Question 1

For a price, Rose agrees to unload the catch from fishing boats that dock at Seafood Shipping. Rose delegates this duty to Tina, who then owes performance of the duty to the warehouse. Tina is
A) the obligor.
B) a third party beneficiary.
C) the obligee.
D) the delegatee.

Accepted Answer

Tina is the delegatee, as she has been delegated the duty of unloading the catch by Rose.

Question 2

Retail LLC contracts with Paving Inc. to grade and pave a parking lot. The contract provides that it cannot be assigned without Retail's consent. Later, Paving assigns the contract to Roadwork Company without obtaining Retail's consent. Retail could most successfully argue that the contract cannot be assigned because
A) the assignment is prohibited by statute.
B) the contract is personal.
C) the assignment will materially change a risk.
D) the contract prohibits assignment.

Accepted Answer

The contract explicitly states that it cannot be assigned without Retail's consent. Therefore, the assignment without consent is a breach of contract. The other options are not relevant to this situation.

Question 3

Marlo and Nita enter into a contract for the sale of Marlo's apartment for which Nita agrees to pay $250,000. Nita assigns her right to buy the apartment to Owen. Owen is
A) the obligor.
B) a third party beneficiary.
C) the assignee.
D) the assignor.

Accepted Answer

Owen is the assignee, as he is the one to whom Nita assigned her right to buy the apartment. Marlo remains the obligor, as he is still obligated to sell the apartment to the assignee (Owen), even though Nita is no longer involved in the contract. Owen is not a third party beneficiary, as he did not originally have any rights under the contract between Marlo and Nita. Owen is not the assignor, as he did not assign any rights to anyone else.

Question 4

For a price, Evan agrees to empty the dumpster behind Fast Food Diner. Evan delegates this duty to Gus, who then owes performance of the duty to the diner. The diner is
A) the obligor.
B) a third party beneficiary.
C) the obligee.
D) the delegatee.

Accepted Answer

The diner is the party to whom the duty is owed and therefore the obligee.

Question 5

Harry assigns his rights under a contract with Irma to his college roommate, Jake. Neither Harry nor Jake notifies Irma of the assignment. The assignment
A) will not be effective until notice is given to Irma.
B) will become effective after thirty days even if no notice is given to Irma.
C) is effective immediately.
D) is invalid.

Accepted Answer

Generally, under US law, an assignment of a contract is effective immediately upon the assignment taking place. Notice to the other party is not required for the assignment to become effective. Therefore, even though Harry and Jake did not notify Irma, the assignment is still effective.

Question 6

Generally, the duties under a contract can be delegated
A) unless the contract expressly prohibits delegation.
B) unless the delegation involves only a payment of money on the deal.
C) unless the rights under the contract have previously been assigned.
D) under no circumstances.

Accepted Answer

Generally, duties under a contract can be delegated unless the contract expressly prohibits delegation.

Question 7

Lew and Mavis enter into a contract for the clearing and plowing of Mavis's 350-acre tract for which she agrees to pay $1,000. Lew transfers his duty under this contract to Nye. With respect to the duties under the original contract, this transfer
A) does not relieve Lew of the potential obligation to perform.
B) extinguishes Lew's obligation to perform.
C) is an invalid transfer of a non-transferable obligation.
D) requires a special form to constitute a valid transfer.

Accepted Answer

Transferring a duty under a contract to another party, known as a delegation of duties, does not relieve the original party (Lew) of the obligation to perform if the delegatee (Nye) fails to perform. Lew remains potentially liable to Mavis to ensure the contract's terms are fulfilled.

Question 8

If performance under a contract will vary materially on a delegation of its duties to a third party from that expected by the obligee, the delegation is
A) prohibited.
B) permitted on sufficient notice by the obligor.
C) permitted if the performance does not require the obligor's personal skill.
D) permitted if special trust has been place in the obligor.

Accepted Answer

Delegation of duties under a contract to a third party is prohibited if the performance will materially vary from what the obligee expected, especially in cases where the contract requires the obligor's personal skills or trust has been placed in the obligor.

Question 9

For a price, Ray agrees to unload trucks that make deliveries to Shoppers Warehouse. Ray delegates this duty to Tim, who then owes performance of the duty to the warehouse. Ray is
A) the obligor.
B) a third party beneficiary.
C) the obligee.
D) the delegatee.

