Q&A Hero

Q: An incidental beneficiary can sue directly to enforce a promisee's promise.

Q: If a contract does not require that performance be rendered directly to a third party, the third party will be considered an intended beneficiary.

Q: If a contract does not require that performance be rendered directly to a third party, the third party may be considered an incidental beneficiary.

Q: The vesting of contractual rights in a third party will always prevent the original parties to the contract from modifying it.

Q: A donee beneficiary can never sue to enforce the promise of a promisor.

Q: A creditor beneficiary can sue directly to enforce a promisor's promise.

Q: A third party beneficiary contract is formed when a contract confers a benefit on any third party.

Q: An intended beneficiary can sue directly to enforce a promisor's promise.

Q: Generally, a clause in a contract permitting "the assignment of all rights" does not include a delegation of all duties.

Q: A third party beneficiary contract is formed only when the parties to a contract intend to confer a benefit on a third party.

Q: Generally, a party may not delegate his or her duties under a contract.

Q: An assignment is effective only after notice has been given to the obligor.

Q: An assignment of rights in real estate can always be prohibited.

Q: A right to receive income can be assigned.

Q: A contract that contains a clause prohibiting its assignment will prevent it from being assigned.

Q: The rights under a contract for personal service normally can be assigned.

Q: An assignee of a right to receive money acquires any rights to the money held by the assignor.

Q: Banks may assign their loan contracts to other firms.

Q: A party to a contract may transfer the rights arising from the contract to another.

Q: A-One Landscapers, Inc., owes Friendly Finance Company $5,000. A-One enters into a contract with Suburban Office Park under which A-One promises to maintain the landscaping on Suburban's property. Under the contract, Suburban promises to pay Friendly Finance the amount that will be due A-One until A-One's debt to Friendly Finance is paid. A-One performs as promised, but Suburban does not pay Friendly Finance. Can Friendly Finance succeed in a suit against Suburban? Why or why not?

Q: Pam borrows $5,000 from Quality Auto Sales to buy a car. When Pam does not pay the loan or return the car, Quality wants to transfers the right to the payment to Rapid Collection Agency. Rapid agrees to pay Quality for this right, but for a price that is less than the amount owed. Can Quality transfer this right to Rapid without Pam's consent? If so, and Quality committed fraud in the deal with Pam, could Pam legitimately refuse to pay Rapid? Explain.

Q: Fact Pattern 16-1 AAA Properties, Inc., contracts with Best Builders, Inc., to construct an office building. AAA agrees to obtain insurance to cover the project, after which the parties waive their rights against the subcontractors. AAA obtains the policy from City Insurance Company. When the new building is destroyed in a storm, City pays AAA and then files a suit against the subcontractors. Refer to Fact Pattern 16-1. Delta Corporation is the owner of an adjacent building, the value of which increased when AAA's new offices were built. City files a suit against Delta, claiming that Delta's negligence contributed to the collapse of AAA's new building. Under the reasoning of the court in Case 16.3, Midwestern Indemnity Co. v. Systems Builders, Inc., in relation to the waiver in AAA's contract with Best, Delta would be a. an incidental beneficiary and thus not liable to City. b. an incidental beneficiary and thus possibly liable to City. c. an intended beneficiary and thus not liable to City. d. an intended beneficiary and thus possibly liable to City.

Q: Fact Pattern 16-1 AAA Properties, Inc., contracts with Best Builders, Inc., to construct an office building. AAA agrees to obtain insurance to cover the project, after which the parties waive their rights against the subcontractors. AAA obtains the policy from City Insurance Company. When the new building is destroyed in a storm, City pays AAA and then files a suit against the subcontractors. Refer to Fact Pattern 16-1. Under the reasoning of the court in Case 16.3, Midwestern Indemnity Co. v. Systems Builders, Inc., in relation to the waiver in AAA's contract with Best, the subcontractors are a. incidental beneficiaries and thus liable to City. b. incidental beneficiaries and thus not liable to City. c. intended beneficiaries and thus liable to City. d. intended beneficiaries and thus not liable to City.

Q: Nick and Roberta contract for the sale of computer equipment, reserving the right to alter a particular provision in the contract. The rights of any third party beneficiary of that contract are a. not affected by the reservation. b. limited to the extent of the reservation. c. limited only if the beneficiary agrees to the reservation. d. none of the above.

Q: Edgar and William agree that Edgar will fix William's car in exchange for William's paying a preexisting debt owed by Edgar to Kate. Kate is a. an assignee. b. an intended beneficiary. c. an incidental beneficiary. d. none of the above.

Q: Lois takes out a life insurance policy that names her son, Matt, as the beneficiary. This is a. a delegation. b. an assignment. c. a third party incidental beneficiary contract. d. a third party intended beneficiary contract.

