Question 1

Which of the following involves a creditor beneficiary relationship?
A) A contract where the insured names a bank with which he has a loan as the beneficiary of a life insurance policy
B) A contract between an employer and a union representing the employees,which contract is made for the benefit of the employees
C) A contract between the owner of a building and the contractor stating that the contractor will pay his employees at a stated rate
D) A contract between a governmental unit and business for services to be rendered to area citizens

Accepted Answer

A creditor beneficiary relationship is one where the beneficiary of a contract stands to benefit financially from the performance of the contract. In this case, a bank with which the insured has a loan would be considered a creditor beneficiary as it would receive the proceeds from the life insurance policy to repay the loan owed by the insured.

Question 2

Which of the following is correct with regard to successive assignments of the same right?
A) It is impossible for an assignor to assign the same right more than once.
B) In England,the first assignee to notify the obligor prevails.
C) The Restatement does not recognize the validity of any successive assignments.
D) The majority rule in the United States is that the first assignee to notify the obligor prevails.

Accepted Answer

In England, the rule is that the first assignee to notify the obligor of the assignment has priority over other assignees.

Question 3

Odessa owes Kevin $2,000.On July 1,Kevin assigns the right to the $2,000 to Troy.Thereafter,on July 15,Kevin assigns the same right to Donna,who in good faith gives value for it and knows nothing about the first assignee.In this case:
A) Troy has the right to the payment of $2,000.
B) Donna has the right to the $2,000.
C) neither Troy nor Donna can claim the $2,000.
D) the rule differs in different states.Depending on which rule a state follows,the answer will vary.

Accepted Answer

The rule regarding assignment of rights can vary by jurisdiction. Some states follow the "first in time, first in right" rule, while others may follow the "bona fide purchaser" rule, which could give Donna the right if she acted in good faith and gave value without notice of the prior assignment.

Question 4

Barbara owes Arturo $2,000.On July 1,Arturo assigns the debt to Charles.Thereafter on July 15,Arturo assigns the same right to Dennis,who in good faith gives value for it and knows nothing about the first assignee.Dennis immediately notifies Barbara of the assignment.Under:
A) all of the rules,Charles has priority since he was the first assignee in time.
B) the majority rule,Dennis has priority.
C) the English Rule,Dennis has priority.
D) the English Rule,Charles has priority.

Accepted Answer

Under the English Rule, the first assignee to give notice to the debtor has priority. In this case, Dennis gave notice to Barbara before Charles did, so Dennis has priority. It does not matter that Charles was the first assignee in time, as long as Dennis acted in good faith and gave value for the assignment. Therefore, option C is the best choice.

Question 5

Notice of an assignment:
A) cuts off any defenses based on subsequent agreements between the obligor and assignor.
B) does not prevent subsequent setoffs of the obligor that arise out of separate matters.
C) does not bar subsequent counterclaims of the obligor that arise out of separate matters.
D) has no effect on defenses based on subsequent agreements between the obligor and assignor or on subsequent setoffs and counterclaims of the obligor that arise out of separate matters.

Accepted Answer

Notice of an assignment to the obligor effectively cuts off any defenses the obligor might have based on subsequent agreements with the assignor, as the obligor's rights and obligations are now directed towards the assignee.

Question 6

Notice of an assignment:
A) must be given to the obligor.
B) cuts off any defenses based on prior agreements between the obligor and assignor.
C) precludes subsequent setoffs and counterclaims of the obligor that arise out of entirely separate matters.
D) All of these.

Accepted Answer

The answer of Notice of an assignment:
A) must be given...

Question 7

Mr.Homayer hired Blake Painters to paint his house.Blake decides it has too many jobs and delegates the duties to the Andrews Company.Andrews does a poor job,and drips paint on the Homayers' flowers and windows.Mr.Homayer:
A) can sue both Blake and Andrews.
B) can sue Blake,but he cannot sue Andrews.
C) can sue Andrews,but he cannot sue Blake.
D) cannot sue,because he has accepted the benefits of the assignment.

Accepted Answer

Mr. Homayer can sue both Blake and Andrews because Blake, as the original contractor, is responsible for the work, including the work delegated to Andrews. Andrews is directly responsible for the damage caused.

Question 8

Give an example of an assignment of rights and explain the relationship of the parties.

Accepted Answer

The answer of Give an example of an assignment of...

Question 9

The law governing assignments is found in Articles ____ and ____ of the Uniform Commercial Code (UCC),as well as the common law.
A) 1 and 2
B) 2 and 4
C) 2 and 9
D) 3 and 4

Accepted Answer

The law governing assignments is found in Articles 2 and 9 of the Uniform Commercial Code (UCC), as well as the common law. Therefore, option C is the correct choice.

