Law for Business 12th Edition by A. James Barnes Terry M. Dworkin Eric Richards test bank

<< Law and Society 1st Edition by Matthew Lippman Test Bank Ladewig London Davidson Contemporary Maternal Newborn Nursing 8E Test bank >>
Product Code: 222
Availability: In Stock
Price: $24.99
Qty:     - OR -   Add to Wish List
Add to Compare

Law for Business 12th Edition by A. James Barnes Terry M. Dworkin Eric Richards test bank

Description

Chapter 17
Third Parties Contract Rights

True / False Questions

1. The transfer of duties under a contract is called an assignment.

True False

2. As a general rule, assignments that do not involve personal relationships or increase the promisors burden are enforceable.

True False

3. Employment contracts are generally assignable.

True False

4. A promisor who renders performance to the assignor without notice of the assignment bears liability under the contract.

True False

5. Assignors who are paid for making an assignment are potentially liable to assignees for certain implied guarantees.

True False

6. Public policy can prevent the delegation of duties.

True False

7. The promisor who delegates duties is not liable to the promisee if the party to whom the duties were delegated fails to satisfactorily perform them.

True False

8. If a third party only incidentally benefits from a contract and was not an intended beneficiary, he or she is an incidental beneficiary and cannot enforce it.

True False

9. Life insurance contracts give the insured the right to change the beneficiary, but only with the beneficiarys consent.

True False

10. Ronny contracted Smiths to supply a dress for his niece, Lucie, on her birthday. Since the dress was intended for Lucie, Ronny cannot modify the contract without her consent.

True False

11. To make a third party a donee beneficiary, making a gift of the contracted performance must be the promisees primary purpose in contracting.

True False

12. A creditor beneficiary has rights against the promisee, but not the promisor.

True False

13. Annie buys a car from Bobs Motors. She then sells the car to Michael, who agrees to make the remaining payments Annie owes Bobs Motors. Bobs Motors is a creditor beneficiary of Annie, and can therefore recover the balance due only from her, and not from Michael.

True False

14. Incidental beneficiaries acquire no rights under the contract and so cannot sue for nonperformance.

True False

15. Only certain specified individuals, and not members of the general public, can be incidental beneficiaries of contracts.

True False

Multiple Choice Questions

16. The transfer of rights under a contract is referred to as a(n) _____.

A. assignment

B. novation

C. delegation

D. obligor

17. The term delegation refers to the transfer of:

A. personal rights.

B. duties.

C. property rights.

D. securities.

18. Which of the following statements is true about assignment of contracts?

A. An assignment represents the transfer of duties to assignees.

B. An assignment cannot be done orally.

C. An assignee is not entitled to the performance that the assignor had a right to under the original contract.

D. A promisor must render all performance to the assignee.

19. Edward owes Frank $100, payable in six months. Frank, who is leaving the country, gives his rights to the payment to Marge for $80. Which of the following is true about the scenario?

A. Frank is the obligor.

B. Edward owes Marge $80.

C. Edward owes Marge $100.

D. Frank will get $100 from Edward.

20. Which of the following contracts can generally be assigned in all states in the U.S.?

A. Assignment of future wages

B. Employment contracts

C. Contracts promising to deliver goods

D. Contracts involving personal rights

21. Assignments of future wages are not effective because:

A. they involve personal relationships.

B. they are contrary to public policy.

C. they materially alter the duties of the promisor.

D. they involve personal rights.

22. Which of the following is true of employment contracts?

A. They are generally assignable.

B. They are contrary to public policies.

C. They involve personal rights.

D. They involve the transfer of duties.

23. Why are contracts prohibiting competition with a buyer of a business or an employer generally assignable with the sale of the business?

A. To protect the goodwill of the business

B. To protect the employees from losing their jobs

C. To protect the interest of the public

D. To protect wage earners from unwisely impoverishing themselves

24. Assignees should promptly notify the promisor of an assignment because the promisor who renders performance to the assignor without notice of the assignment:

A. is still liable under the contract.

B. has no further liability under the contract.

C. creates a novation.

D. cannot be sued by the assignee for nonperformance.

25. Assignees:

A. are not entitled to the rights to a promisors performance.

B. are not required to notify the promisor of the assignment.

C. can sue a promisor for nonperformance.

D. can acquire greater rights than an assignor.

26. Which of the following statements is true of assignors?

A. An assignor who is paid for making an assignment is not liable to assignees for implied guarantees.

B. An assignor who wrongfully assigns the same claim more than once is not liable to an assignee as the assignee is later held to have acquired rights against the promisor.

C. An assignor does not impliedly warrant the solvency of a promisor.

D. An assignor who accepts performance from the promisor after the assignment does not hold any benefits he or she receives as trustee for his or her assignee.

27. For an assigned claim to be valid, _____.

A. the assignor need not have the capacity to contract

B. the contract must not be voidable for any other reason known to the assignor

C. the contract must have been discharged once prior to the assignment

D. the assignee must have a good title to the rights assigned

28. Which of the following is an implied guarantee when an assignor is paid for making an assignment?

A. The promisor himself or herself does not have the capacity to contract.

B. The assignor has good title to the rights assigned.

C. The contract has been discharged two months prior to assignment.

D. Any oral statement representing the claim is genuine.

29. When a promisor appoints another person to perform his duties under a contract, _____.

A. it is called an assignment

B. it is called a delegation

C. it creates an incidental beneficiary

D. it creates a donee beneficiary

30. Which of the following statements is true of delegation of duties?

A. A promisor who delegates duties is not liable to the promisee if the party to whom the duties were delegated fails to satisfactorily perform them.

