Question 1

Lyle and Miranda agree that Lyle will fix the refrigeration unit in Miranda's Bagel Café in exchange for her payment of a debt that Lyle owes to New Credit Corporation. Under this contract, the intended beneficiary is
A) Miranda.
B) New Credit.
C) Lyle.
D) any customer of Miranda's.

Accepted Answer

The intended beneficiary in this contract is New Credit Corporation as they are the party that will receive the benefit (payment of Lyle's debt) as a result of the performance of the contract (Lyle fixing the refrigeration unit).

Question 2

Pablo and Roth agree that Pablo will fix Roth's boat dock in exchange for $5,000. Pablo spends half of the amount due under the contract to acquire the materials for the job from Seaside Lumber. Seaside is
A) a delegatee.
B) an intended beneficiary.
C) an incidental beneficiary.
D) a primary beneficiary.

Accepted Answer

Seaside Lumber is an incidental beneficiary because they benefit from the contract between Pablo and Roth indirectly, as a result of Pablo purchasing materials from them, but they are not a party to the contract nor intended to benefit from it.

Question 3

Kent enters into a contract with Life Insurance Company for a policy that designates Mia as the beneficiary. Kent reserves the right to change the designated beneficiary. Mia's rights under the policy are
A) not affected by the reservation.
B) subject to any change that Kent makes.
C) subject to the first-in-time rule.
D) terminated by the reservation.

Accepted Answer

Mia's rights under the policy are subject to any change that Kent makes because Kent has reserved the right to change the designated beneficiary. This means that Mia's status as a beneficiary is not guaranteed and can be altered by Kent at any time.

Question 4

Pam borrows $5,000 from Quality Auto Sales to buy a car.  When Pam does not pay the loan or return the car, Quality wants to transfer the right to the payment to Rapid Collection Agency. Rapid agrees to pay Quality for this right, but for a price that is less than the amount owed. Can Quality transfer this right to Rapid without Pam's consent? If so, and Quality committed fraud in the deal with Pam, could Pam legitimately refuse to pay Rapid? Explain.

Accepted Answer

The answer of Pam borrows $5,000 from Quality Auto Sales...

Question 5

Business Loans, LLC, is a creditor beneficiary in a deal that involves Carla's Hair Salon and Dani's Nails. Like most creditor beneficiaries, Business Loans is
A) a donee beneficiary.
B) an incidental beneficiary.
C) an intended beneficiary.
D) an original contracting party.

Accepted Answer

Business Loans, LLC is specifically named as a beneficiary in the contract between Carla's Hair Salon and Dani's Nails, indicating that they were intended to receive some benefit from the deal. This distinguishes them from incidental beneficiaries who receive a benefit but are not the intended recipient, and from donee beneficiaries who receive a gift or donation from the contracting parties. Business Loans is also not an original contracting party since they are not one of the two business entities making the deal.

Question 6

Fact Pattern 15-1 Restore Construction Company enters into a contract with Sam to remodel Tess's Home Store, using products from United Building Supplies.
Refer to Fact Pattern 15-1. United will realize a profit from the sale of products to Restore to remodel Tess's store. United is
A) a delegatee.
B) an assignee.
C) an incidental beneficiary.
D) an intended beneficiary.

Accepted Answer

The answer of Fact Pattern 15-1 Restore Construction Company enters...

Question 7

Fact Pattern 15-1 Restore Construction Company enters into a contract with Sam to remodel Tess's Home Store, using products from United Building Supplies.
Refer to Fact Pattern 15-1. Halfway through the project, Restore refuses to finish the job. The contract can be enforced against Restore by
A) Sam only.
B) Tess only.
C) Sam or Tess.
D) Sam and Tess.

Accepted Answer

Sam, as the party who contracted with Restore, can enforce the contract. Tess, as the intended beneficiary of the contract, may also have rights to enforce it.