Question 10

When contract terms prohibiting the assignment of rights exist,most courts will:
A) strictly construe them.
B) interpret a general term prohibiting assignments as rendering any assignment ineffective.
C) award the obligor no right to damages for breach of a general term prohibiting assignments.
D) All of these.

Accepted Answer

Most courts will strictly construe contract terms prohibiting the assignment of rights. This means that they will closely scrutinize the language used in the contract and interpret it narrowly to ensure that the parties' intentions are respected. However, they will not necessarily render any assignment ineffective or deny damages for breach of a general term prohibiting assignments.

Question 11

Which of the following involves an invalid assignment that a court would not enforce?
A) An assignment of a savings account accompanied by the delivery of the passbook
B) An assignment lacking consideration
C) An assignment of an automobile liability insurance policy accompanied by the delivery of the policy
D) An assignment in writing signed by the assignor and delivered to the assignee

Accepted Answer

Assignments of certain types of contracts, such as personal service contracts or contracts involving a high degree of personal trust and confidence, are generally not enforceable. An automobile liability insurance policy is a contract of a personal nature because it is based on an assessment of risk that is specific to the individual insured. Therefore, an assignment of such a policy would typically be invalid because it would attempt to transfer the personal trust and confidence placed by the insurer in the original insured to someone else without the insurer's consent.

Question 12

Noel and Lyle have a contract whereby Noel is to perform routine construction services according to the blueprints that Lyle has provided.Noel assigns the contract to David.As a result of this assignment:
A) Lyle can bring suit based upon detrimental reliance.
B) Noel has no more rights or responsibilities with regard to the contract.
C) Noel no longer has any rights under the contract,but he remains responsible for the duties he agreed to perform.
D) Noel has all of his rights under the contract,but he has no responsibility for the performance of the duties.

Accepted Answer

An assignment transfers the rights to the assignee (here, David) but the assignor (Noel) remains responsible for the duties he agreed to perform under the contract. Therefore, Noel no longer has any rights under the contract (since he assigned them to David), but he remains responsible for performing his agreed-upon duties under the contract. Lyle can still hold Noel responsible for any breach of contract. Option A is incorrect because Lyle cannot bring suit based on detrimental reliance since there is no indication that Lyle changed his position in reliance on Noel's promise. Option B is incorrect because the assignment does not relieve Noel of his responsibilities under the contract. Option D is incorrect because Noel still has responsibilities under the contract even though he assigned his rights to David.

Question 13

Which of the following is NOT true concerning the requirements for an effective assignment?
A) The assignment must be voluntary.
B) Consideration is required.
C) There must be an intention to make the assignee the owner of the right.
D) The assignment may be either written or oral.

Accepted Answer

Consideration is not required for an effective assignment. However, the other three options are requirements for an effective assignment. The assignment must be voluntary, there must be an intention to transfer the ownership of the right to the assignee, and the assignment can be either written or oral.

Question 14

The UCC permits a buyer under a contract of sale to agree as part of the contract that he will not assert against an assignee any claim or defense that the buyer may have against the seller under certain circumstances.Identify these circumstances,and discuss the reason the UCC permits such a provision and how the FTC deals with such waiver of defense provisions.

Accepted Answer

The answer of The UCC permits a buyer under a...

Question 15

Name four nonassignable contract rights found in Restatement (Second)of Contracts,Section 317(2).

Accepted Answer

The answer of Name four nonassignable contract rights found in...

Question 16

Brice owns a parcel of land that is encumbered by a mortgage held by the First National Bank.Brice agrees to sell the land to Paul for $50,000.Brice and Paul together go to the First National Bank to discuss the sale and purchase with the banker.Brice,Paul,and the banker sign an agreement stating that Paul will assume the mortgage and that Brice will be discharged from all further liability on the mortgage.In this case:
A) the bank is a third party donee beneficiary.
B) the bank can collect from Brice if Paul defaults.
C) Brice is a third party beneficiary of the agreement between Paul and the bank.
D) the agreement among the three is a novation.

Accepted Answer

The agreement among Brice, Paul, and the First National Bank is a novation. This is because the parties agreed to substitute Paul as the new debtor and release Brice from all further liability on the mortgage. As a result, if Paul defaults, the bank cannot collect from Brice as he has been discharged from the mortgage. This is different from an assignment, where Brice would remain liable on the mortgage if Paul defaults. Additionally, there are no third-party beneficiaries in this scenario as the agreement was made solely for the benefit of Brice and Paul.