B. If the duty to be performed could be performed fully by many different persons, it is delegable.

C. All duties are delegable, like assignments.

D. If performance depends on the personal skill, it can be delegated.

31. Rocky was voted the most valuable player of his universitys basketball team. Rocky:

A. can delegate his duties to another player.

B. cannot delegate his duties due to public policy.

C. cannot delegate his duties since they involve his personal skill.

D. can assign his duties to another player.

32. Zeta is contracted to perform a violin solo for Pat. Zeta assigns the contract to Roy. Which of the following statements is true about delegation of duty in this case?

A. This is a valid delegation of Zetas duty as Zeta has entered into a novation with Roy.

B. This is a valid delegation of Zetas duty because Zeta does not want to play for Pat.

C. This is not a valid delegation of Zetas duty to play because all delegations must be expressly stated in the assignment contract.

D. This is not a valid delegation of Zetas duty to play because the contract is one in which Zetas personal skill as a musician is an essential part of the agreement.

33. Unless an assignment agreement clearly indicates a contrary intent, courts today tend to interpret assignments as including a delegation of the assignors duties. A promise on the part of the assignee to perform these duties:

A. is not implied.

B. is enforceable by either the promisor or the assignor.

C. depends on the policy followed by the public.

D. is not enforceable by the assignor.

34. A promisor who delegates duties is _____ if the party to whom the duties were delegated fails to satisfactorily perform them.

A. liable to the promisee

B. not liable to the promisee

C. liable for novation

D. liable to the creditor beneficiary

35. A(n) _____ is a new, separate agreement by the promisee to release the original promisor from liability in exchange for a third partys agreement to assume the promisors duties.

A. assignment

B. delegation

C. novation

D. obligor

36. Once a donee or creditor beneficiary has accepted a contract, the original parties:

A. can cancel the contract if the original contract gives them the right to do so.

B. can cancel the contract without the third partys consent.

C. can modify the contract without the third partys consent.

D. can cancel only monetary contracts.

37. Susan wanted to give a diamond pendant to Lucy, her daughter. Susan entered into a contract with Andrew, a dealer who specializes in diamond jewelry. Susan had promised to pay him if he delivered the pendant to Lucy. Andrew withdrew from the contract and Lucy wanted to sue him. Which of the following statements is true in this scenario?

A. Lucy can sue Andrew as she is a creditor beneficiary of the contract.

B. Lucy can sue Andrew as she is a donee beneficiary of the contract.

C. Lucy cannot sue Andrew as she is an incidental beneficiary of the contract.

D. Lucy cannot sue Andrew as Susans promise was gratuitous and therefore unenforceable.

38. A donee beneficiary:

A. is a third-party beneficiary to whom a gift of the contracted performance is given.

B. is a third-party beneficiary who is no longer a part of an agreement.

C. is a third-party beneficiary who incidentally benefits from a contract.

D. is a third party beneficiary who cannot recover the value of the promised performance.

39. Lydias father has named Lydia in his will as the inheritor of his farm. He has also named her as a beneficiary in his insurance policy. Lydia is:

A. a donee beneficiary.

B. an incidental beneficiary.

C. the assignee by novation.

D. a creditor beneficiary.

40. A creditor beneficiary:

A. has rights against both the promisee and the promisor.

B. is the promisor in a performance that satisfies a legal duty.

C. acquires no rights under a contract and therefore cannot sue for nonperformance.

D. is the promisee who owes a legal duty to a third party.

41. If a promisors performance will satisfy a legal duty that the promisee owes a third party, the third party is a(n) _____.

A. donee beneficiary.

B. incidental beneficiary.

C. creditor beneficiary.

D. implied beneficiary.

42. An incidental beneficiary can:

A. enforce a contract.

B. acquire rights under a contract.

C. be a member of the general public.

D. sue for nonperformance.

43. The municipality of College Town enters into a contract with Wooster Inc. to have the towns roads repaired. Katie is a resident of College Town and will be considered a(n):

A. donee beneficiary.

B. incidental beneficiary.

C. implied beneficiary.

D. creditor beneficiary.

44. Nick, a builder, contracts with the city of Chicago to build a new convention center. Jack, a hotel owner, stands to benefit once the convention center is built. Jack decides to sue Nick if Nick backs out of the contract. Which of the following statements is true of this scenario?

A. Jack cannot sue Nick because he is an incidental beneficiary.

B. Jack can sue Nick because he is a donee beneficiary.

C. Jack can sue Nick because Jack is a citizen of Chicago.

D. Jack cannot sue Nick because he is a creditor beneficiary.

45. GP Corp. had been contracted by the public services department of Kingston to install monitoring systems at all public places. This was to be done in two phases and the city had the right to terminate the contract. GP had plans to use a subcontractor, Rex, whom they usually hired for the last phases of projects executed by them. After two weeks of the work, the city of Kingston found that things were not going according to plan and terminated GPs contract. Under these circumstances:

A. Rex can sue the public services department of Kingston because he is a third-party donee beneficiary.

B. Rex cannot sue the public services department of Kingston because he is only an incidental beneficiary.

C. Rex can sue the public services department of Kingston because he is involved in a novation.

D. Rex cannot sue the public services department of Kingston because he is a creditor beneficiary.

Short Answer Questions

46. Explain what types of contracts are assignable and name the types of contracts that are not assignable.

47. What is an implied guarantee?

48. Ford owned an apartment complex and was converting the complex to a cooperative by selling individual units. Each purchaser was required to pay Ford an extra $30 per month for utilities, taxes, and insurance. Ford sold all his rights in the complex to Roberts and assigned the purchasers contracts to him. Roberts failed to pay the applicable property tax, and Crowe, a purchasing tenant, sued him to compel payment of the tax. Roberts argued that in purchasing Fords interest, all he bought was the right to collect the payments made by tenants and that he assumed no duties. Is Roberts liable for the property tax?

