Question 1

The law governing assignments is found in Articles well as the common law. A) 1 and 2 B) 2 and 4 C) 2 and 9 _d.₃_an_d₄ And Of the Uniform Commercial Code (UCC), as

Accepted Answer

Article 2 of the UCC covers sales of goods, and Article 9 covers secured transactions, both of which can involve assignments.

Question 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):
A) donee beneficiary.
B) transferee.
C) delegatee.
D) assignee.

Accepted Answer

A donee beneficiary is the intended recipient of a gift or benefit, which applies in this case as Mary purchased the stock as a Valentine's Day gift for her husband Warren.

Question 3

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

In a creditor beneficiary relationship, the beneficiary is someone to whom the insured owes a debt or obligation. In this case, the bank is the beneficiary of the life insurance policy because the insured owes them a loan.

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

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 that prohibit the assignment of rights. This means that they will interpret the language of the contract narrowly and will not allow any assignments that are not explicitly permitted. This does not necessarily mean that all assignments are prohibited, but rather that the language of the contract must be carefully examined to determine what is allowed. Option B is not entirely correct because courts may allow some assignments even if there is a general term prohibiting them. Option C is not correct because the obligor may still be entitled to damages if there is a breach of the contract, but it will depend on the specific circumstances of the case.

Question 6

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 7

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

The answer of Lynne is the intended beneficiary of a...

Question 8

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 9

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 answer of Odessa owes Kevin $2,000. On July 1,...

Question 10

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

When Noel assigns the contract to David, he no longer has any rights under the contract, but he remains responsible for the duties he agreed to perform. This means that Lyle can still hold Noel responsible for the performance of the duties even though David is now the one completing them. However, Lyle cannot bring suit based upon detrimental reliance because there is no evidence of any such reliance.

Question 11

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 12

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 necessary requirements for an effective assignment. The assignment must be voluntary, there must be an intention to make the assignee the owner of the right, and the assignment may be either written or oral.

Question 13

A gratuitous assignment is rendered irrevocable if, prior to the attempted revocation, the assignee:
a. receives payment of the claim from the obligor.
b. obtains a judgment against the obligor.
c. Neither of these. A gratuitous assignment is always revocable.
d. Both of these.

Accepted Answer

The answer of A gratuitous assignment is rendered irrevocable if,...

Question 14

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 signed by Brice, Paul, and the banker stating that Paul will assume the mortgage and that Brice will be discharged from all further liability on the mortgage is a novation. A novation replaces the original obligation with a new obligation, and it requires the consent of all parties involved. In this case, the original obligation was the mortgage held by the First National Bank on Brice's land, and the new obligation is the mortgage assumed by Paul with Brice being discharged from liability. Therefore, the bank cannot collect from Brice if Paul defaults, and Brice is not a third party beneficiary of the agreement.

Question 15

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

The answer of Which of the following is correct with...

Question 16

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 17

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 18

Under Section 2-210 of the Code, unless circumstances indicate to the contrary, a contract that prohibits an assignment:
A) prohibits both an assignment of rights and a delegation of duties under the contract.
B) prohibits only a delegation of the delegator's duty of performance and not the assignment of rights.
C) renders any subsequent assignment ineffective.
D) All of these.

Accepted Answer

Section 2-210 of the Code indicates that unless circumstances indicate the contrary, a contract that prohibits assignment only prohibits a delegation of the delegator's duty of performance and NOT the assignment of rights.

Question 19

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 20

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...

Quiz 16: Third Parties to Contracts

The law governing assignments is found in Articles well as the common law.

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) :

Which of the following involves a creditor beneficiary relationship?

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:

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

Notice of an assignment:

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:

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:

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:

Notice of an assignment:

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

A gratuitous assignment is rendered irrevocable if, prior to the attempted revocation, the assignee: a. receives payment of the claim from the obligor. b. obtains a judgment against the obligor. c. Neither of these. A gratuitous assignment is always revocable. d. Both of these.

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

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

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

Under Section 2-210 of the Code, unless circumstances indicate to the contrary, a contract that prohibits 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.