Chapter 16

After an assignment, only the assignee has a right to the obligor’s performance.
A gratuitous assignment is revocable by the assignor.
Marlene owes Bailey $750 due June 1. Bailey assigns the debt to Greg on May 1, but neither Bailey nor Greg informs Marlene. On June 1, Marlene pays Bailey. Marlene is fully discharged from her obligation.
A person who owes a duty under a contract is an obligee.
The delegation of a duty still leaves the delegator responsible for the performance of the duty.
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.
Donee beneficiaries and incidental beneficiaries are called intended beneficiaries.
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.
The obligor need not receive notice for an assignment to be valid.
UCC Article 9 requires certain assignments to be in writing.
The State Opera Company has a contract with a famous tenor to perform in its production of La Boheme. If the tenor chooses, he may delegate his duties under the contract to an equally well-known tenor.
When the rights under a contract are highly personal, they are not assignable.
An obligor may assert rights of setoff arising out of entirely separate matters that he might have against the assignor, as long as the matters arose before he had notice of the assignment.
Sean has a right against Tanner and assigns it for value to Megan. Later, Sean gives Tanner a release. Megan:
a. will be unaffected by Sean’s action.
b. may recover damages from Sean for breach of an implied warranty.
c. may recover damages from Tanner for breach of an implied warranty.
d. has lost her right and has no remedy.
A(n) __________ is a method of discharging a contract in which a third party becomes bound upon a promise to the obligee.
a. assignment
b. delegation
c. partial assignment
d. novation
Anita owes Brad $75,000. Brad signs a written statement granting Carl a gratuitous assignment of his rights from Anita. Brad delivers the signed statement to Carl before he dies.
a. The delivery of the statement makes the assignment irrevocable.
b. The assignment is terminated upon Brad’s death.
c. The signing of the statement makes the assignment irrevocable.
d. The assignment is invalid, because it is revocable.
Theresa has a contract to teach eighth grade at Washington Middle School. She decided she could make more money writing a book, so she wants to assign her teaching contract to her friend, Stephanie, who is also a licensed teacher.
a. If effective, this would be both an assignment and a delegation.
b. The duties which Theresa wants to delegate are personal in nature.
c. If the school district agrees to accept Stephanie’s services, a novation would occur, which would relieve Theresa of her obligation to the school district.
d. All of the above are correct.
Professor Doright has a life insurance policy on his own life that provides that in the event of his death, his mother will receive the proceeds. Professor Doright’s mother is a(n):
a. incidental beneficiary.
b. creditor beneficiary.
c. donee beneficiary.
d. assignee.
When contract terms prohibiting the assignment of rights exist, most courts will:
a. strictly construe them.
b. interpret a general term prohibiting assignments as a mere promise not to assign.
c. award the obligor a right to damages for the breach of the terms forbidding the assignment.
d. All of the above.
Stark enters into a contract with a contractor to build a large shopping mall in River City. Donner will greatly benefit from this contract since his convenience store is adjacent to the mall. Donner in this instance is:
a. an implied beneficiary.
b. a partial beneficiary.
c. a donee beneficiary.
d. an incidental beneficiary.
In the case of Speelman v. Pascal, the court held that:
a. a gratuitous assignment is terminated by the assignor’s death, even if the assignor made an effective delivery of the assignment prior to his death.
b. assignments of rights to sums that are expected to become due to the assignor are enforceable.
c. assignments cannot be made of sums that are not presently due but are expected to become due in the future.
d. personal contracts are not assignable.
In which of the following situations is there a third party incidental beneficiary who would be unable to enforce the agreement?
a. Wholesalers, when the buyer of a business promises the seller that he will pay outstanding debts to wholesalers who have supplied inventory for the business.
b. Workers, where a contractor agrees to post a performance bond to assure payment of workers and material suppliers.
c. A debtor, where a new partner enters an accounting firm and agrees to pay a share of debts incurred prior to his admission to the firm.
d. A doctor, when an automobile accident policy states that the insurance company will reimburse the insured for medical expenses incurred as a result of an automobile accident.
Which of the following involves an invalid assignment that a court would not enforce?
a. An assignment of a savings account accompanied by the delivery of the passbook.
b. An assignment lacking consideration.
c. An assignment of an automobile liability insurance policy accompanied by the delivery of the policy.
d. An assignment in writing signed by the assignor and delivered to the assignee.