49. Who is a creditor beneficiary? Can he/she enforce a contract?

50. An underground water main burst in Manhattan and flooded the building where Acme Inc. has an electricity supply substation. A fire resulted and disrupted electric power for four days. This occurred during the biannual Buyers Week, when merchandisers from around the world were in town to visit fashion showrooms and place orders for future seasons. Around 200 merchandisers brought suit against Acme. Some of the businesses had no direct contractual relationship with Acme. They argued that their lease agreements with their landlords, who were the direct contracting entities with Acme, obligated them to pay a share of the electricity expenses and therefore they could sue under the contract agreement between the landlords and Acme. Are the demands of the businesses with no direct contractual relationship with Acme justified?

Chapter 17 Third Parties Contract Rights Answer Key

True / False Questions

1.
(p. 276) The transfer of duties under a contract is called an assignment.

FALSE

AACSB: Analytic
Blooms: Remember
Difficulty: 1 Easy
Learning Objective: 17-01 Describe an assignment and explain which contracts are assignable.
Topic: Assignment of Contracts

2.
(p. 277) As a general rule, assignments that do not involve personal relationships or increase the promisors burden are enforceable.

TRUE

AACSB: Analytic
Blooms: Understand
Difficulty: 2 Medium
Learning Objective: 17-01 Describe an assignment and explain which contracts are assignable.
Topic: Assignment of Contracts

3.
(p. 276-277) Employment contracts are generally assignable.

FALSE

AACSB: Analytic
Blooms: Remember
Difficulty: 1 Easy
Learning Objective: 17-01 Describe an assignment and explain which contracts are assignable.
Topic: Assignment of Contracts

4.
(p. 278) A promisor who renders performance to the assignor without notice of the assignment bears liability under the contract.

FALSE

AACSB: Analytic
Blooms: Understand
Difficulty: 2 Medium
Learning Objective: 17-02 List the rights and duties of assignees.
Topic: The Consequences of Assignment

5.
(p. 278) Assignors who are paid for making an assignment are potentially liable to assignees for certain implied guarantees.

TRUE

AACSB: Analytic
Blooms: Remember
Difficulty: 1 Easy
Learning Objective: 17-02 List the rights and duties of assignees.
Topic: The Consequences of Assignment

6.
(p. 278) Public policy can prevent the delegation of duties.

TRUE

AACSB: Analytic
Blooms: Remember
Difficulty: 1 Easy
Learning Objective: 17-03 Explain a delegation of duties and its effect.
Topic: The Consequences of Assignment

7.
(p. 279) The promisor who delegates duties is not liable to the promisee if the party to whom the duties were delegated fails to satisfactorily perform them.

FALSE

AACSB: Analytic
Blooms: Remember
Difficulty: 1 Easy
Learning Objective: 17-03 Explain a delegation of duties and its effect.
Topic: The Consequences of Assignment

8.
(p. 280) If a third party only incidentally benefits from a contract and was not an intended beneficiary, he or she is an incidental beneficiary and cannot enforce it.

TRUE

AACSB: Analytic
Blooms: Remember
Difficulty: 1 Easy
Learning Objective: 17-04 Discuss the difference between a donee beneficiary and a creditor beneficiary.
Topic: Third-Party Beneficiary Contracts

9.
(p. 280) Life insurance contracts give the insured the right to change the beneficiary, but only with the beneficiarys consent.

FALSE

AACSB: Analytic
Blooms: Understand
Difficulty: 2 Medium
Learning Objective: 17-04 Discuss the difference between a donee beneficiary and a creditor beneficiary.
Topic: Third-Party Beneficiary Contracts

10.
(p. 280) Ronny contracted Smiths to supply a dress for his niece, Lucie, on her birthday. Since the dress was intended for Lucie, Ronny cannot modify the contract without her consent.

TRUE

AACSB: Reflective Thinking
Blooms: Apply
Difficulty: 2 Medium
Learning Objective: 17-04 Discuss the difference between a donee beneficiary and a creditor beneficiary.
Topic: Third-Party Beneficiary Contracts

11.
(p. 280) To make a third party a donee beneficiary, making a gift of the contracted performance must be the promisees primary purpose in contracting.

TRUE

AACSB: Analytic
Blooms: Understand
Difficulty: 2 Medium
Learning Objective: 17-04 Discuss the difference between a donee beneficiary and a creditor beneficiary.
Topic: Third-Party Beneficiary Contracts

12.
(p. 281) A creditor beneficiary has rights against the promisee, but not the promisor.

