Question 1

As long as a contract is personal in nature,all rights under the contract can be assigned.

Accepted Answer

Contracts that are personal in nature, such as those involving unique skills, personality, or characteristics of one of the parties, cannot be assigned. Only those contracts that involve the transfer of goods or property, or those that have no personalized characteristics can be assigned.

Question 2

An incidental third party beneficiary cannot sue to enforce the contract because the benefit is unintentional.

Accepted Answer

An incidental third party beneficiary is a party who may receive some benefit from the performance of the contract but the benefit is unintentional. This means that they cannot sue to enforce the contract because the contract was not made for their benefit. Only intended third party beneficiaries can sue to enforce the contract.

Question 3

The rights of a third party beneficiary under a contract vest if the third party brings a lawsuit on the promise.

Accepted Answer

Third party beneficiaries have the right to enforce a contract if they bring a lawsuit on the promise. Once they bring the lawsuit, their rights under the contract become vested.

Question 4

A life insurance contract involves an intended beneficiary.

Accepted Answer

A life insurance contract typically involves the policyholder designating a beneficiary, who will receive the death benefit in the event of the policyholder's death.

Question 5

In most cases,a contract that prohibits its assignment cannot be assigned.

Accepted Answer

A contract that expressly prohibits assignment generally cannot be assigned without the consent of all parties involved. This is because the parties have agreed that the obligations and rights under the contract are specific to them and cannot be transferred to a third party without their prior consent.

Question 6

A valid delegation of duties relieves the delegator of obligations under the contract.

Accepted Answer

A valid delegation of duties does not relieve the delegator of obligations under the contract unless the obligee agrees to release the delegator from liability.

Question 7

Without exception,any duty can be delegated.

Accepted Answer

Some duties may not be able to be delegated due to legal or ethical responsibilities, such as a CEO delegating a decision that only they are authorized to make or a healthcare professional delegating a task that requires their level of licensure.

Question 8

No contract can prohibit delegation of the duties of the contract.

Accepted Answer

Many contracts include clauses that explicitly prohibit the delegation of duties to another party without prior consent, to ensure that the original party's obligations are satisfactorily met.

Question 9

A right can be assigned even if the assignment will significantly alter the risks or duties of the obligor.

Accepted Answer

An assignment that significantly alters the risks or duties of the obligor is generally not permissible, as it can unfairly impact the obligor's obligations under the contract.

Question 10

A transfer of contract duties to a third party is an assignment.

Accepted Answer

A transfer of contract duties to a third party is a delegation, not an assignment. An assignment involves transferring rights, not duties.

Question 11

The rights of a third party beneficiary under a contract vest if the third party materially changes his or her position in justifiable reliance on the promise.

Accepted Answer

This is known as the doctrine of detrimental reliance or promissory estoppel. Essentially, if the third party relied on the promise and changed their position because of the promise, they may have a legal right to enforce the contract, even though they were not originally a party to the contract.

Question 12

An assignee's rights are subject to the defenses that the obligor has against the assignor.

Accepted Answer

This principle is known as the principle of "subject to equities". It means that an assignee cannot have greater rights than the assignor had, and the obligor can assert any defenses or claims it had against the assignor.

Question 13

Expressly designating a third party as a beneficiary in a contract does not indicate whether the beneficiary is intended or incidental.

Accepted Answer

The answer of Expressly designating a third party as a...

Question 14

The assignment of the same contract right to two different parties automatically cancels both assignments.

Accepted Answer

Assigning the same contract right to two different parties creates a conflict of interest and is not valid. However, it does not automatically cancel both assignments. The parties may have to resolve the issue through legal means, and the assignment that was made first may have priority.

Question 15

Banks may not assign their loan contracts to other firms.

Accepted Answer

Banks have the right to assign their loan contracts to other firms. This is a common practice known as loan securitization. Banks can transfer the risk associated with their loans to other investors or financial institutions in exchange for a fee.

Question 16

Vested is the condition in which rights have taken effect and cannot be taken away.

Accepted Answer

This is the correct definition of vested. Once rights have taken effect, they are secure and cannot be revoked or taken away.

Question 17

An assignee has a right to demand performance from the obligor.

Accepted Answer

When an assignee receives the assignment of a contract, they also receive the right to demand performance from the obligor. This means that the assignee has the ability to require the obligor to fulfill the terms of the contract as agreed upon.

Question 18

In an assignment,the party receiving the rights is the assignee.

Accepted Answer

The term "assignee" is used to refer to the party who receives the rights in an assignment. Therefore, the statement is true.

Question 19

It is legally necessary to notify the obligor of any assignment of rights to a third party.

Accepted Answer

It is true that it is legally necessary to notify the obligor (the person who is obligated to perform a duty or pay a debt) of any assignment of rights to a third party. This is because the third party (the assignee) steps into the shoes of the assignor and can enforce the rights against the obligor, but the obligor needs to know who they are dealing with and who has the right to demand performance or payment. Failure to provide notice could result in the assignment being invalid or unenforceable.

Question 20

Intended beneficiaries can sue to enforce a contract.

Accepted Answer

Intended beneficiaries have the right to enforce a contract if they are identified and intended to benefit from it. They can bring a lawsuit against the parties involved to seek enforcement of the terms of the contract.

Quiz 17: Third Party Rights