Q: Ace Finance Company is a creditor beneficiary in a deal that involves Brad and Carol. Ace, like most creditor beneficiaries, is a. a donee beneficiary. b. an incidental beneficiary. c. an intended beneficiary. d. none of the above.

Q: Vicky makes a contract with Warren with the intent to benefit Alex. This is a. a delegation. b. an assignment. c. a third party beneficiary contract. d. not a delegation, an assignment, or a third party beneficiary contract.

Q: Dale and Elin sign a contract that intentionally confers a benefit on Flo. Flo's rights under the contract will vest a. automatically. b. if she manifests assent to the contract or materially alters her position in detrimental reliance on it. c. only if she manifests assent. d. only if she materially alters her position in detrimental reliance.

Q: Britney's declaration that she is assigning all her rights in a contract with Chris to Diane will be construed as a. a delegation but not an assignment. b. an assignment and a delegation. c. an assignment but not a delegation. d. neither an assignment nor a delegation.

Q: Fred and Gail enter into a contract by which Fred promises to deliver fertilizer to Gail. Fred subsequently delegates this duty to Holly. Fred is a. the delegatee and the obligee. b. the delegatee but not the obligee. c. the delegator and the obligor. d. the delegator but not the obligor.

Q: Abby and Bob enter into a contract. This contract may not be delegated if a. performance depends on the personal skills or talents of the obligor. b. special trust has been placed in the obligor. c. performance by a third party will vary materially from the performance expected by the obligee under the contract. d. any of the above.

Q: Pat, a world famous musician and composer, agrees to give ten piano lessons to Quinn in exchange for $1,000. Pat's attempt to delegate his contract to Ruth, an inexperienced pianist, will probably be a. permitted because contracts may be freely delegated. b. permitted because the contract is concerned with music lessons. c. prohibited because contracts may not be freely delegated. d. prohibited because Pat and Ruth have very different skill levels.

Q: A contract between Owen and Paula expressly prohibits any transfer of rights. Despite this clause, the contract may be assigned if the assignment involves a. a right to receive money or a negotiable instrument only. b. rights in real estate only. c. a right to receive money, a negotiable instrument, or rights in real estate. d. none of the above.

Q: A contract between Lee and Mary may not be assigned if it a. does not expressly permit assignment. b. involves a sale of goods. c. involves personal services. d. is oral.

Q: Allen and Barb enter into a contract. This contract may not be assigned if a. the assignment will materially increase the risk of nonperformance. b. the assignment is expressly prohibited by the terms of the contract. c. the contract is uniquely personal in nature. d. any of the above.

Q: Mort attempts to assign his rights under a contract to Nina. To ensure that the assignment is valid, Mort a. does not need to designate Nina as his "delegate" or file a notice in the public records. b. must designate Nina as his "delegate" in a notice filed in the public records. c. must only designate Nina as his "delegate." d. must only file a notice in the public records.

Q: Jill and Kurt enter into a contract under which Jill agrees to pay Kurt $125 for a new briefcase. Kurt's transfer of his right to receive this payment is a. a delegation. b. an assignment. c. a third party beneficiary contract. d. not a delegation, an assignment, or a third party beneficiary contract.

Q: Peg's transfer of rights under her contract with Quinn to Rob is a. a delegation. b. an assignment. c. a third party beneficiary contract. d. not a delegation, an assignment, or a third party beneficiary contract.

Q: National Steel, Inc., and Overland Transport Company enter into a contract. Superior Oil Corporation, which will indirectly benefit from the deal, is prevented from having rights under the contract by the principle of a. assignment. b. delegation. c. privity. d. vesting.

Q: Ann and Burt sign a contract in which Ann agrees to paint Burt's house for $2,000. They agree later that Burt will pay Ann's supplier, City Paint Store, the $2,000 directly. City Paint Store is a. a delegatee. b. an assignee. c. an incidental beneficiary. d. an intended beneficiary.

Q: An incidental beneficiary can sue directly to enforce a promisor's promise.

Q: In a transaction for the sale of a warehouse, Standard Storage Company tells Tri-County Investment Corporation that the office furniture is included. The contract says nothing about office furniture, but does state, "This document supercedes all oral promises relating to the sale." Is the furniture part of the sale? Why or why not?

Q: Alpha Corporation in Boston offers a job to Carol, who lives in Des Moines, Iowa. Betty orally agrees with Alpha to work in Boston for two years. She moves her family to Massachusetts and begins work. Three months later, she is fired for no stated cause. She files a suit against Alpha for reinstatement or pay. Alpha pleads the lack of a written contract. In whose favor is the court likely to rule, and why?

Q: Applied Service Company files a suit against Best Sales Corporation to enforce a written contract. Parol evidence will be admitted to prove a. anything that varies the written terms. b. fraud, misrepresentation, or mistake. c. only contemporaneous negotiations that vary the written terms. d. only prior negotiations that vary the written terms.

