Chapter 16
Third Party Rights
N.B.: TYPE indicates that a question is new, modified, or unchanged, as follows.
N A question new to this edition of the Test Bank.
+ A question modified from the previous edition of the Test Bank.
= A question included in the previous edition of the Test Bank.
TRUE/FALSE QUESTIONS
B1. A transfer of contract rights to a third party is a delegation.
B2. Privity of contract refers to the fact that traditionally contracting parties alone have
rights and liabilities under their contract.
B3. The person to whom rights in a contract are assigned is the assignee.
B4. An assignee can compel the obligor to perform.
B5. An assignee’s rights are subject to the defenses that the obligor has against the
assignor.
B6. To be enforceable, any assignment covered by the Statute of Frauds must be in
writing.
B7. If a statute prohibits the assignment of certain rights, those rights cannot be assigned.
B8. An assignment of a negotiable instrument is generally prohibited.
B9. An assignment is effective immediately, whether or not notice is given.
B10. The assignment of the same contract right to two different parties automatically
cancels both assignments.
B11. To make an effective delegation, the delegator must use the word delegate.
B12. A delegation relieves the party making it of the obligation to perform.
B13. Alienation is a transfer of contract rights between citizens of different nations.
B14. Both intended and incidental beneficiaries acquire legal rights in a contract.
B15. A creditor beneficiary can sue the promisor directly for breach.
B16. A “donee” beneficiary is a type of an “incidental” beneficiary.
B17. A life insurance contract is a third party beneficiary contract involving a donee
beneficiary.
B18. The rights of a third party beneficiary under a contract vest if the third party brings a
suit on the promise.
B19. An incidental third party beneficiary cannot sue to enforce the contract because the
benefit is unintentional.
B20. Designating a third party as a beneficiary in a contract does not indicate whether the
beneficiary is intended or incidental.
MULTIPLE CHOICE QUESTIONS
B1. Nashville Harmonies Inc. and Taylor enter into a contract for Taylor to write six songs
for which Nashville agrees to pay her. Taylor transfers her right to payment under the
contract to Omni Entertainment Agency. In the transfer of rights, Taylor is
a. a delegator.
b. an assignor.
c. an obligor.
d. an alien.
B2. Basil and Rosemary enter into a contract for the sale of Basil’s condominium to
Rosemary. She transfers her right to be recorded as the owner of the property to her
son Sage. This transfer is
a. a delegation.
b. an assignment.
c. prohibited.
d. a negotiation.
B3. Tanya attempts to free herself from the duties of her contract with Drew by telling
Drew to find someone else to perform them. This is
a. a delegation.
b. an assignment.
c. a third party beneficiary contract.
d. none of the choices.
B4. Bret and Cory enter into a contract for the sale of Bret’s textbook at the end of the fall
semester for which Cory agrees to pay Bret $60. Cory wants to transfer her right to
payment for the book to Del. This transfer
a. is prohibited.
b. may be oral or written.
c. must be implied.
d. must be in writing.
B5. Commercial Shipping, Inc., and Dock Services Corporation enter into a contract for
Dock to load Commercial’s barges for which Commercial agrees to pay Dock. Dock
transfers its duty to load the barges to Riverside Freight Company. Dock is
a. a delegator.
b. an assignor.
c. an alien.
d. an obligee.
B6. Miley and Rico enter into a contract for the closing of a sale of Miley’s recording
studio. When Rico’s schedule conflicts, he asks Oliver to perform his duties at the
closing. This transfer of duties is
a. a delegation.
b. an assignment.
c. prohibited.
d. a negotiation.
B7. A contract between Drill-Bit Sharpeners, Inc., and East Oil Mining Corporation
contains a clause stating that any assignment is “void.” This ordinarily prohibits
a. any assignment.
b. no assignment.
c. only an assignment of contract rights to personal services.
d. only an assignment that would change the obligor’s risk.
B8. Reba and Sly enter into a contract by which Reba promises to deliver newly printed
marketing brochures to Sly. Reba later transfers her duty under the contract to Troy.
Reba is
a. a delegator and an obligor.
b. a delegator only.
c. an obligor only.
d. neither a delegator nor an obligor.
B9. Jocasta contracts to provide lawn-mowing services to Kevin for $140 per month.
