Quiz Answers and Explanations
Third Party Rights and Discharge
1. The transfer of a right to a third person is known as:
  1. a delegation.
    Incorrect. Delegation refers to a transfer of duties, not rights.

  2. an assignment.
    Correct. An assignment occurs when rights are transferred to a third party.

  3. a restitution
    Incorrect. A restitution occurs when a party to a contract is restored to his or her original - pre-contractual - position.

  4. a reformation.
    Incorrect. A reformation occurs when a court changes some terms of a contract.

2. Parties have corresponding rights and duties in which type of a contract?
  1. A bilateral contract.
    Correct. A mutual, or bilateral, contract involves two parties with corresponding duties and rights.

  2. A unilateral contract.
    Incorrect. A unilateral contract is not mutual, only one party has duties.

  3. A void contract.
    Incorrect. A void contract is not a contract at all and so neither party has rights or duties.

  4. A one-sided contract.
    Incorrect. A one-sided, or unilateral, contract does not involve corresponding rights and duties.

3. The person to whom rights in a contract are assigned is called the:
  1. obligor.
    Incorrect. The obligor is the original party to the contract.

  2. obligee.
    Incorrect. There is no obligee in an assignment.

  3. assignor.
    Incorrect. The assignor is the party who makes the assignment.

  4. assignee.
    Correct. The assignee is the party to whom the assignment of rights is made.

4. If you contract with National Bank for a home mortgage and National transfers its right to receive payment from you to Jones' Bank, National Bank is called:
  1. the obligor.
    Incorrect. You are the obligor in this case.

  2. the assignor.
    Correct. National Bank assigned its right to receive payment, so it is the assignor.

  3. the assignee.
    Incorrect. Jones' Bank is the assignee in this case.

  4. the contractee.
    Incorrect. There is no such thing as a contractee.

5. As a general rule, which rights can be assigned?
  1. Only rights to receive negotiable instruments.
    Incorrect. As a general rule, all rights may be assigned.

  2. Only rights to receive monetary damages.
    Incorrect. More rights than just the right to receive monetary damages may be assigned.

  3. All rights.
    Correct. In general, with some exceptions, all rights may be assigned.

  4. No rights may be assigned, only duties may be assigned.
    Incorrect. Rights may be assigned, duties are delegated.

6. If Sally argues to work as a chef for Fred and Fred assigns his right to Sally's services to Don, this assignment:
  1. generally will not be allowed because it involves personal services.
    Correct. As a general rule, when a contract is for personal services, the rights under that contract may not be assigned.

  2. generally will be allowed because it is an assignment rather than a delegation.
    Incorrect. Such rights generally may not be assigned, the issue of delegation does not arise because a duty is not involved.

  3. will never be allowed, in any circumstance.
    Incorrect. If, in this case, all that remained to be done was to pay Sally - if, in other words she had already cooked for Don - then a court might allow this assignment.

  4. will be allowed only if Don agrees.
    Incorrect. It is Sally's agreement rather than Don's that is the key issue here.

7. The term "alienation" means:
  1. the process of moving from one state to another.
    Incorrect. You may become alienated when you move, but the term does not refer to moving out-of-state.

  2. the process of moving from one country to another.
    Incorrect. Once again, you may become alienated moving out of the country, but the term doesn't refer to this kind of malaise.

  3. the process of transferring land out of one's possession.
    Correct. When you transfer land you "alienate" it.

  4. the process of transferring someone else's property.
    Incorrect. Alienation refers to your land, not someone else's property.

8. When someone transfers her contractual rights to you in an assignment, you would be well advised to:
  1. provide the obligor with a huge money payment.
    Incorrect. This would typically not be advisable.

  2. always do nothing, this is safest.
    Incorrect. Although you do not legally need to do anything, it is oftentimes safest to inform the obligor of the change.

  3. tell the assignee what has happened.
    Incorrect. The assignee has transferred her right to you, she already knows what's up.

  4. notify the obligor.
    Correct. Although there is no legal obligation to do so, it may be wise to inform the obligor when rights are transferred to you.

9. When you transfer contractual duties to someone else, this is known as:
  1. a revitalization.
    Incorrect. Revitalization is not the term for the transfer of duties.

  2. a delegation.
    Correct. When you transfer contractual duties you delegate them.

  3. a differentiation.
    Incorrect. The term for a transfer of contractual duties is not "differentiation."

  4. an assignment.
    Incorrect. You assign contractual rights and delegate contractual duties.

10. As a general rule, which of the following is a duty that MAY NOT be delegated?
  1. a duty to transport paper in a tractor trailer.
    Incorrect. This duty does not involve unique skills or talents and so could be delegated.

  2. a duty to paint a portrait.
    Correct. This duty involves unique personal skills or talents and so may not be delegated.

  3. a duty to supply paper clips.
    Incorrect. This duty involves no unique skills or talents and so may be delegated.

  4. a duty to supply ice to a concession stand.
    Incorrect. This duty does not involve a unique skill or talent.

11. If Larry contracts with George to have George write a chapter of a book, and George delegates his duty to Joanne, this delegation:
  1. will probably not be good because the duty involved personal services.
    Correct. Presumably George has some unique talent for writing the chapter or some special expertise, therefore, the delegations would be ineffective.

  2. will probably be good because the duty involved personal services.
    Incorrect. This delegation would probably be ineffective.

  3. is not a delegation at all; it is an assignment.
    Incorrect. This is not an assignment because it involves duties.

  4. will be allowed based on the doctrine of alienation.
    Incorrect. The doctrine of alienation does not apply here.

