Deck 14: Operation of Contracts

Question 1

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

Answer 1

False

Question 2

A person who agrees in a contract to perform a particular task may generally delegate this task to someone else and can transfer responsibility for getting it done.

Answer 2

False

Question 3

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

Answer 3

False

Question 4

An example of a party to a personal-service contract is a musician.

Question 5

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 6

Third parties to a contract are affected by the contract if they:

A) are witnesses to the contract.
B) sign the contract.
C) arethird-party beneficiaries or incidental beneficiaries.
D) have rights under the contract.

Question 7

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

Question 8

Randy and Donald were property developers, and they 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 9

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 10

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

Question 11

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 12

If a 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 13

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

Question 14

An assignment must always be in writing.

Question 15

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 16

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

Question 17

Personal-service contracts may not be assigned because the party who hires the specific person has a substantial interest in having only the hired person perform.

Question 18

A third-party beneficiary to a contract rarely has a legal right to the benefits resulting from the contract.

Question 19

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.

Question 20

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 21

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 22

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 23

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 24

If the original contract is required to be in writing under the Statute of Frauds, the assignment:

A) must also be in writing.
B) may be either written or oral.
C) is void.
D) is valid.

Question 25

Which of the following contracts can be assigned?

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 26

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

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

Question 27

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

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

Question 28

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 29

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

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

Question 30

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.

Question 31

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

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

Question 32

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 33

What states, "No delegation of performance relieves the party delegating of any duty to perform or any liability for breach"?

A) The Uniform Commercial Code (UCC)
B) The law of each state
C) A federal statute
D) Common law

Question 34

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 35

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 36

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

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

Question 37

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 38

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 39

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

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

Question 40

In a bankruptcy, the assets and contracts of a bankrupt person or business will be assigned to:

A) the party to the contract.
B) the court.
C) the trustee.
D) the creditors.

Question 41

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

Question 42

State the differences between a novation and an assignment.

Question 43

Name the three kinds of contracts that cannot be assigned.