Accepted Answer

Ray is the obligor because he originally agreed to perform the duty (unloading trucks) and has the obligation to ensure the task is completed, even after delegating the duty to Tim.

Question 10

If a contract stipulates that it cannot be assigned, then it cannot be assigned unless the assignment
A) involves ownership rights in real estate.
B) is contrary to public policy in most states.
C) is pursuant to a contract for a sale of goods.
D) operates only in favor of the concerned parties.

Accepted Answer

The answer of If a contract stipulates that it cannot...

Question 11

Beck and Cary enter into a contract under which Beck agrees to cater Cary's wedding. The contract expressly prohibits any transfer of rights without the assignee's consent. Cary may transfer the right to receive Beck's services to her sister Dian
A) if Beck consents.
B) if Cary decides to use a different caterer.
C) if Dian is also getting married.
D) under no circumstances.

Accepted Answer

The contract expressly permits the transfer of rights with the assignee's consent. So, if Beck consents to the transfer of rights to Dian, then Cary may transfer the right to receive Beck's services to her sister.

Question 12

Laminate LLC agrees to buy factory equipment from Metalwork Company on the seller's misrepresentation that it meets certain specifications. Metalwork assigns the right to payment on the deal to National Credit Corporation. When the buyer discovers the fraud, the firm returns the equipment and cancels their contract. Laminate
A) must pay the entire contract price to National Credit.
B) need not pay any of the contract price to National Credit.
C) must reimburse National Credit for costs with respect to the assignment.
D) must pay a prorated amount of the contract price to National Credit.

Accepted Answer

Since the contract was cancelled due to the seller's misrepresentation, Laminate LLC has no obligation to pay any of the contract price to either Metalwork Company or its assignee, National Credit Corporation.

Question 13

To create a valid delegation of duties requires
A) a special form.
B) the delegator's expressed intent to make the delegation.
C) the delegator's use of the word delegate.
D) none of the choices.

Accepted Answer

The delegator's expressed intent to make the delegation is the most important factor in creating a valid delegation of duties. It is not necessary to use a special form or the word "delegate." Therefore, options A, C, and D are incorrect.

Question 14

The rights under an insurance policy can normally be assigned
A) if the assignment involves only a payment of benefits.
B) if the assignment significantly changes the risk to the insurer.
C) if the assignment significantly alters the duties of the insurer.
D) under no circumstances.

Accepted Answer

The rights under an insurance policy can normally be assigned if the assignment involves only a payment of benefits. This means that the original policyholder can assign their right to receive the benefits of the policy to another party, such as a medical provider or a funeral home, without significantly changing the risk or altering the duties of the insurer. However, if the assignment significantly changes the risk to the insurer or alters their duties, such as by adding a new insured or changing the coverage terms, the insurer may require permission or may refuse the assignment altogether.

Question 15

Elin owes Floyd $10,000. Floyd assigns the claim to Gary. Gary does not notify Elin of the assignment. Later, Floyd assigns the same claim to Holly. Holly immediately notifies Elin of the assignment. Holly has priority to payment in
A) all states.
B) states that follow the English rule.
C) no state.
D) most states.

Accepted Answer

Under the English rule, the first assignee to give notice to the debtor has priority over subsequent assignees. In this case, Holly immediately notified Elin of the assignment, so she has priority to payment over Gary, who did not give notice. The result may vary depending on the state's law, but the English rule is followed in some states.

Question 16

Ira owes Jessie $1,000. Kerry owes Ira $1,000. Ira unconditionally assigns to Jessie the right to Kerry's payment. Jessie's right to the $1,000 is subject to the defenses that
A) Jessie had against Ira.
B) Kerry had against Ira.
C) Ira had against Kerry.
D) none of the choices.

Accepted Answer

An assignment of rights transfers the assignor's rights to the assignee. However, the rights transferred are subject to any defenses or setoffs that could have been raised against the assignor before the assignment (unless the assignment is made for value). In this case, Kerry owes Ira $1,000, but Kerry may have defenses against Ira's claim. Therefore, Jessie's right to Kerry's payment is subject to those defenses. The defenses that Jessie had against Ira (choice A) and the defenses that Ira had against Kerry (choice C) are not applicable in this situation.

