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Exam 19: Third-Party Rights to Contracts

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Question 51

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Which statement below is NOT true with respect to the rights of an assignee and assignor?

A) Assignees essentially fill in for the assignor as the legal recipient of contractual duties.
B) Assignees acquire the same contractual duties that were held by the assignor.
C) Assignees are offered more protection than assignors.
D) The obligor may raise any of the same defenses for nonperformance against the assignee that he would have been able to raise against the assignor.
E) When an assignor transfers rights to an assignee, the assignor legally gives up all rights he or she previously had to collect on the contract.

F) A) and B)
G) A) and C)

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Question 52

Multiple Choice

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When two parties enter into a contract with the intended end purpose of benefiting a third party, a[n] ________ is created.

A) Third-party beneficiary
B) Second-party beneficiary
C) First-party beneficiary
D) Assignment
E) Creditor Beneficiary

F) All of the above
G) A) and D)

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Question 53

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A third party who is intended to directly benefit from a contract made by two contracting parties is called an incidental beneficiary.

[Portraits] Tori, a famous portrait painter, agreed to paint Harry's portrait for $4,000. She also agreed to paint the portraits of Gabby's two Corgi dogs, Queenie and Prince. Gabby agreed to pay Tori $10,000 for the two Corgi portraits. Tori charged Gabby more because she met the spoiled dogs, and they really got on her nerves. Tori subsequently fell behind on finishing Harry's portrait, so she assigned the right to receive the money for the dog portraits to her assistant, Justin, and delegated the duty to Justin to paint the dog portraits. Justin eagerly accepted, and painted the portraits. Tori also assigned to Justin the right to receive payment from Harry to satisfy various payments she owed him for other duties. The contract Tori had with Gabby did not address assignment in any way. The contract Tori had with Harry, however, prohibited the right to assign payment for services received. Harry considered himself to be an experienced business person and insisted on that antiassignment clause because he had read somewhere that such a provision was a good idea. Tori finished the portrait of Harry and called him to come and pick it up. Meanwhile, a disgruntled secretary who disliked Tori told both Gabby and Harry about the assignments to Justin. Gabby was furious and refused to pick up the portrait or to pay anyone. Harry likewise refused to pay for his portrait. -What would be the most likely result if Justin sues Gabby for the $10,000 payment?

Amy owned a condominium directly above Miguel. Amy failed to take proper care of some plumbing problems, and on several occasions, Amy's plumbing leaked into Miguel's apartment and caused property damage. Both Amy and Miguel had signed a condominium association agreement providing that each tenant would pay for any damage caused; that the agreement could be enforced by the management of the association or, in a proper case, by an aggrieved owner; and that adherence to the agreement was required "for the benefit of the Association and any person acquiring or owning an interest in the property." The association itself refused to sue Amy in order to recover damages to reimburse Miguel. Therefore, Miguel sued Amy himself. Amy claimed that Miguel had no standing to sue. Which of the following is the most likely result of the dispute if the court follows Allan v. Nersesova, the case in the text involving a similar issue?

There are two situations in which a third party gains rights to a contract: donee beneficiary and incidental beneficiary.

If a contract states "I assign all of my rights under the contract," in most cases the assignment will be considered an assignment of rights but not duties.

What type of third-party beneficiary is Bianca?

________ can enforce their rights under a contract whenever the contract is valid.

Gloria transferred her duty to perform under the contract she was in with Julia to Lydia who was not a part of the original contract. This is known as a(n) ________.