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Third-Party Assignments

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Contracts-Third-Party Assignments

Question 1 of 18

1

West, Inc., and Barton entered into a contract. After receiving valuable consideration from Egan, West assigned its rights under the Barton contract to Egan. In which of the following circumstances would West not be liable to Egan?

Select one of the following:

  • A. West released Barton.

  • B. West breached the contract.

  • C. Egan released Barton.

  • D. Barton paid West.

Explanation

Question 2 of 18

1

Wilk bought an apartment building from Dix Corp. There was a mortgage on the building securing Dix's promissory note to Xeon Finance Co. Wilk took title subject to Xeon's mortgage. Wilk did not make the payments on the note due Xeon, and the building was sold at a foreclosure sale. If the proceeds of the foreclosure sale are less than the balance due on the note, which of the following statements is regarding the deficiency?

Select one of the following:

  • A. Xeon must attempt to collect the deficiency from Wilk before suing Dix.

  • B. Dix will not be liable for any of the deficiency because Wilk assumed the note and mortgage.

  • C. Xeon may collect the deficiency from either Dix or Wilk.

  • D. Dix will be liable for the entire deficiency.

Explanation

Question 3 of 18

1

Union Bank lent $200,000 to Wagner. Union required Wagner to obtain a life insurance policy naming Union as beneficiary. While the loan was outstanding, Wagner stopped paying the premiums on the policy. Union paid the premiums, adding the amounts paid to Wagner's loan. Wagner died, and the insurance company refused to pay the policy proceeds to Union. Union may:

Select one of the following:

  • A. recover the policy proceeds because it is a creditor beneficiary.

  • B. recover the policy proceeds because it is a donee beneficiary.

  • C. not recover the policy proceeds because it is not in privity of contract with the insurance company.

  • D. not recover the policy proceeds because it is only an incidental beneficiary.

Explanation

Question 4 of 18

1

Which of the following contract rights can generally be assigned?

Select one of the following:

  • A. The right to receive personal services

  • B. The right to receive a sum of money

  • C. The right of an insured to coverage under a fire insurance policy

  • D. A right whose assignment is prohibited by statute

Explanation

Question 5 of 18

1

On February 1, Burns contracted in writing with Nagel to sell Nagel a used car. The contract provided that Burns was to deliver the car on February 15 and Nagel was to pay the $800 purchase price not later than March 15. On February 21, Burns assigned the contract to Ross for $600. Nagel was not notified of the assignment. Which of the following statements is ?

Select one of the following:

  • A. By making the assignment, Burns impliedly warranted Nagel would pay the full purchase price.

  • B. The assignment to Ross is invalid because Nagel was not notified.

  • C. Ross will not be subject to any contract defenses Nagel could have raised against Burns.

  • D. By making the assignment, Burns impliedly warranted a lack of knowledge of any fact impairing the value of the assignment.

Explanation

Question 6 of 18

1

One of the criteria for a valid assignment of a sales contract to a third party is that the assignment must:

Select one of the following:

  • A. be supported by adequate consideration from the assignee.

  • B. be in writing and signed by the assignor.

  • C. not materially increase the other party's risk or duty.

  • D. not be revocable by the assignor.

Explanation

Question 7 of 18

1

Which of the following statements is (are) regarding a valid assignment?
I. An assignment of an interest in a sum of money must be in writing and must be supported by legally sufficient consideration.
II. An assignment of an insurance policy must be made to another party having an insurable interest in the property.

Select one of the following:

  • A. I only

  • B. II only

  • C. Both I and II

  • D. Neither I nor II

Explanation

Question 8 of 18

1

In general, which of the following statements is with respect to a real estate mortgage?

Select one of the following:

  • A. The mortgage may not be given to secure an antecedent debt.

  • B. The mortgage must contain the actual amount of the underlying debt.

  • C. The mortgage must be signed by both the mortgagor (borrower) and mortgagee (lender).

  • D. The mortgagee may assign the mortgage to a third party without the mortgagor's consent.

Explanation

Question 9 of 18

1

In general, which of the following statements is with respect to a real estate mortgage?

Select one of the following:

  • A. The mortgage may not be given to secure an antecedent debt.

  • B. The mortgage must contain the actual amount of the underlying debt.