Jocasta cannot transfer this duty
a. under any circumstances.
b. without continuing to be potentially liable.
c. without Kevin’s consent.
d. without paying Kevin at least one monthly fee.
B10. Parsley, a world-famous chef, signs a contract to give lessons in French cooking to
Curry. Parsley wants to transfer his duties under the contract to Relish, the operator
of a hot dog concession. The transfer is
a. valid because the performance required is of a nonpersonal nature.
b. valid if Relish is a highly regarded vendor.
c. not valid because performance depends on Parsley’s personal skills.
d. not valid if Curry does not hold Relish in high regard.
B11. Fiorella and Midwest Agri-Ship, Inc., enter into a contract for Midwest to transport a
silo of corn for which Fiorella agrees to pay Midwest. Due to schedule conflicts,
Midwest contacts Hybrid Crop Transport Company, to which Midwest “assigns all
rights under the contract.” This transfer is
a. an assignment and a delegation.
b. an alienation and a negotiation.
c. an obligation and a cancelation.
d. prohibited.
B12. Heather and Genice agree that Genice can satisfy her debt to Heather by paying the
money directly to Fava (to whom Heather owes a debt). The designation of this con–
tract as a third party beneficiary contract is determined by the intent to benefit
a. all of the parties.
b. Heather only.
c. Genice only.
d. Fava only.
B13. Betty assigns her right to payment of a loan to Cody. Cody is
a. a creditor beneficiary.
b. a debtor beneficiary.
c. a donee beneficiary.
d. a donor beneficiary.
B14. George promises to repair Ford’s boat dock in exchange for Efrem’s promise to plant
trees on George’s property. This is
a. a delegation.
b. an assignment.
c. a third party beneficiary contract.
d. an alienation.
Fact Pattern 16-B1 (Questions B15–B18 apply)
Bayside Construction Company enters into a contract with Clio to remodel Dewey’s Home
Store, using products from Eagle Building Supplies. Fresh Food Café is next to Dewey’s Home
Store.
B15. Refer to Fact Pattern 16-B1. Halfway through the project, Bayside refuses to finish the
job. The contract can be enforced against Bayside by
a. Clio only.
b. Clio or Dewey only.
c. Clio, Dewey, or Eagle only.
d. Clio, Dewey, Eagle, or Fresh Food.
B16. Refer to Fact Pattern 16-B1. Dewey is
a. a delegatee.
b. an assignee.
c. an incidental beneficiary.
d. an intended beneficiary.
B17. Refer to Fact Pattern 16-B1. The value of Fresh Food’s property will increase after
Dewey’s store is remodeled. Fresh Food is
a. a delegatee.
b. an assignee.
c. an incidental beneficiary.
d. an intended beneficiary.
B18. Refer to Fact Pattern 16–B1. Eagle will realize a profit from the sale of products to
Bayside to remodel Dewey’s store. Eagle is
a. a delegatee.
b. an assignee.
c. an incidental beneficiary.
d. an intended beneficiary.
B19. Jen is a third party beneficiary under a contract between Kyla and Leo. Kyla and Leo
can modify or rescind their contract without Jen’s consent
a. at any time.
b. at no time.
c. after Jen’s rights have vested.
d. before Jen’s rights have vested.
B20. Ron makes a contract with Stu that indirectly benefits Tim, although neither Ron nor
Stu intended that result. Tim is
a. a delegatee.
b. an assignee.
c. an incidental beneficiary.
d. none of the choices.
ESSAY QUESTIONS
B1. Fix-It Auto Company contracts to sell a car to Garth for $3,500. Garth gives Fix-It a
worthless check for the price. Garth assigns his right to the car to Herb. If Fix-It refuses
to deliver the car to Herb and Herb sues, can Fix-It raise Garth’s fraud as a defense
against delivery of the car to Herb? Explain.
B2. Shade Tree Landscaping Company enters into a contract with Jill to landscape Jack’s
yard, using Fertile Nursery to supply trees and bushes. Maria owns the lot next to
Jack’s property. The landscaping is a gift from Jill to Jack, who is Jill’s friend, but they
are not related. What type of beneficiary is Jack? What type of beneficiary is Maria?
What type of beneficiary is Fertile Nursery? If Shade Tree refuses to do the job, who
can enforce the contract against it?