12. If Carlos contracts with Maryann to paint her house and if Carlos (with Maryann's approval) delegates his duties to James, what happens if James fails to paint the house?
  1. Nothing. Maryann is out of luck.
    Incorrect. Maryann does have recourse; she may sue.

  2. Maryann may sue both Carlos and James.
    Correct. As a general rule, Maryann may sue either Carlos or James or both.

  3. Maryann may sue only James.
    Incorrect. Maryann may sue Carlos also.

  4. Maryann may sue only Carlos.
    Incorrect. Maryann may sue James also.

13. If your Dad enters into a life insurance contract which states that you will receive $75,000 when he dies, you are:
  1. a substantial performer.
    Incorrect. You may be substantial and you may perform, but you are not a substantial performer in this case as far as contract law is concerned.

  2. an assignee to the contract.
    Incorrect. You are not a main party to the contract so you cannot assign any rights.

  3. a third-party beneficiary.
    Correct. As a person for whose benefit the contract is made, but as a non-party, you are considered a third-party beneficiary.

  4. a delegator.
    Incorrect. You are not a main party to the contract and so cannot be a delegator.

14. The famous case of Lawrence v. Fox involved:
  1. whether or not someone was a third-party beneficiary to a contract.
    Correct. The question was whether or not Lawrence was a third-party beneficiary to a contract between Holly and Fox.

  2. whether or not a donee beneficiary could recover in court.
    Incorrect. Because no gift was involved this case did not involve donee beneficiaries.

  3. whether or not vested third-party rights could be discussed in court.
    Incorrect. This case was not about vested rights and whether or not they could be discussed in court.

  4. whether or not a party to a contract was a valid obligor.
    Incorrect. This case did not involve a question about an obligor.

15. Melissa promises to pay Jane $1,000 for a pure-bred, champion Scottish terrier named Sir Josh. When Melissa discovers she really doesn't have the $1,000 Bob agrees to pay Jane. In this case, Jane is:
  1. out of luck.
    Incorrect. As a creditor beneficiary, Jane may sue either Melissa or Bob.

  2. a creditor beneficiary.
    Correct. Jane benefits from Bob's promise to Melissa.

  3. a donee beneficiary.
    Incorrect. Because no gift is involved, this case does not involve a donee beneficiary.

  4. a lapsed beneficiary.
    Incorrect. There is no such thing as a lapsed beneficiary.

16. If Carl buys an insurance policy that will pay Amanda $150,000 in the event of his death, Amanda is considered:
  1. a creditor beneficiary.
    Incorrect. Amanda will receive a gift, so she would be considered a donee beneficiary.

  2. a donee beneficiary.
    Correct. Carl's life insurance proceeds represent a gift to Amanda, and she would be considered a donee beneficiary.

  3. a donor beneficiary.
    Incorrect. In this case Carl is a donor, but Amanda is not a donor beneficiary.

  4. an unintended beneficiary.
    Incorrect. Carl intends to give Amanda a gift so she is not an unintended beneficiary.

17. If Lou plans to build a shopping center next to your 10 acre parcel of land, causing the value of your land to increase, you are:
  1. a donee beneficiary.
    Incorrect. Lou has not intended to give you a gift to you are not a donee beneficiary.

  2. a creditor beneficiary.
    Incorrect. There are no promises to pay here, so you are not a creditor beneficiary.

  3. a vested beneficiary.
    Incorrect. You have no rights that will vest, so you are not a vested beneficiary.

  4. an unintended beneficiary.
    Correct. Lou has provided you with an incidental benefit by planning to build close to your land. You have no third-party right should Lou, for example, choose not to build.

18. Suppose Lou agrees to build a shopping center on a certain piece of land contingent upon a determination that there are no environmental problems, such as contaminated soil, with the property. In this case, the contingency represents:
  1. a vested interest.
    Incorrect. The contingency is a condition that must be met before Lou's promise to build becomes absolute.

  2. a condition subsequent.
    Incorrect. The contingency is a condition that must be met BEFORE Lou's promise becomes absolute. A condition subsequent is a condition that, if not fulfilled, terminates the other party's obligation to perform.

  3. a condition precedent.
    Correct. This contingency is a condition precedent.

  4. a full and complete discharge.
    Incorrect. The contingency is not the same thing as a discharge.

19. If Lou agrees to purchase your 10 acre tract of land so that he can expand his shopping center and if, further, he provides the money you want and you transfer the deed to him, this is known as:
  1. discharge by breach.
    Incorrect. The contract terms have been fulfilled, not breached, in this case.

  2. discharge by lapse of time.
    Incorrect. The contract has been performed, not discharged by the passage of time.

  3. discharge by performance.
    Correct. You and Lou have fulfilled your contractual obligations and so have discharged by performance.

  4. discharge by concurrence.
    Incorrect. There is no such thing as a discharge by concurrence.

20. If, three weeks before you and Lou are supposed to close your deal for the sale of your 10 acre tract of land Lou calls you to say "the deal is off!" Lou has:
  1. substantially performed.
    Incorrect. Lou has not performed his obligation to you and so he has not substantially performed under the terms of this contract.

  2. Anticipatorily breached.
    Correct. Lou is refusing to perform before the date specified in the contract for performance. This is an anticipatory breach.

  3. Discharged by reformation.
    Incorrect. The court has not changed the terms of the contract, so this is not a contract that has been discharged by reformation.

  4. Discharged by novation.
    Incorrect. Parties to the contract have not been changed (not yet anyway) so this is not a discharge by novation.

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