituted in his/her place.

Quiz 17: Rights of Third Parties

Which section of the Uniform Commercial Code (UCC) indicates that it is presumed that an assignment includes a delegation under contract law?

A third party is categorized as a donee beneficiary when:

Fiona owed Lutz $5,000.As the result of an unrelated transaction,Lutz owed Bing that same amount.The three parties signed an agreement that Fiona would pay Bing instead of Lutz and Lutz would be discharged from all liability.The agreement among the parties is:

Which of the following is a type of substituted contract in which the obligee agrees to discharge the original obligor and to substitute a new obligor in his/her place?

Which of the following is true of delegation?

Who performs the duty under a proper delegation?

As a general rule,members of the public are held to be ________ of contracts entered into by their municipalities or other governmental units in the regular course of carrying on governmental functions.

Selena delegates her rights under a contract.The clause delegating her rights are termed: "All my rights under the contract are hereby effectively delegated to...." This language shows that the contract created a(n) :

A contract may be enforced by a third-party beneficiary if that beneficiary:

In a novation:

Jada owned an insurance policy on her life,on which she paid all the premiums.Shaun was named the beneficiary.Jada died and the insurance company refused to pay the insurance proceeds to Shaun.An action by Shaun against the insurance company for the insurance proceeds will be:

In an assignment/delegation,which party remains secondarily liable on the obligation that has been delegated?

Denise contracts with Long Life Insurance Co. ,agreeing to pay premiums in return for which the company agrees to pay $500,000 to Denise's husband Barn when Denise dies.Barn is a(n) :

Stella buys a car from Marble Sales for $10,000 on credit.Joel's daughter likes the car and so Joel buys the car from Stella.Joel also agrees to pay the balance due to Marble Sales,on behalf of Stella.Joel defaults.Marble Sales can bring a suit for breach of contract against:

For a third person to have the right to enforce a contract,he/she must necessarily prove that: