Fundamentals of Business Law

Business

Quiz 11 :

Third Party Rights and Discharge

Quiz 11 :

Third Party Rights and Discharge

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What factors indicate that a third party beneficiary is an intended beneficiary?
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The third party beneficiary is an intended beneficiary, as the third party will acquire the rights that are legal and will have the power of suing the person directly who promises and is still responsible for the violation of the contract. Intended beneficiaries are the only ones who are able to obtain the legal rights when they are in a contract. There are several factors which strongly specify that the third party beneficiary is indeed an intended beneficiary and the factors have been listed below:
Rendering of the performance is done directly to the third party.
The various details relating to the performance is entirely controlled by the third party.
The beneficiary in the contract is the third party.

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What rights can be assigned despite a contract clause expressly prohibiting assignment?
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Yes , rights can be assigned expressly despite prohibiting assignments. One may transfer rights to another or third party as per given:
First is to transfer rights to third party or assignee party for the contractual rights. Secondly, the third party may ask for the performance from original party through given rights.
Thirdly, the assignee party can't assign for personal services or uses. It should be as per given directions and contract.

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ISSUE SPOTTERS Eagle Company contracts to build a house for Frank. The contract states that "any assignment of this contract renders the contract void." After Eagle builds the house, but before Frank pays, Eagle assigns its right to payment to Good Credit Company. Can Good Credit enforce the contract against Frank? Why or why not? (See pages 256-257.)
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In this bilateral agreement Company E decides to assign the right to payment to Company GC whereas the contract clearly mentions that the right cannot be assigned otherwise the contract is rendered void. This rule has several exceptions (for example the right to negotiable funds) however the present cast cannot be classified as an exception. So in this case Company GC cannot force the contract against Mr F as Company E did not have the right to assign the right to payment to Company GC as per the contract.