FALSE

AACSB: Analytic
Blooms: Remember
Difficulty: 1 Easy
Learning Objective: 17-04 Discuss the difference between a donee beneficiary and a creditor beneficiary.
Topic: Third-Party Beneficiary Contracts

13.
(p. 281) Annie buys a car from Bobs Motors. She then sells the car to Michael, who agrees to make the remaining payments Annie owes Bobs Motors. Bobs Motors is a creditor beneficiary of Annie, and can therefore recover the balance due only from her, and not from Michael.

FALSE

AACSB: Analytic
Blooms: Understand
Difficulty: 2 Medium
Learning Objective: 17-04 Discuss the difference between a donee beneficiary and a creditor beneficiary.
Topic: Third-Party Beneficiary Contracts

14.
(p. 281) Incidental beneficiaries acquire no rights under the contract and so cannot sue for nonperformance.

TRUE

AACSB: Analytic
Blooms: Remember
Difficulty: 1 Easy
Learning Objective: 17-05 Define an incidental beneficiary and whether he or she has any rights under a contract.
Topic: Third-Party Beneficiary Contracts

15.
(p. 282) Only certain specified individuals, and not members of the general public, can be incidental beneficiaries of contracts.

FALSE

AACSB: Analytic
Blooms: Understand
Difficulty: 2 Medium
Learning Objective: 17-05 Define an incidental beneficiary and whether he or she has any rights under a contract.
Topic: Third-Party Beneficiary Contracts

Multiple Choice Questions

16.
(p. 276) The transfer of rights under a contract is referred to as a(n) _____.

A. assignment

B. novation

C. delegation

D. obligor
A contract consists of both rights and duties. These rights and duties can usually be transferred to third persons. When rights under a contract are transferred, this is called an assignment.

AACSB: Analytic
Blooms: Remember
Difficulty: 1 Easy
Learning Objective: 17-01 Describe an assignment and explain which contracts are assignable.
Topic: Assignment of Contracts

17.
(p. 276) The term delegation refers to the transfer of:

A. personal rights.

B. duties.

C. property rights.

D. securities.
A contract consists of both rights and duties. These rights and duties can usually be transferred to third persons. The transfer of duties is called a delegation.

AACSB: Analytic
Blooms: Remember
Difficulty: 1 Easy
Learning Objective: 17-01 Describe an assignment and explain which contracts are assignable.
Topic: Assignment of Contracts

18.
(p. 276) Which of the following statements is true about assignment of contracts?

A. An assignment represents the transfer of duties to assignees.

B. An assignment cannot be done orally.

C. An assignee is not entitled to the performance that the assignor had a right to under the original contract.

D. A promisor must render all performance to the assignee.
After an assignment, the assignee is entitled to whatever performance the assignor had a right to under the original contract. The other original party to the contract (called the promisor or obligor) must render all performance to the assignee.

AACSB: Analytic
Blooms: Understand
Difficulty: 2 Medium
Learning Objective: 17-01 Describe an assignment and explain which contracts are assignable.
Topic: Assignment of Contracts

19.
(p. 276) Edward owes Frank $100, payable in six months. Frank, who is leaving the country, gives his rights to the payment to Marge for $80. Which of the following is true about the scenario?

A. Frank is the obligor.

B. Edward owes Marge $80.

C. Edward owes Marge $100.

D. Frank will get $100 from Edward.
The person who makes an assignment is called the assignor, and the person who accepts the assignment is called the assignee. After an assignment, the assignee is entitled to whatever performance the assignor had a right to under the original contract. The other original party to the contract (called the promisor or obligor) must render all performance to the assignee.

AACSB: Analytic
Blooms: Understand
Difficulty: 2 Medium
Learning Objective: 17-01 Describe an assignment and explain which contracts are assignable.
Topic: Assignment of Contracts

20.
(p. 277) Which of the following contracts can generally be assigned in all states in the U.S.?

A. Assignment of future wages

B. Employment contracts

C. Contracts promising to deliver goods

D. Contracts involving personal rights
Generally, all kinds of assignments that do not involve personal relationships or increase the promisors burden are enforceable. Promises to pay money, deliver goods, or sell land are generally assignable.

AACSB: Analytic
Blooms: Understand
Difficulty: 2 Medium
Learning Objective: 17-01 Describe an assignment and explain which contracts are assignable.
Topic: Assignment of Contracts

21.
(p. 277) Assignments of future wages are not effective because:

A. they involve personal relationships.

B. they are contrary to public policy.

C. they materially alter the duties of the promisor.

D. they involve personal rights.
Any assignment that would materially alter the duties of the promisor is unenforceable, since the promisor cannot be required to do something significantly more than, or different from, what he or she originally agreed to do. Assignments contrary to public policy are also not effective. Assignments of future wages are an example. In order to protect wage earners from unwisely impoverishing themselves, some states prohibit wage assignments by statute.

AACSB: Analytic
Blooms: Understand
Difficulty: 2 Medium
Learning Objective: 17-01 Describe an assignment and explain which contracts are assignable.
Topic: Assignment of Contracts

22.
(p. 276-277) Which of the following is true of employment contracts?

A. They are generally assignable.

B. They are contrary to public policies.

C. They involve personal rights.

D. They involve the transfer of duties.
Contracts involving personal rights are generally nonassignable. These are contracts in which some element of personal skill, credit, character, or judgment is an essential part of the agreement. In such a case, the substitution of the assignee for the assignor would materially change the nature of the performance required of the promisor. Employment contracts are therefore generally held nonassignable.

