Deck 14: Operation of Contracts

Question 1

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

Answer 1

False

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.

Answer 2

A

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.

Answer 3

B

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.

Question 5

A life insurance policy is an example of 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.

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.

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.

Question 9

Personal-service contracts may be assigned.

Question 10

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

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.

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.

Question 13

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

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.

Question 15

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

Question 16

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

Question 17

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

Question 18

Personal service contracts are automatically assigned at the time of 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.

Question 20

An assignment must always be in writing.

Question 21

In most states,the law permits parties to a contract to transfer their rights to another by:

A) transference.
B) recovery.
C) assignment.
D) delegation.

Question 22

The assignor of a contract right becomes a(n):

A) assignee.
B) grantor.
C) guarantor.
D) transferee.

Question 23

In a contract,the term ________means tasks and performances,but not responsibilities.

A) rights
B) duties
C) role
D) errands

Question 24

A party to a contract who assigns his or her rights or delegates his or her duties to a third party is:

A) allowed to hold the third party responsible for the contract execution.
B) held responsible only until the contract is assigned.
C) not responsible for the execution of the contract.
D) never free from the contract until it is completely executed.

Question 25

When a contracting party dies,contract rights are assigned to the:

A) parents of the deceased person.
B) heirs of the deceased person.
C) administrator or executor of the estate.
D) spouse of the deceased person.

Question 26

A party to a contract will not be obligated by an assignment made by the other party without his or her knowledge until:

A) recorded.
B) stamped.
C) notified.
D) rejected.

Question 27

Athletes are hired because of their special personal skills; because of this,their services under a contract:

A) may not be delegated.
B) may be delegated.
C) may not be assigned.
D) may be assigned.

Question 28

A party's rights in a contract can be assigned to another party; and also a party's duties are transferred to a third party if the duties do not involve:

A) charity.
B) royalty.
C) goodwill.
D) unique skills or abilities.

Question 29

Most rights are assignable,except in cases in which the obligations of the parties would be significantly:

A) altered.
B) recorded.
C) rejected.
D) notified.

Question 30

All of the following contracts cannot be assigned,EXCEPT:

A) contracts that include assignment restrictions.
B) assignments prohibited by law.
C) contracts that cannot be performed within one year.
D) contracts that require personal service.

Question 31

When all parties to a contract agree to a significant change in the contract,the change is called a(n):

A) assignment.
B) delegation.
C) execution.
D) novation.

Question 32

Person A was contracted by Person B to build a beach house.Soon after,Person A was unable to complete the entire house,and hence assigned Person C to complete the contract,after seeking Person B's approval.In this example,the obligation of Person A is discharged and this is a:

A) novation of contract.
B) contingent contract.
C) specialty contract.
D) contract of records.

Question 33

The Uniform Commercial Code (UCC)states,"No delegation of performance relieves the party delegating of any duty to perform or any liability for breach" under:

A) UCC 1-210.
B) UCC 2-210.
C) UCC 3-210.
D) UCC 4-210.

Question 34

Rights or duties under a contract may be assigned by a court of law when a contracting party:

A) earns profits.
B) incurs losses.
C) opens new business.
D) dies or becomes bankrupt.

Question 35

A(n)__________ transfers all rights and obligations in a contract.

A) assignment
B) novation
C) exemption
D) execution

Question 36

A party to an existing contract may appoint a third person to perform contractual duties by:

A) transference.
B) recovery.
C) assignment.
D) delegation.

Question 37

When parties to a contract include in the contract itself a specific provision forbidding assignment,such contracts are called:

A) contracts with assignment restrictions.
B) contracts with impeachment clause.
C) contracts with arbitration clause.
D) contracts with exemption clause.

Question 38

The burden of investigating claims of assignment falls on the party notified of the:

A) assignment.
B) delegation.
C) execution.
D) rescission.

Question 39

The laws dealing with bankruptcy provide that the assets and contracts of a bankrupt person or business be:

A) sold to the highest bidder.
B) assigned to the trustee in bankruptcy.
C) held by the court pursuant to a decree.
D) transferred to the largest creditor.

Question 40

In a private-service contract,the party who hires the specific person to perform certain duties has a(n)____________interest in having only the hired person perform.

A) substantial
B) implied
C) explicit
D) reasonable

Question 41

State the differences between a novation and an assignment.

Question 42

What is the difference between a third-party beneficiary and an incidental beneficiary?

Question 43

Name the three kinds of contracts that cannot be assigned.