Darrell owns a parcel of land that is encumbered by a mortgage held by the First National Bank. Darrell agrees to sell the land to Paul for $50,000. Darrell and Paul together go to the First National Bank to discuss the sale and purchase with the banker. Darrell, Paul, and the banker sign an agreement stating that Paul will assume the mortgage and that Darrell will be discharged from all further liability on the mortgage.
a. The bank is a third party donee beneficiary.
b. The bank can collect from Darrell if Paul defaults.
c. Darrell is a third party beneficiary of the agreement between Paul and the bank.
d. The agreement among the three is a novation.
Which one of the following assignments would probably be prohibited by a court?
a. Mary is in debt. A credit card company calls and threatens to sue. Mary orally assigns her next bimonthly paycheck to her creditor.
b. John is a house painter. He is scheduled to paint Molly’s home on Monday. John wakes up Monday morning with a stiff neck. He calls Ed, who is also a painter, to begin the job at Molly’s.
c. Ron has a contract with Bonett Bank to service their coffee machines. He assigns the remainder of his contract with Bonett to Michelle, who also owns a coffee service.
d. All of the above.
Assignment of Rights: Definition of Assignment
voluntary transfer to a third party of the rights arising from a contract so that the assignor’s right to performance is extinguished.
Assignment of Rights:Assignor
party making an assignment.
Assignment of Rights:Assignee
party to whom contract rights are assigned.
Assignment of Rights: Obligor
party owing a duty to the assignor under the original contract.
Assignment of Rights:Obligee
party to whom a duty of performance is owed under a contract.
Assignment of Rights: Requirements of an Assignment
include intent but not consideration.
Assignment of Rights: Revocability of Assignment
if assignee gives consideration, assignor may not revoke the assignment without the assignee’s consent.
Assignment of Rights: Partial Assignment
transfer of a portion of contractual rights to one or more assignees.
Assignment of Rights: Successive Assignments
majority rule is that the first assignee in point of time prevails over later assignees; minority rule is that the first assignee to notify the obligor prevails
Assignability: Most contract rights are assignable, except:
assignments that materially increase the duty, risk, or burden upon the obligor
assignments of personal rights
assignments expressly forbidden by the contract
assignments prohibited by law
Rights and Defenses:Rights of Assignee
the assignee stands in the shoes of the assignor.
Rights and Defenses:Defenses of Obligor
may be asserted against the assignee.
Rights and Defenses:Notice
is not required but is advisable.
Warranty:Implied Warranty
obligation imposed by law upon the assignor of a contract right.
Warranty:Express Warranty
explicitly made contractual promise regarding contract rights transferred.
Delegation of Duties:Definition of Delegation
transfer to a third party of a contractual obligation.
Delegation of Duties: Delegator
party delegating his duty to a third party.
Delegation of Duties: Delegatee
third party to whom the delegator’s duty is delegated.
Delegation of Duties: Obligee
party to whom a duty of performance is owed by the delegator and delagatee.
Delegability: Most contract duties may be delegated, except:
duties that are personal
duties that are expressly nondelegable
duties whose delegation is prohibited by statute or public policy
Duties of Parties: Delegation
delegator is still bound to perform original obligation.
Duties of Parties:Novation
contract, to which the obligee is a party, substituting a new promisor for an existing promisor, who is consequently no longer liable on the original contract and is not liable as a delegator.
Third-Party Beneficiary Contracts:
a contract in which one party promises to render a performance to a third person (the beneficiary).
Third-Party Beneficiary Contracts:
third parties intended by the two contracting parties to receive a benefit from their contract.
Third-Party Beneficiary Contracts:
a third party intended to receive a benefit from the contract as a gift.
Third-Party Beneficiary Contracts:
a third person intended to receive a benefit from the agreement to satisfy a legal duty owed to her.
Intended Beneficiaries:Rights of Intended Beneficiaries –
an intended donee beneficiary may enforce the contract against the promisor; an intended creditor beneficiary may enforce the contract against either or both the promisor and the promisee.
Intended Beneficiaries:Vesting of Rights –
if the beneficiary’s rights vest, the promisor and promisee may not thereafter vary or discharge these vested rights.
Intended Beneficiaries: Defenses Against Beneficiary
in an action by the intended beneficiary of a third-party contract to enforce the promise, the promisor may assert any defense that would be available to her if the action had been brought by the promisee.
Incidental Beneficiaries
third party whom the two parties to the contract have no intention of benefiting by their contract and who acquires no rights under the contract.

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