AACSB: Analytic
Blooms: Understand
Difficulty: 2 Medium
Learning Objective: 17-01 Describe an assignment and explain which contracts are assignable.
Topic: Assignment of Contracts

23.
(p. 277) Why are contracts prohibiting competition with a buyer of a business or an employer generally assignable with the sale of the business?

A. To protect the goodwill of the business

B. To protect the employees from losing their jobs

C. To protect the interest of the public

D. To protect wage earners from unwisely impoverishing themselves
Contracts not to compete with a buyer of a business or an employer are generally assignable with the sale of the business. The purpose of such contracts is to protect the goodwill of the business (the value of the business as a going concern), an asset that can be sold with the business.

AACSB: Analytic
Blooms: Understand
Difficulty: 2 Medium
Learning Objective: 17-01 Describe an assignment and explain which contracts are assignable.
Topic: Assignment of Contracts

24.
(p. 278) Assignees should promptly notify the promisor of an assignment because the promisor who renders performance to the assignor without notice of the assignment:

A. is still liable under the contract.

B. has no further liability under the contract.

C. creates a novation.

D. cannot be sued by the assignee for nonperformance.
Assignees should promptly notify the promisor of the assignment. This is necessary because the promisor who renders performance to the assignor without notice of the assignment has no further liability under the contract. Promisors with notice of the assignment who render performance to the assignor or to any third party remain liable to the assignee under the assigned contract.

AACSB: Analytic
Blooms: Understand
Difficulty: 2 Medium
Learning Objective: 17-02 List the rights and duties of assignees.
Topic: The Consequences of Assignment

25.
(p. 278) Assignees:

A. are not entitled to the rights to a promisors performance.

B. are not required to notify the promisor of the assignment.

C. can sue a promisor for nonperformance.

D. can acquire greater rights than an assignor.
An assignee is entitled to all the rights his or her assignor had under the assigned contract, including the right to the promisors performance. If the promisor does not perform, the assignee can sue for nonperformance.

AACSB: Analytic
Blooms: Understand
Difficulty: 2 Medium
Learning Objective: 17-02 List the rights and duties of assignees.
Topic: The Consequences of Assignment

26.
(p. 278) Which of the following statements is true of assignors?

A. An assignor who is paid for making an assignment is not liable to assignees for implied guarantees.

B. An assignor who wrongfully assigns the same claim more than once is not liable to an assignee as the assignee is later held to have acquired rights against the promisor.

C. An assignor does not impliedly warrant the solvency of a promisor.

D. An assignor who accepts performance from the promisor after the assignment does not hold any benefits he or she receives as trustee for his or her assignee.
Assignors who wrongfully assign the same claim more than once are liable to an assignee who is later held to have acquired no rights against the promisor. The assignor does not impliedly warrant the solvency of the promisor.

AACSB: Analytic
Blooms: Understand
Difficulty: 2 Medium
Learning Objective: 17-02 List the rights and duties of assignees.
Topic: The Consequences of Assignment

27.
(p. 278) For an assigned claim to be valid, _____.

A. the assignor need not have the capacity to contract

B. the contract must not be voidable for any other reason known to the assignor

C. the contract must have been discharged once prior to the assignment

D. the assignee must have a good title to the rights assigned
Assignors who are paid for making an assignment are potentially liable to assignees for certain implied guarantees. These guarantees are imposed by law unless the assignment agreement clearly indicates to the contrary. One such guarantee is that the assigned claim is valid, which implies that the contract is not illegal, and it is not voidable for any other reason known to the assignor.

AACSB: Analytic
Blooms: Remember
Difficulty: 1 Easy
Learning Objective: 17-02 List the rights and duties of assignees.
Topic: The Consequences of Assignment

28.
(p. 278) Which of the following is an implied guarantee when an assignor is paid for making an assignment?

A. The promisor himself or herself does not have the capacity to contract.

B. The assignor has good title to the rights assigned.

C. The contract has been discharged two months prior to assignment.

D. Any oral statement representing the claim is genuine.
Assignors who are paid for making an assignment are potentially liable to assignees for certain implied guarantees. These guarantees are imposed by law unless the assignment agreement clearly indicates to the contrary. One such guarantee is that the assignor has good title to the rights assigned.

AACSB: Analytic
Blooms: Remember
Difficulty: 1 Easy
Learning Objective: 17-02 List the rights and duties of assignees.
Topic: The Consequences of Assignment

29.
(p. 278) When a promisor appoints another person to perform his duties under a contract, _____.

A. it is called an assignment

B. it is called a delegation

C. it creates an incidental beneficiary

D. it creates a donee beneficiary
When a promisor appoints another to perform his duties under a contract, this is called a delegation. Like assignments, not all duties are delegable.

AACSB: Analytic
Blooms: Remember
Difficulty: 1 Easy
Learning Objective: 17-03 Explain a delegation of duties and its effect.
Topic: The Consequences of Assignment

30.
(p. 278) Which of the following statements is true of delegation of duties?

A. A promisor who delegates duties is not liable to the promisee if the party to whom the duties were delegated fails to satisfactorily perform them.

B. If the duty to be performed could be performed fully by many different persons, it is delegable.

C. All duties are delegable, like assignments.

D. If performance depends on the personal skill, it can be delegated.
Like assignments, not all duties are delegable. If the duty to be performed could be performed fully by many different persons, it is delegable. If performance depends on the personal skill, character, or judgment of the promisor, however, it may not be delegated.