Q: Lou and Mona enter into a written contract for the sale of two portable digital music players. When they dispute the terms, Lou files a suit against Mona. Evidence of a subsequent modification of the deal may be introduced in court a. if the modification affects the price in any way. b. only if the modification increases the price to $500 or more. c. only if the modification keeps the price below $500. d. under no circumstances.

Q: Jack and Kay sign a contract that states, "No evidence of prior oral or written negotiations may be used to change the terms of this writing." This is a. the doctrine of promissory estoppel. b. the "main purpose" exception. c. the parol evidence rule. d. the Statute of Frauds.

Q: Consumer Goods, Inc., and Delta Distribution, Inc., sign a written contract for a sale of goods. To be enforceable, this written contract must include a. a correct title, such as "Purchase Order" or "Sales Invoice." b. a declaration of the subject matter. c. a quantity term. d. the parties' names.

Q: Fine Services Company and Great Distributors, Inc., sign a written contract that does not involve a sale of goods. To be enforceable, this written contract must include a. a correct title, such as "Service Contract." b. all non-essential terms. c. a statement of the consideration. d. the parties' addresses.

Q: Chloe files a suit against Digital Associates, Inc. (DAI), to enforce a contract. The only written evidence of the contract is a memo on DAI's letterhead as signed by a DAI officer in its files. The contract can be enforced if the memo includes a. a correct title, such as "Chloe-DAI Contract." b. all essential terms. c. a statement of the consideration. d. the parties' addresses.

Q: Dieter's will provides for a distribution of his assets on his death. Who will "distribute" Dieter's property, and what are the steps involved?

Q: Alan and Britney enter into an oral contract. Alan lists the terms on a sheet of paper that includes his business logo and address, and signs it. Britney does not sign the paper. This agreement is enforceable by a. Alan and Britney. b. Alan only. c. Britney only. d. neither Alan nor Britney.

Q: Patty, who is divorced, owns a house. She has no reasonable expectation of benefit from the life of Quinn, her ex-spouse, but she applies for insur­ance on his life anyway. She also obtains a fire insurance policy on the house, which she later sells. Five years later, Quinn dies and the house is destroyed in a fire. Can Patty obtain payment on either the death of Quinn or the loss of the house? Explain.

Q: Alpha Grocers orders by phone twenty cartons of canned beets from Capital Food Packers, Inc. After ten cartons are delivered and accepted, Alpha repudiates the contract. Capital can enforce the contract to a. any extent because the order was placed orally. b. no extent because the order was placed orally. c. the extent of the ten accepted cartons. d. the extent of the twenty ordered cartons.

Q: E-Business, Inc. files a suit against Federated Financial Corporation, asking the court to enforce an oral contract between the parties under the doctrine of promissory estoppel. This doctrine applies in a. all states. b. no states. c. one state. d. some states.

Q: Mason creates a trust to prevent his son, Newt, the beneficiary, from assign­ing his rights to future payments of income from the trust. This is a. a charitable trust. b. a constructive trust. c. a spendthrift trust. d. an illegal trust.

Q: Benny dies without a will, with no surviving spouse or child. Benny's survivors in­clude his granddaughter Callie, his nephew Duncan, and his cousin Earl. In most states, his estate would pass to a. Callie. b. Duncan. c. Earl. d. the state.

Q: Mira orally promises Nick that she will buy his fishing trawler for $10,000. Before either party acts in reliance on this promise, under the doctrine of promissory estoppel, the transaction is enforceable by a. either party. b. Mira only. c. neither party. d. Nick only.

Q: Cliff dies without a will. His survivors include his spouse Dana and his two children, Efrem and Fay. Under applicable laws, Dana will probably receive a. all of Cliff's estate. b. none of Cliff's estate. c. one-half of Cliff's estate. d. one-third of Cliff's estate.

Q: Pacific Applications, Inc., and Quality Resale Company (QRC) enter into an oral contract for Pacific's sale to QRC of six used forklifts for $1,900 each. Before QRC takes possession of the items, this contract is enforceable by a. either party. b. neither party. c. Pacific only. d. QRC only.

Q: Sherman dies without a will, survived by his granddaughter Roxy and Roxy's brother Pio. Roxy and Pio are Sherman's a. collateral heirs. b. settlors. c. trustees. d. lineal descendants.

Q: Orin creates a living trust to pass his assets, including stock in Petro Oil Company and other business investments, to his heirs. One advantage of this arrangement is that a. income taxes do not have to be paid on trust earnings. b. the assets are sheltered from the payment of estate taxes. c. the assets can be transferred without going through probate. d. the trust does not come into existence until the grantor's death .