Question 8

Hilda enters into a contract with Indemnity Insurance Company that designates Hilda's daughter Jackie as the beneficiary. Jackie's rights under the contract will vest
A) automatically.
B) never.
C) if Hilda attempts to change the beneficiary.
D) on the occurrence of the event for which the insurance was procured.

Accepted Answer

Jackie's rights as a beneficiary will vest upon the occurrence of the event for which the insurance was procured, such as Hilda's death, as that is when the insurance benefits become payable to the beneficiary.

Question 9

A-One Landscapers, Inc., owes Friendly Finance Company $5,000.  A-One enters into a contract with Suburban Office Park under which A-One promises to maintain the landscaping on Suburban's property.  Under the contract, Suburban promises to pay Friendly Finance the amount that will be due A-One until A-One's debt to Friendly Finance is paid.  A-One performs as promised, but Suburban does not pay Friendly Finance.  Can Friendly Finance succeed in a suit against Suburban?  Why or why not?

Accepted Answer

The answer of A-One Landscapers, Inc., owes Friendly Finance Company...

Question 10

Apps LLC enters into a contract with Bart, the chief executive officer of Corporate Sales Inc., to create an app for the firm. To fulfill the contract, Apps hires Dave as a student intern. With respect to the contract, Dave is
A) an intended beneficiary.
B) an incidental beneficiary.
C) a delegatee.
D) an assignee.

Accepted Answer

The answer of Apps LLC enters into a contract with...

Question 11

Rhea takes out a life insurance policy with Secure Insurance Corporation that names her spouse Tim as the beneficiary. This is
A) a delegation.
B) an assignment.
C) a third party incidental beneficiary contract.
D) a third party intended beneficiary contract.

Accepted Answer

In this scenario, Tim is a third party intended beneficiary because the life insurance policy is specifically intended to benefit him upon Rhea's death.

Question 12

Molly is a third party beneficiary under a contract between Ned and Otis. Ned and Otis can modify or rescind their contract without Molly's consent
A) at any time.
B) at no time.
C) after Molly's rights have vested.
D) before Molly's rights have vested.

Accepted Answer

Before Molly's rights have vested, Ned and Otis can modify or rescind their contract without her consent. Once her rights have vested, her consent would be necessary.

Quiz 15: Third Party Rights

Lyle and Miranda agree that Lyle will fix the refrigeration unit in Miranda's Bagel Café in exchange for her payment of a debt that Lyle owes to New Credit Corporation. Under this contract, the intended beneficiary is

Pablo and Roth agree that Pablo will fix Roth's boat dock in exchange for $5,000. Pablo spends half of the amount due under the contract to acquire the materials for the job from Seaside Lumber. Seaside is

Kent enters into a contract with Life Insurance Company for a policy that designates Mia as the beneficiary. Kent reserves the right to change the designated beneficiary. Mia's rights under the policy are

Business Loans, LLC, is a creditor beneficiary in a deal that involves Carla's Hair Salon and Dani's Nails. Like most creditor beneficiaries, Business Loans is

Fact Pattern 15-1 Restore Construction Company enters into a contract with Sam to remodel Tess's Home Store, using products from United Building Supplies. Refer to Fact Pattern 15-1. United will realize a profit from the sale of products to Restore to remodel Tess's store. United is

Fact Pattern 15-1 Restore Construction Company enters into a contract with Sam to remodel Tess's Home Store, using products from United Building Supplies. Refer to Fact Pattern 15-1. Halfway through the project, Restore refuses to finish the job. The contract can be enforced against Restore by

Hilda enters into a contract with Indemnity Insurance Company that designates Hilda's daughter Jackie as the beneficiary. Jackie's rights under the contract will vest

Apps LLC enters into a contract with Bart, the chief executive officer of Corporate Sales Inc., to create an app for the firm. To fulfill the contract, Apps hires Dave as a student intern. With respect to the contract, Dave is

Rhea takes out a life insurance policy with Secure Insurance Corporation that names her spouse Tim as the beneficiary. This is

Molly is a third party beneficiary under a contract between Ned and Otis. Ned and Otis can modify or rescind their contract without Molly's consent