AACSB: Analytic
Blooms: Remember
Difficulty: 1 Easy
Learning Objective: 17-03 Explain a delegation of duties and its effect.
Topic: The Consequences of Assignment

31.
(p. 278) Rocky was voted the most valuable player of his universitys basketball team. Rocky:

A. can delegate his duties to another player.

B. cannot delegate his duties due to public policy.

C. cannot delegate his duties since they involve his personal skill.

D. can assign his duties to another player.
Like assignments, not all duties are delegable. If performance depends on the personal skill, character, or judgment of the promisor, however, it may not be delegated. Thus, in Rockys case, his duty as a player is not delegable.

AACSB: Reflective Thinking
Blooms: Apply
Difficulty: 2 Medium
Learning Objective: 17-03 Explain a delegation of duties and its effect.
Topic: The Consequences of Assignment

32.
(p. 278) Zeta is contracted to perform a violin solo for Pat. Zeta assigns the contract to Roy. Which of the following statements is true about delegation of duty in this case?

A. This is a valid delegation of Zetas duty as Zeta has entered into a novation with Roy.

B. This is a valid delegation of Zetas duty because Zeta does not want to play for Pat.

C. This is not a valid delegation of Zetas duty to play because all delegations must be expressly stated in the assignment contract.

D. This is not a valid delegation of Zetas duty to play because the contract is one in which Zetas personal skill as a musician is an essential part of the agreement.
Like assignments, not all duties are delegable. If performance depends on the personal skill, character, or judgment of the promisor, however, it may not be delegated. Thus, in Zetas case, her duty to play the violin is not delegable because it involves her personal skill.

AACSB: Reflective Thinking
Blooms: Apply
Difficulty: 3 Hard
Learning Objective: 17-03 Explain a delegation of duties and its effect.
Topic: The Consequences of Assignment

33.
(p. 279) Unless an assignment agreement clearly indicates a contrary intent, courts today tend to interpret assignments as including a delegation of the assignors duties. A promise on the part of the assignee to perform these duties:

A. is not implied.

B. is enforceable by either the promisor or the assignor.

C. depends on the policy followed by the public.

D. is not enforceable by the assignor.
Unless an assignment agreement clearly indicates a contrary intent, courts today tend to interpret assignments as including a delegation of the assignors duties. A promise on the part of the assignee to perform these duties is implied, and this implied promise is enforceable by either the promisor or the assignor. Both the Code and the Restatement support this interpretation.

AACSB: Analytic
Blooms: Understand
Difficulty: 2 Medium
Learning Objective: 17-03 Explain a delegation of duties and its effect.
Topic: The Consequences of Assignment

34.
(p. 279) A promisor who delegates duties is _____ if the party to whom the duties were delegated fails to satisfactorily perform them.

A. liable to the promisee

B. not liable to the promisee

C. liable for novation

D. liable to the creditor beneficiary
A promisor who delegates duties is still liable to the promisee if the party to whom the duties were delegated fails to satisfactorily perform them. This rule is necessary to make contracts truly binding; otherwise, a promisor could avoid virtually all liability by merely delegating duties she did not want to perform.

AACSB: Analytic
Blooms: Remember
Difficulty: 1 Easy
Learning Objective: 17-03 Explain a delegation of duties and its effect.
Topic: The Consequences of Assignment

35.
(p. 279) A(n) _____ is a new, separate agreement by the promisee to release the original promisor from liability in exchange for a third partys agreement to assume the promisors duties.

A. assignment

B. delegation

C. novation

D. obligor
A novation is a new, separate agreement by the promisee to release the original promisor from liability in exchange for a third partys agreement to assume the promisors duties. To have a novation requires more than the obligees consent to having the delegate perform the duties.

AACSB: Analytic
Blooms: Remember
Difficulty: 1 Easy
Learning Objective: 17-03 Explain a delegation of duties and its effect.
Topic: The Consequences of Assignment

36.
(p. 280) Once a donee or creditor beneficiary has accepted a contract, the original parties:

A. can cancel the contract if the original contract gives them the right to do so.

B. can cancel the contract without the third partys consent.

C. can modify the contract without the third partys consent.

D. can cancel only monetary contracts.
If the parties to a contract intended to benefit a third party, the third party can enforce the contract. There are two classes of third-party beneficiaries that have such enforcement rightsdonee beneficiaries and creditor beneficiaries. Once a donee or creditor beneficiary has accepted the contract, or relied on it, the original parties cannot cancel or modify the contract without the third partys consent, unless the original contract gives them the right to do so.

AACSB: Analytic
Blooms: Understand
Difficulty: 2 Medium
Learning Objective: 17-04 Discuss the difference between a donee beneficiary and a creditor beneficiary.
Topic: Third-Party Beneficiary Contracts

37.
(p. 280) Susan wanted to give a diamond pendant to Lucy, her daughter. Susan entered into a contract with Andrew, a dealer who specializes in diamond jewelry. Susan had promised to pay him if he delivered the pendant to Lucy. Andrew withdrew from the contract and Lucy wanted to sue him. Which of the following statements is true in this scenario?

A. Lucy can sue Andrew as she is a creditor beneficiary of the contract.

B. Lucy can sue Andrew as she is a donee beneficiary of the contract.

C. Lucy cannot sue Andrew as she is an incidental beneficiary of the contract.

D. Lucy cannot sue Andrew as Susans promise was gratuitous and therefore unenforceable.
In this scenario, Lucy can sue Andrew as she is a donee beneficiary of the contract. A third person is a donee beneficiary if the promisees primary purpose in contracting was to make a gift of the contracted performance to the third party. Either the promisee or the donee beneficiary can sue the promisor for not performing the promise. The beneficiary can recover the value of the promised performance, while the promisee can recover damages resulting from nonperformance (usually only nominal damages).