Q: Ann and Beth enter into an oral contract for Ann's sale to Beth of eight DVD players for $100 each. After Beth takes possession of the players, but before she makes payment, this contract is a. enforceable only if it is in writing. b. enforceable only if it is oral. c. enforceable whether it is oral or in writing. d. not enforceable.

Q: Dyan executes her will to give "to my nephew Esau my stock in Fargo, Inc." Later, Dyan writes separately, with the same formalities required for a will, to leave the stock to her niece Ginny and cash to Esau. This writing a. does not affect the will's gift of the stock to Esau. b. requires a gift of the stock in equal shares to Esau and Ginny. c. revokes the whole will, which must be redrafted. d. revokes the will's gift of the stock to Esau.

Q: Quality Manufacturing, Inc., and Regional Sales Corporation orally agree to several contracts. Most likely enforceable is an oral contract involving a. a collateral promise. b. a sale of goods for $400. c. a sale of land. d. a sale that cannot be completed within a year.

Q: Amelia executes a separate written instrument to amend her prior will. This separate document is a. a codicil. b. a holographic will. c. a living will. d. a nuncupative will.

Q: Edie borrows $1,000 from First State Bank. Glen orally promises First State that he will repay the loan if Edie does not. Glen does not get any personal benefit for the promise. Glen's promise is a. enforceable only if it is in writing. b. enforceable only if it is oral. c. enforceable whether it is oral or in writing. d. not enforceable.

Q: International Business, Inc. (IBI), agrees to assume a debt of Southern Export Company to First National Bank. This promise is for the benefit of IBI. To be enforceable, the promise must be in writing if the debt is for a. $50. b. $500. c. $5,000. d. none of the above.

Q: Ratzo is asked to be a witness to Sade's will. Before attesting to the will, a. Ratzo does not have to read the will or be informed of its contents. b. Ratzo must read the will and recite its contents. c. Sade must orally tell Ratzo of the will's contents. d. Sade's attorney must read the will aloud to Ratzo.

Q: Lani is asked to serve as a witness to Mona's will. To qualify, Lani must be a. a collateral heir. b. a lineal descendant. c. eighteen years of age or older. d. mentally competent.

Q: Ilsa and Jiffy Loan Company enter into an oral contract under which Ilsa agrees to pay Kyle's debt if he does not. Ilsa does not get any personal benefit for the agreement. This contract is enforceable by a. any party. b. Jiffy only. c. Jiffy or Kyle. d. none of the parties.

Q: Juli types onto a computer what she intends to be "My Will" and prints it out. Juli has capacity. "My Will" is a. invalid. b. valid if Juli signs it. c. valid if Juli signs it and has three witnesses sign it. d. valid if Juli signs it, has three witnesses sign it, and files it in a cer­tain state office.

Q: Lost in a canyon near Gila, Arizona, Hester writes her will in crayon, on a paper bag, while Ivan states orally how he wants his estate distributed. Most states do not permit a. an olographic will. b. a nuncupative will. c. a will written on a paper bag. d. a will written in crayon.

Q: Ed and First Star Company enter into an oral contract under which Ed agrees to provide delivery service for First Star for nine months. This contract is enforceable by a. Ed only. b. either party. c. First Star only. d. neither party.

Q: Cody and Dora enter into an oral contract under which Cody agrees to work on Dora's farm for not less than one week. This contract is enforceable by a. Cody only. b. Dora only. c. either party. d. neither party.

Q: Eighty-year-old Clark exhibits confusion, forgetfulness, and disorienta­tion. Dave, Clark's doctor, believes that the symptoms indicate dementia. Elsa, who has significant contact with Clark, believes that he is in a state of men­tal decline. These facts indicate a. an urgency that Clark distribute his assets. b. Clark's lack of capacity. c. Dave's misdiagnosis. d. Elsa's intent to take advantage of Clark.

Q: Regional Delivery, Inc., and Safe Storage Company enter into a long-term lease for a warehouse. To be enforceable, the lease must be in writing if the warehouse is valued at a. $50. b. $500. c. $5,000. d. $50, $500, or $5,000.

Q: Lori and Mike orally agree to several different contracts. The Statute of Frauds will bar enforcement of an oral contract for a. a deal that will be performed within a year. b. a primary obligation. c. a sale of goods for $100. d. a sale of land.

Q: Gigi, a twenty-year-old, wants to execute a will before she undertakes a moun­tain-climbing trip on a peak in the Himalaya Mountains. In most states, the legal age for executing a will is a. sixteen years of age. b. eighteen years of age. c. twenty-one years of age. d. twenty-five years of age.

Q: According to the terms of Diego's will, specific gifts are made, and taxes and other es­tate expenses and debts are paid. The assets of Diego's estate that remain are most likely to be distributed a. by codicil. b. holographically. c. per capita. d. through a residuary clause.