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Chapter 16. Third Parties to Contracts
1. After an assignment, only the assignee has a right to the obligor's performance.
a. True
b. False
2. Ben promises to sell five acres of his land to Tomas for $8,000. If Ben transfers his right to the $8,000 to Firewood
Financial, Ben is the assignee and Tomas is the obligor.
a. True
b. False
3. Alma sells her car to Ervin. Since she still has four months left on her automobile insurance policy, she tells Ervin he
will be covered for this four-month period under the policy. This purported assignment of her policy is effective as
long as she notifies her insurance company about the change of insureds.
a. True
b. False
4. Consideration is required in order to have a valid assignment.
a. True
b. False
5. The general rule is that an assignee stands in the shoes of the assignor. He acquires the rights of the assignor but no
new or additional rights.
a. True
b. False
6. Arthur enters into a contract with Bob as a result of Bob's fraud in the inducement. Under the contract, Bob has the
right to the payment of $100. Bob assigns the right to the $100 to Carl. Arthur may assert the defense of fraud in the
inducement to avoid paying Carl the $100.
a. True
b. False
7. A gratuitous assignment is generally valid and enforceable.
a. True
b. False
8. The delegation of a duty still leaves the delegator responsible for the performance of the duty.
a. True
b. False
9. An incidental beneficiary has no right to enforce a contract.
a. True
b. False
10. An intended donee beneficiary may enforce the contract only against the promisor.
a. True
b. False
11. In some states, the vesting of a third party's rights occurs only when the third party learns of the contract and
assents to it.
a. True
b. False
12. Some states have statutes which prohibit an employee from assigning his future wages.
a. True
b. False
13. A valid assignment requires that notice be given to the obligor.
a. True
b. False
14. An assignor normally guarantees that the obligor will pay the assigned debt.
a. True
b. False
15. Though contractual duties generally are delegable; a delegation will not be permitted if the nature of the duties is
personal in that the obligee has a substantial interest in having the delegator perform the contract.
a. True
b. False
16. When the assignee gives consideration in exchange for an assignment, there is a contract between the assignor and
the assignee that prevents the assignor from revoking the assignment without the assent of the assignee.
a. True
b. False
17. The right to property other than money, such as goods or land, is not assignable.
a. True
b. False
18. A promisor and a promisee may provide that the benefits under a contract will never vest in a third person.
a. True
b. False
19. In a novation, the delegator is discharged and the third party becomes directly bound upon his promise to the obligee.
a. True
b. False
20. A contract in which a party (the promisor) promises to render a certain performance not to the other party (the
promisee) but to a third person (the beneficiary) is called a third party beneficiary contract.
a. True
b. False
21. A creditor beneficiary is a type of incidental beneficiary.
a. True
b. False
22. The law governing assignments arises solely from the common law of contracts.
a. True
b. False
23. Pedro has a contract to build a garage. He delegates the wiring job to a local electrician who improperly performs it.
Pedro is responsible, even though he delegated the duty.
a. True
b. False
24. An assignor is bound by any express warranties he makes to the assignee with respect to the right assigned.
a. True
b. False
25. Contractual duties are assignable.
a. True
b. False
26. Lauren received a $1,500 scholarship to attend the local community college. She decides not to attend college that
year, so she can assign her right to the scholarship to her friend, Sean.
a. True
b. False
27. Rick has a contract with a home repair company to paint his house and landscape his yard. When he realizes that he
will have some unexpected medical expenses, he calls the home Repair Company to cancel the contract. Rick's next
door neighbor can sue Rick to enforce the contract, because if Rick improves his own property, his neighbor's
property will also be worth more money.
a. True
b. False
28. The Restatement and Article 2 of the Code provide that, unless circumstances indicate the contrary, a contract term
that prohibits the assignment of a contract bars only the delegation to the assignee of the assignor's duty of
performance and does not bar the assignment of contract rights.
a. True
b. False
29. In a third-party beneficiary contract, the third party’s rights arise after the contract is made.
a. True
b. False
30. The Restatement adopts the majority American rule and provides that, where there are successive assignments of
the same right, the first assignee in point of time prevails.
a. True
b. False
31. Third party rights in contracts can arise by assignment of rights, delegation of duties, or express terms in third party
beneficiary contracts.
a. True
b. False
32. The UCC imposes a writing requirement on all assignments of $500 or more.
a. True
b. False
33. The UCC prohibits assignments of $5,000 or more.
a. True
b. False
34. Ron owes Lloyd $500 due March 1. Lloyd assigns his right to the money to Lou, but neither Lloyd nor Lou notifies
Ron. On March 1, Ron pays Lloyd the $500. Ron is not discharged from his obligation, but is liable to Lou for the
money.
a. True
b. False
35. In England and in a minority of states, the first of two or more assignees to give notice to the obligor is entitled to the
assigned performance.
a. True
b. False
36. Donee beneficiaries and incidental beneficiaries are called intended beneficiaries.
a. True
b. False
37. Assignment of rights is the voluntary transfer to a third party of the rights arising from a contract.
a. True
b. False
38. In an assignment or delegation, the third parties' rights or duties arise after the contract is made.
a. True
b. False
39. The student government of State University has a contract with a famous rock band to perform at the university on
homecoming weekend. The band cannot assign its rights and delegate its duties under this contract.
a. True
b. False
40. Generally, rights under an option contract are not assignable.
a. True
b. False
41. As a general rule, most contract rights are assignable.
a. True
b. False
42. Unless otherwise provided by statute, an assignment may be oral.
a. True
b. False
43. A partial assignment is a transfer of a portion of the contractual rights to one or more assignees.
a. True
b. False
44. As a general rule, partial assignments of contract rights are not enforceable.
a. True
b. False
45. A promisor may assert the defense of contractual modification or rescission, even if an intended beneficiary’s rights
have vested.
a. True
b. False