AACSB: Reflective Thinking
Blooms: Apply
Difficulty: 3 Hard
Learning Objective: 17-04 Discuss the difference between a donee beneficiary and a creditor beneficiary.
Topic: Third-Party Beneficiary Contracts

38.
(p. 280) A donee beneficiary:

A. is a third-party beneficiary to whom a gift of the contracted performance is given.

B. is a third-party beneficiary who is no longer a part of an agreement.

C. is a third-party beneficiary who incidentally benefits from a contract.

D. is a third party beneficiary who cannot recover the value of the promised performance.
A third person is a donee beneficiary if the promisees primary purpose in contracting was to make a gift of the contracted performance to the third party. The beneficiary can recover the value of the promised performance, while the promisee can recover damages resulting from nonperformance (usually only nominal damages).

AACSB: Analytic
Blooms: Remember
Difficulty: 1 Easy
Learning Objective: 17-04 Discuss the difference between a donee beneficiary and a creditor beneficiary.
Topic: Third-Party Beneficiary Contracts

39.
(p. 280-281) Lydias father has named Lydia in his will as the inheritor of his farm. He has also named her as a beneficiary in his insurance policy. Lydia is:

A. a donee beneficiary.

B. an incidental beneficiary.

C. the assignee by novation.

D. a creditor beneficiary.
A third person is a donee beneficiary if the promisees primary purpose in contracting was to make a gift of the contracted performance to the third party. Life insurance contracts are a common form of donee beneficiary contract. In this scenario, Lydia is a donee beneficiary.

AACSB: Reflective Thinking
Blooms: Apply
Difficulty: 1 Easy
Learning Objective: 17-04 Discuss the difference between a donee beneficiary and a creditor beneficiary.
Topic: Third-Party Beneficiary Contracts

40.
(p. 281) A creditor beneficiary:

A. has rights against both the promisee and the promisor.

B. is the promisor in a performance that satisfies a legal duty.

C. acquires no rights under a contract and therefore cannot sue for nonperformance.

D. is the promisee who owes a legal duty to a third party.
If a promisors performance will satisfy a legal duty that the promisee owes a third party, the third party is a creditor beneficiary. The creditor beneficiary has rights against both the promisee and the promisor.

AACSB: Analytic
Blooms: Remember
Difficulty: 1 Easy
Learning Objective: 17-04 Discuss the difference between a donee beneficiary and a creditor beneficiary.
Topic: Third-Party Beneficiary Contracts

41.
(p. 281) If a promisors performance will satisfy a legal duty that the promisee owes a third party, the third party is a(n) _____.

A. donee beneficiary.

B. incidental beneficiary.

C. creditor beneficiary.

D. implied beneficiary.
If a promisors performance will satisfy a legal duty that the promisee owes a third party, the third party is a creditor beneficiary. The duty owed can be any kind of legal duty and need not necessarily be the payment of money.

AACSB: Analytic
Blooms: Remember
Difficulty: 1 Easy
Learning Objective: 17-04 Discuss the difference between a donee beneficiary and a creditor beneficiary.
Topic: Third-Party Beneficiary Contracts

42.
(p. 282) An incidental beneficiary can:

A. enforce a contract.

B. acquire rights under a contract.

C. be a member of the general public.

D. sue for nonperformance.
Occasionally, the performance of a contract intended solely for the benefit of the promisee will incidentally benefit a third person. Members of the general public are generally held to be incidental beneficiaries of contracts such as street repair contracts entered into by municipalities or other government units.

AACSB: Analytic
Blooms: Remember
Difficulty: 1 Easy
Learning Objective: 17-05 Define an incidental beneficiary and whether he or she has any rights under a contract.
Topic: Third-Party Beneficiary Contracts

43.
(p. 281-282) The municipality of College Town enters into a contract with Wooster Inc. to have the towns roads repaired. Katie is a resident of College Town and will be considered a(n):

A. donee beneficiary.

B. incidental beneficiary.

C. implied beneficiary.

D. creditor beneficiary.
Occasionally, the performance of a contract intended solely for the benefit of the promisee will incidentally benefit a third person. Members of the general public are generally held to be incidental beneficiaries of contracts such as street repair contracts entered into by municipalities or other government units. In this scenario, Katie will be an incidental beneficiary.

AACSB: Reflective Thinking
Blooms: Apply
Difficulty: 3 Hard
Learning Objective: 17-05 Define an incidental beneficiary and whether he or she has any rights under a contract.
Topic: Third-Party Beneficiary Contracts

44.
(p. 281-282) Nick, a builder, contracts with the city of Chicago to build a new convention center. Jack, a hotel owner, stands to benefit once the convention center is built. Jack decides to sue Nick if Nick backs out of the contract. Which of the following statements is true of this scenario?

A. Jack cannot sue Nick because he is an incidental beneficiary.

B. Jack can sue Nick because he is a donee beneficiary.

C. Jack can sue Nick because Jack is a citizen of Chicago.

D. Jack cannot sue Nick because he is a creditor beneficiary.
Occasionally, the performance of a contract intended solely for the benefit of the promisee will also incidentally benefit a third person. These incidental beneficiaries acquire no rights under the contract and so cannot sue for nonperformance.