Question 17

Mary goes to a stockbroker,purchases 50 shares of a certain stock,and instructs the broker to register the stock in her husband Warren's name.If this stock is intended as a Valentine's Day gift,Warren becomes a(n):
A) donee beneficiary.
B) transferee.
C) delegatee.
D) assignee.

Accepted Answer

Mary's intention is to gift the stock to her husband Warren by registering it in his name. Warren, as the recipient of the gift, becomes the donee beneficiary of the shares.

Question 18

Lynne is the intended beneficiary of a third-party contract.Her rights have vested.In an action by Lynne to enforce the promise,the promisor may assert the defense of:
A) rescission.
B) contractual modification.
C) fraud.
D) All of these.

Accepted Answer

Fraud is a valid defense against enforcement of a contract, even if the third-party beneficiary's rights have vested.

Quiz 16: Third Parties to Contracts

Which of the following involves a creditor beneficiary relationship?

Which of the following is correct with regard to successive assignments of the same right?

Odessa owes Kevin $2,000.On July 1,Kevin assigns the right to the $2,000 to Troy.Thereafter,on July 15,Kevin assigns the same right to Donna,who in good faith gives value for it and knows nothing about the first assignee.In this case:

Barbara owes Arturo $2,000.On July 1,Arturo assigns the debt to Charles.Thereafter on July 15,Arturo assigns the same right to Dennis,who in good faith gives value for it and knows nothing about the first assignee.Dennis immediately notifies Barbara of the assignment.Under:

Notice of an assignment:

Notice of an assignment:

Mr.Homayer hired Blake Painters to paint his house.Blake decides it has too many jobs and delegates the duties to the Andrews Company.Andrews does a poor job,and drips paint on the Homayers' flowers and windows.Mr.Homayer:

Give an example of an assignment of rights and explain the relationship of the parties.

The law governing assignments is found in Articles and of the Uniform Commercial Code (UCC) ,as well as the common law.

When contract terms prohibiting the assignment of rights exist,most courts will:

Which of the following involves an invalid assignment that a court would not enforce?

Noel and Lyle have a contract whereby Noel is to perform routine construction services according to the blueprints that Lyle has provided.Noel assigns the contract to David.As a result of this assignment:

Which of the following is NOT true concerning the requirements for an effective assignment?

Name four nonassignable contract rights found in Restatement (Second)of Contracts,Section 317(2).

Mary goes to a stockbroker,purchases 50 shares of a certain stock,and instructs the broker to register the stock in her husband Warren's name.If this stock is intended as a Valentine's Day gift,Warren becomes a(n) :

Lynne is the intended beneficiary of a third-party contract.Her rights have vested.In an action by Lynne to enforce the promise,the promisor may assert the defense of:

Quiz 16: Third Parties to Contracts

Which of the following involves a creditor beneficiary relationship?

Which of the following is correct with regard to successive assignments of the same right?

Odessa owes Kevin $2,000.On July 1,Kevin assigns the right to the $2,000 to Troy.Thereafter,on July 15,Kevin assigns the same right to Donna,who in good faith gives value for it and knows nothing about the first assignee.In this case:

Barbara owes Arturo $2,000.On July 1,Arturo assigns the debt to Charles.Thereafter on July 15,Arturo assigns the same right to Dennis,who in good faith gives value for it and knows nothing about the first assignee.Dennis immediately notifies Barbara of the assignment.Under:

Notice of an assignment:

Notice of an assignment:

Mr.Homayer hired Blake Painters to paint his house.Blake decides it has too many jobs and delegates the duties to the Andrews Company.Andrews does a poor job,and drips paint on the Homayers' flowers and windows.Mr.Homayer:

Give an example of an assignment of rights and explain the relationship of the parties.

The law governing assignments is found in Articles ____ and ____ of the Uniform Commercial Code (UCC) ,as well as the common law.

When contract terms prohibiting the assignment of rights exist,most courts will:

Which of the following involves an invalid assignment that a court would not enforce?

Noel and Lyle have a contract whereby Noel is to perform routine construction services according to the blueprints that Lyle has provided.Noel assigns the contract to David.As a result of this assignment:

Which of the following is NOT true concerning the requirements for an effective assignment?

Name four nonassignable contract rights found in Restatement (Second)of Contracts,Section 317(2).

Mary goes to a stockbroker,purchases 50 shares of a certain stock,and instructs the broker to register the stock in her husband Warren's name.If this stock is intended as a Valentine's Day gift,Warren becomes a(n) :

Lynne is the intended beneficiary of a third-party contract.Her rights have vested.In an action by Lynne to enforce the promise,the promisor may assert the defense of:

The law governing assignments is found in Articles and of the Uniform Commercial Code (UCC) ,as well as the common law.