Question 17

In a state in which a statute prohibits an employee from assigning the right to receive workers' compensation benefits, the employee can assign the right
A) if all interested parties consent.
B) if the employee is fully advised of his or her rights.
C) if there is no significant change to the obligor's risk or duties.
D) under no circumstances.

Accepted Answer

The statute explicitly prohibits the assignment of the right to receive workers' compensation benefits, meaning that regardless of consent, advisement, or changes to risk or duties, the assignment cannot legally occur.

Question 18

Under a contract, an assignment of negotiable instruments
A) cannot be prohibited.
B) can be prohibited only by an anti-assignment clause.
C) can be prohibited only by the obligor.
D) is prohibited under any circumstances.

Accepted Answer

The answer of Under a contract, an assignment of negotiable...

Question 19

Music Masters Inc. enters into a contract to pay Nagi for a dozen original songs. Nagi transfers the right to payment under the contract to Omni Artists. After the transfer, Nagi's contract right to the payment is
A) unaffected.
B) extinguished.
C) conditional.
D) secondary.

Accepted Answer

When Nagi transfers the right to payment under the contract to Omni Artists, Nagi's contract right to the payment is extinguished. This means that Nagi no longer has any claim to the payment and Omni Artists becomes the rightful recipient of the payment.

Question 20

The rights under a contract for personal services can normally be assigned
A) if all that remains on the deal is a payment of money.
B) if the contract is executory.
C) if the personal services are unique to the party rendering them.
D) under no circumstances.

Accepted Answer

The rights under a contract for personal services can be assigned if all that remains on the deal is a payment of money. This means that if the services have already been completed and the only thing left is for one party to pay the other, the rights can be assigned to someone else. However, if there are still personal services to be rendered or the services are unique to the party rendering them, the rights under the contract cannot be assigned.

Quiz 18: Third Party Rights

For a price, Rose agrees to unload the catch from fishing boats that dock at Seafood Shipping. Rose delegates this duty to Tina, who then owes performance of the duty to the warehouse. Tina is

Marlo and Nita enter into a contract for the sale of Marlo's apartment for which Nita agrees to pay $250,000. Nita assigns her right to buy the apartment to Owen. Owen is

For a price, Evan agrees to empty the dumpster behind Fast Food Diner. Evan delegates this duty to Gus, who then owes performance of the duty to the diner. The diner is

Harry assigns his rights under a contract with Irma to his college roommate, Jake. Neither Harry nor Jake notifies Irma of the assignment. The assignment

Generally, the duties under a contract can be delegated

Lew and Mavis enter into a contract for the clearing and plowing of Mavis's 350-acre tract for which she agrees to pay $1,000. Lew transfers his duty under this contract to Nye. With respect to the duties under the original contract, this transfer

If performance under a contract will vary materially on a delegation of its duties to a third party from that expected by the obligee, the delegation is

For a price, Ray agrees to unload trucks that make deliveries to Shoppers Warehouse. Ray delegates this duty to Tim, who then owes performance of the duty to the warehouse. Ray is

If a contract stipulates that it cannot be assigned, then it cannot be assigned unless the assignment

Beck and Cary enter into a contract under which Beck agrees to cater Cary's wedding. The contract expressly prohibits any transfer of rights without the assignee's consent. Cary may transfer the right to receive Beck's services to her sister Dian

To create a valid delegation of duties requires

The rights under an insurance policy can normally be assigned

Elin owes Floyd $10,000. Floyd assigns the claim to Gary. Gary does not notify Elin of the assignment. Later, Floyd assigns the same claim to Holly. Holly immediately notifies Elin of the assignment. Holly has priority to payment in

Ira owes Jessie $1,000. Kerry owes Ira $1,000. Ira unconditionally assigns to Jessie the right to Kerry's payment. Jessie's right to the $1,000 is subject to the defenses that

In a state in which a statute prohibits an employee from assigning the right to receive workers' compensation benefits, the employee can assign the right

Under a contract, an assignment of negotiable instruments

Music Masters Inc. enters into a contract to pay Nagi for a dozen original songs. Nagi transfers the right to payment under the contract to Omni Artists. After the transfer, Nagi's contract right to the payment is

The rights under a contract for personal services can normally be assigned