AACSB: Reflective Thinking
Blooms: Apply
Difficulty: 3 Hard
Learning Objective: 17-05 Define an incidental beneficiary and whether he or she has any rights under a contract.
Topic: Third-Party Beneficiary Contracts

45.
(p. 281) GP Corp. had been contracted by the public services department of Kingston to install monitoring systems at all public places. This was to be done in two phases and the city had the right to terminate the contract. GP had plans to use a subcontractor, Rex, whom they usually hired for the last phases of projects executed by them. After two weeks of the work, the city of Kingston found that things were not going according to plan and terminated GPs contract. Under these circumstances:

A. Rex can sue the public services department of Kingston because he is a third-party donee beneficiary.

B. Rex cannot sue the public services department of Kingston because he is only an incidental beneficiary.

C. Rex can sue the public services department of Kingston because he is involved in a novation.

D. Rex cannot sue the public services department of Kingston because he is a creditor beneficiary.
Occasionally, the performance of a contract intended solely for the benefit of the promisee will also incidentally benefit a third person. These incidental beneficiaries acquire no rights under the contract and so cannot sue for nonperformance.

AACSB: Reflective Thinking
Blooms: Apply
Difficulty: 3 Hard
Learning Objective: 17-05 Define an incidental beneficiary and whether he or she has any rights under a contract.
Topic: Third-Party Beneficiary Contracts

Short Answer Questions

46.
(p. 276-277) Explain what types of contracts are assignable and name the types of contracts that are not assignable.

Generally, any kind of assignment that does not involve personal relationships or increases the promisors burden is enforceable. The following types of contracts are unenforceablethose that materially alter the duties of the promisor; those involving personal rights; those that expressly forbid assignment; and, those contrary to public policy.

AACSB: Analytic
Blooms: Understand
Difficulty: 2 Medium
Learning Objective: 17-01 Describe an assignment and explain which contracts are assignable.
Topic: Assignment of Contracts

47.
(p. 278) What is an implied guarantee?

An implied guarantee is a guarantee imposed by law unless the assignment agreement clearly indicates to the contrary. Assignors who are paid for making an assignment are potentially liable to assignees for certain implied guarantees such as the assignor has good title to the rights assigned and that the assigned claim is valid.

AACSB: Analytic
Blooms: Understand
Difficulty: 2 Medium
Learning Objective: 17-02 List the rights and duties of assignees.
Topic: The Consequences of Assignment

48.
(p. 279) Ford owned an apartment complex and was converting the complex to a cooperative by selling individual units. Each purchaser was required to pay Ford an extra $30 per month for utilities, taxes, and insurance. Ford sold all his rights in the complex to Roberts and assigned the purchasers contracts to him. Roberts failed to pay the applicable property tax, and Crowe, a purchasing tenant, sued him to compel payment of the tax. Roberts argued that in purchasing Fords interest, all he bought was the right to collect the payments made by tenants and that he assumed no duties. Is Roberts liable for the property tax?

Yes, Roberts is liable for the property tax. Since Roberts accepted the benefits of the contracts, he had to assume their burdens. Unless the assignment agreement clearly indicates a contrary intent, the assignment will be interpreted as including a delegation of the assignors duties. A promise on the part of the assignee to perform these duties is implied, and this implied promise is enforceable by either the promisor or the assignor.

AACSB: Reflective Thinking
Blooms: Apply
Difficulty: 3 Hard
Learning Objective: 17-03 Explain a delegation of duties and its effect.
Topic: The Consequences of Assignment

49.
(p. 281) Who is a creditor beneficiary? Can he/she enforce a contract?

A creditor beneficiary is a person who is owed a duty by the promisee. The creditor beneficiary can enforce the contract.

AACSB: Analytic
Blooms: Remember
Difficulty: 1 Easy
Learning Objective: 17-04 Discuss the difference between a donee beneficiary and a creditor beneficiary.
Topic: Third-Party Beneficiary Contracts

50.
(p. 281) An underground water main burst in Manhattan and flooded the building where Acme Inc. has an electricity supply substation. A fire resulted and disrupted electric power for four days. This occurred during the biannual Buyers Week, when merchandisers from around the world were in town to visit fashion showrooms and place orders for future seasons. Around 200 merchandisers brought suit against Acme. Some of the businesses had no direct contractual relationship with Acme. They argued that their lease agreements with their landlords, who were the direct contracting entities with Acme, obligated them to pay a share of the electricity expenses and therefore they could sue under the contract agreement between the landlords and Acme. Are the demands of the businesses with no direct contractual relationship with Acme justified?

The plaintiffs (the businesses who had no direct contractual relationship with Acme) cannot seek recovery as third-party beneficiaries of the contract. Acme did not expressly undertake to supply electricity to them. They were incidental beneficiaries of their landlords contracts and thus do not have a claim.

AACSB: Reflective Thinking
Blooms: Apply
Difficulty: 3 Hard
Learning Objective: 17-05 Define an incidental beneficiary and whether he or she has any rights under a contract.
Topic: Third-Party Beneficiary Contracts

Write a review

Your Name:


Your Review: Note: HTML is not translated!

Rating: Bad           Good

Enter the code in the box below:



 

Once the order is placed, the order will be delivered to your email less than 24 hours, mostly within 4 hours. 

If you have questions, you can contact us here