Question 1

An incidental beneficiary has a legal right to benefits resulting from a contract.

Accepted Answer

An incidental beneficiary does not have a legal right to benefits resulting from a contract. They may receive benefits from the contract, but only as a consequence of the contracting parties' intention to confer a benefit on them.

Question 2

A person who is not a party to a contract but is intended by the contracting parties to benefit as a consequence of a contract is termed a(n):
A) third party beneficiary.
B) incidental beneficiary.
C) official receiver.
D) arbitrator.

Accepted Answer

A person who is not a party to a contract but is intended by the contracting parties to benefit as a consequence of a contract is known as a third party beneficiary. An incidental beneficiary, on the other hand, is someone who may receive an unintended benefit from a contract, but it is not a central feature of the contract. An official receiver is an individual appointed by the government to take over the assets and liabilities of a bankrupt company, and an arbitrator is a neutral third party appointed to resolve disputes between parties in a contract.

Question 3

Third parties to a contract are those who are not a party to the contract but who:
A) are witnesses to a contract.
B) are affected by it.
C) are part of a contract of three persons.
D) always have rights under the contract.

Accepted Answer

Third parties to a contract are those who are affected by it but are not actual parties to the contract. They may have rights or obligations depending on the terms of the contract or applicable laws.

Question 4

The person who transfers his or her rights is known as the assignor; the third party to whom the rights are transferred is known as the assignee.

Accepted Answer

This statement is true.

Question 5

A life insurance policy is an example of a third-party contract.

Accepted Answer

A life insurance policy involves an agreement between the policyholder (first party), the insurance company (second party), and the beneficiary (third party). The beneficiary receives the benefit upon the death of the policyholder, making it a third-party contract.

Question 6

When rights or duties that arise from a contract are legally transferred to a third party,such contracts are an exception to the general rule that only the parties to a contract have rights and duties under it.

Accepted Answer

Contracts that involve the transfer of rights or duties to a third party are known as "assignment" or "delegation" contracts and are an exception to the general rule that only the parties to a contract have rights and duties under it.

Question 7

Randy and Donald were property developers,and decided to construct a condominium in a certain neighborhood.Jim,who owned a chain of restaurants,heard of this agreement,and opened a new restaurant in the same neighborhood even before the condominium construction began.However,the plan for the condominium was not approved by the state authorities,and the project was cancelled.Jim suffered losses as a result,but he had no rights in the contract because he was a(n):
A) material beneficiary.
B) substantial beneficiary.
C) incidental beneficiary.
D) third-party beneficiary.

Accepted Answer

Jim was an incidental beneficiary in the contract between Randy and Donald for the construction of the condominium. As an incidental beneficiary, he had no legal rights in the contract and could not claim damages when the project was cancelled.

Question 8

If the third party enters the contract as a result of a novation,the party whose rights or duties are assumed is completely relieved of obligations.

Accepted Answer

In a novation, a new party replaces one of the original parties in a contract, and that original party is completely relieved of their obligations as the new party takes over. Therefore, the statement is true.

Question 9

Personal-service contracts may be assigned.

Accepted Answer

Personal-service contracts are typically not assignable because they involve a specific individual’s skills, talents, or abilities, which are unique and personal to the contracting party.

Question 10

An incidental beneficiary is one who may benefit as a direct consequence of contract.

Accepted Answer

The answer of An incidental beneficiary is one who may...

Question 11

Even employment contracts may be assigned if there is no relationship of trust or confidence,or any other circumstance that would create a materially greater burden on the party whose services are being assigned.

Accepted Answer

Employment contracts can be assigned if there is no relationship of trust or confidence, or any other circumstance that would create a materially greater burden on the party whose services are being assigned.

Question 12

The beneficiary named in the insurance policy is legally a(n):
A) substantial beneficiary.
B) material beneficiary.
C) incidental beneficiary.
D) third-party beneficiary.

Accepted Answer

The beneficiary named in the insurance policy is known as a third-party beneficiary, as the beneficiary is not a party to the insurance contract but rather is someone who benefits from it.

Question 13

For personal service contracts,parties may transfer their rights but never their duties.

Accepted Answer

In a personal service contract, the parties' duties are unique to them and cannot be transferred to another party.

Question 14

A person who agrees in a contract to perform a particular task may generally delegate this task to someone else,and cannot be held responsible for getting it done.

Accepted Answer

Generally, a person who agrees in a contract to perform a particular task cannot delegate the task without the consent of the other party. If delegated without consent, the person may still be held responsible for getting it done. However, if the contract allows delegation or if the other party consents to it, then the person may delegate the task and may not be held responsible for getting it done by themselves.

Question 15

A contract may prohibit just one party from assigning or delegating.

Accepted Answer

A contract may include a clause stating that one party cannot assign or delegate their rights and obligations to another party without prior written consent.

Question 16

Members of the armed services are permitted to assign their pay.

Accepted Answer

Members of the armed services are generally not permitted to assign their pay because military regulations and federal law typically prohibit such assignments to ensure that the service member retains control over their earnings.

Question 17

A third-party beneficiary to a contract has no legal right to the benefits resulting from the contract.

Accepted Answer

A third-party beneficiary has a legal right to the benefits resulting from the contract, as they are intended to receive them as part of the contract's terms.

Question 18

Personal service contracts are automatically assigned at the time of death.

Accepted Answer

Personal service contracts typically require the performance of services by a specific individual, so they cannot be automatically assigned at the time of their death. Instead, the contract would typically terminate upon the individual's death.

Question 19

An incidental beneficiary is one who may benefit as an indirect consequence of a contract,although that was not the intent of the:
A) administrator.
B) contracting parties.
C) assignor.
D) deceased party.

Accepted Answer

An incidental beneficiary is not a party to a contract, but rather someone who may receive an unintentional benefit as a result of the contract. The contracting parties are the ones who intend to enter into the contract, and thus the incidental beneficiary is not their intended beneficiary.

Question 20

An assignment must always be in writing.

Accepted Answer

An assignment can also be verbal, but it is always better to have it in writing for clarity and record keeping.

Quiz 14: Operation of Contracts