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Myrtle Jackson owns several commercial buildings that she leases to businesses, one of which is a restaurant. The lease states that tenants are responsible for securing all necessary insurance policies but the landlord is obligated to keep the buildings in good repair. The owner of the restaurant, Joe McCall, tells his restaurant manager to purchase insurance, but the manager never does so. Jackson tells her son-in-law, Rob Dunn, to perform any necessary maintenance for the buildings. Dunn knows that the ceiling in the restaurant needs repair but fails to do anything about it. One day a customer, Ian Faught, is dining in the restaurant when a chunk of the ceiling falls on his head and fractures his skull. Faught files suit against the restaurant and discovers that there is no insurance policy in effect. Faught then files a suit against Jackson, arguing that he is an intended third party beneficiary of the lease provision requiring insurance and thus can sue Jackson for failing to enforce the lease (which requires the restaurant to carry insurance). Using the information presented in the chapter, answer the following questions. Can Jackson delegate her duty to maintain the buildings to Dunn? Why or why not?
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What is a contractual condition, and how might a condition affect contractual obligations?
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Case Problem with Sample Answer Just Homes, LLC (JH), hired Mike Building Contracting, Inc., to do $1.35 million worth of renovation work on three homes. Community Preservation Corp. (CPC) supervised Mike's work on behalf of JH. The contract stated that in the event of a dispute, JH would have to obtain the project architect's certification to justify terminating Mike. As construction progressed, relations between Mike and CPC worsened. At a certain point in the project, Mike requested partial payment, and CPC recommended that JH not make it. Mike refused to continue work without further payment. JH evicted Mike from the project. Mike sued for breach of contract. JH contended that it had the right to terminate the contract due to CPC's negative reports and Mike's failure to agree with the project's engineer. Mike moved for summary judgment for the amounts owned for work performed, claiming that JH has not fulfilled the condition precedent-that is, JH never obtained the project architect's certofication for Mike's termination. Which of the two parties involved breached the contract? Explain your answer. [ Mike Building Contracting Inc. v. Just Homes , LLC, 27 Misc.3d 833, 901 N.Y.S.2d 458 (2010)]
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What is the difference between an assignment and a delegation?
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The five Learning Objectives below are designed to help improve your understanding of the chapter. After reading this chapter, you should be able to answer the following questions: What rights can be assigned despite a contract clause expressly prohibiting assignment?
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-Check your answers to these questions against the answers provided in Appendix G. Ready Foods contracts to buy from Speedy Distributors two hundred carloads of frozen pizzas. Before Ready or Speedy starts performing, can they call off the deal? What if Speedy has already shipped the pizzas? Explain your answers.
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Conditions of Performance. The Caplans own a real estate lot, and they contract with Faithful Construction, Inc., to build a house on it for $360,000. The specifications list "all plumbing bowls and fixtures... to be Crane brand." The Caplans leave on vacation, and during their absence Faithful is unable to buy and install Crane plumbing fixtures. Instead, Faithful installs Kohler brand fixtures, an equivalent in the industry. On completion of the building contract, the Caplans inspect the work, discover the substitution, and refuse to accept the house, claiming Faithful has breached the conditions set forth in the specifications. Discuss fully the Caplans' claim.
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What is the difference between an assignment and a delegation?
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The five Learning Objectives below are designed to help improve your understanding of the chapter. After reading this chapter, you should be able to answer the following questions: What factors indicate that a third party beneficiary is an intended beneficiary?
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Assignments. Hensley purchased a house but was unable to pay the full purchase price. She borrowed funds from Thrift Savings and Loan, which in turn took a mortgage at 6.5 percent interest on the house. The mortgage contract did not prohibit the assignment of the mortgage. Hensley secured a job in another city and sold the house to Sylvia. The purchase price included payment to Hensley of the value of her equity and the assumption of the mortgage debt still owed to Thrift. At the time the contract between Hensley and Sylvia was made, Thrift did not know about or consent to the sale. Based on these facts, if Sylvia defaults in making the house payments to Thrift, what are Thrift's rights? Discuss.
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How are most contracts discharged?
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Conditions of Performance. James Maciel leased an apartment in Regent Village, a university-owned housing facility for Regent University (RU) students in Virginia Beach, Virginia. The lease ran until the end of the fall semester. Maciel had an option to renew the lease semester by semester as long as he maintained his status as an RU student. When Maciel completed his coursework for the spring semester, he told RU that he intended to withdraw. The university told him that he could stay in the apartment until May 31, the final day of the spring semester. Maciel asked for two additional weeks, but the university denied the request. On June 1, RU changed the locks on the apartment. Maciel entered through a window and e-mailed the university that he planned to stay "for another one or two weeks." When he was charged with trespassing, Maciel argued that he had "legal authority" to occupy the apartment. Was Maciel correct? Explain. [ Maciel v. Commonwealth, __ S.E.2d __ (Va.App. 2011)] (See Contract Discharge.)
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How are most contracts discharged?
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Assignment and Delegation. Bruce Albea Contracting, Inc., was the general contractor on a state highway project. Albea and its sureties (the companies that consented to guarantee the financial liabilities involved) agreed to be liable for all work on the project. Albea subcontracted with APAC-Southeast, Inc., an asphalt company. The contract stated that it could not be assigned without Albea's consent. Later, Albea and APAC got into a dispute because APAC wanted to be paid more for its asphalt. APAC then sold and assigned its assets, including the contract, to Matthews Contracting Co. Albea was informed of the assignment and did not approve it but allowed Matthews to work. Matthews demanded higher payments for asphalt, and Albea agreed because no other contractor would step in at the original price. Albea suffered a loss on the job and could not pay its bills, so Albea's sureties paid Matthews $2.7 million for work performed. APAC sued Albea and its sureties for $1.2 million for work it had performed before the contract was delegated to Matthews. The trial court granted APAC $1.2 million. On appeal, the defendants argued that APAC had breached the contract by assignment without consent. Did APAC breach the contract with Albea? Did Albea owe APAC anything? Explain your answers. [ Western Surety Co. v. APAC-Southeast, Inc., 302 Ga.App. 654, 691 S.E.2d 234 (2010)]
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Assignment. Mary Kazery entered into a lease with Courtesy Inns, Inc. The initial term was one year, with a renewal option of twenty years and four subsequent options of ten years each. During the first renewal term, Courtesy assigned its interest in the lease to George Wilkinson. A year later, Kazery transferred her interest in the property to her son, Arnold. Less than a year later, Arnold transferred his interest to his son, Sam, who became the sole owner of the property. No one notified Wilkinson. For the next twenty years, Wilkinson paid the rent to Arnold and renewed the lease by notice to Arnold. At the end of the third term, Wilkinson wrote to Arnold that he was exercising the fourth option. More than ten months later, Sam filed a suit in a Mississippi state court against Wilkinson, claiming that the lease was void because Wilkinson had not given proper notice to renew. Who should have notified Wilkinson that Sam had been assigned Arnold's interest in the property? What effect does the lack of notice have on Wilkinson's discharge of his duties under the lease? Did he give proper notice to renew? Discuss. [ Kazery v. Wilkinson, 52 So.3d 1270 (Miss. App. 2011)]
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What is a contractual condition, and how might a condition affect contractual obligations?
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Intended Beneficiaries. Wilken owes Rivera $2,000. Howie promises Wilken that he will pay Rivera the $2,000 in return for Wilken's promise to give Howie's children guitar lessons. Is Rivera an intended beneficiary of the Howie-Wilken contract? Explain. (See Third Party Beneficiaries.)
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