  • C. The mortgage must be signed by both the mortgagor (borrower) and mortgagee (lender).

  • D. The mortgagee may assign the mortgage to a third party without the mortgagor's consent.

Explanation

Question 10 of 18

1

Generally, which of the following contract rights are assignable?

Select one of the following:

  • A. Option contract rights

  • B. Malpractice insurance policy rights

  • C. Both option contract rights and malpractice insurance policy rights

  • D. Neither option contract rights nor malpractice insurance policy rights

Explanation

Question 11 of 18

1

Generally, which of the following contract rights are assignable?

Select one of the following:

  • A. Option contract rights

  • B. Malpractice insurance policy rights

  • C. Both option contract rights and malpractice insurance policy rights

  • D. Neither option contract rights nor malpractice insurance policy rights

Explanation

Question 12 of 18

1

Ferco, Inc., claims to be a creditor beneficiary of a contract between Bell and Allied Industries, Inc. Allied is indebted to Ferco. The contract between Bell and Allied provides that Bell is to purchase certain goods from Allied and pay the purchase price directly to Ferco until Allied's obligation is satisfied. Without justification, Bell failed to pay Ferco and Ferco sued Bell. Ferco will:

Select one of the following:

  • A. not prevail, because Ferco lacked privity of contract with either Bell or Allied.

  • B. not prevail, because Ferco did not give any consideration to Bell.

  • C. prevail, because Ferco was an intended beneficiary of the contract between Allied and Bell.

  • D. prevail, provided Ferco was aware of the contract between Bell and Allied at the time the contract was entered into.

Explanation

Question 13 of 18

1

Which of the following contractual assignments is prohibited?

Select one of the following:

  • A. The right to receive royalties.

  • B. The right to be insured under a liability insurance policy.

  • C. The right to receive installment payments.

  • D. The rights under an option contract.

Explanation

Question 14 of 18

1

Graham contracted with the City of Harris to train and employ high school dropouts residing in Harris. Graham breached the contract. Long, a resident of Harris and a high school dropout, sued Graham for damages. Under the circumstances, Long will

Select one of the following:

  • :A. win, because Long is a third-party beneficiary entitled to enforce the contract.

  • B. win, because the intent of the contract was to confer a benefit to all high school dropouts residing in Harris.

  • C. lose, because Long is merely an incidental beneficiary of the contract.

  • D. lose, because Harris did not assign its contract rights to Long.

Explanation

Question 15 of 18

1

Rice contracted with Locke to build an oil refinery for Locke. The contract provided that Rice was to use United pipe fittings. Rice did not do so. United learned of the contract and, anticipating the order, manufactured additional fittings. United sued Locke and Rice. United is:

Select one of the following:

  • A. entitled to recover from Rice only, because Rice breached the contract.

  • B. entitled to recover from either Locke or Rice because it detrimentally relied on the contract.

  • C. not entitled to recover because it is a donee beneficiary.

  • D. not entitled to recover because it is an incidental beneficiary.

Explanation

Question 16 of 18

1

Egan contracted with Barton to buy Barton's business. The contract provided that Egan would pay the business debts Barton owed Ness and that the balance of the purchase price would be paid to Barton over a 10-year period. The contract also required Egan to take out a decreasing term life insurance policy naming Barton and Ness as beneficiaries to ensure that the amounts owed Barton and Ness would be paid if Egan died.
Barton's contract rights were assigned to Vim and Egan was notified of the assignment. Despite the assignment, Egan continued making payments to Barton. Egan died before completing payment, and Vim sued Barton for the insurance proceeds and the other payments on the purchase price received by Barton after the assignment. To which of the following is Vim entitled?

Select one of the following:

  • A. Payment on purchase price

  • B. Insurance proceeds

  • C. Both payment on purchase price and insurance proceeds

  • D. Neither payment on purchase price nor insurance proceeds

Explanation

Question 17 of 18

1

Jones owned an insurance policy on her life, on which she paid all the premiums. Smith was named the beneficiary. Jones died and the insurance company refused to pay the insurance proceeds to Smith. An action by Smith against the insurance company for the insurance proceeds will be:

Select one of the following:

  • A. successful, because Smith is a third-party donee beneficiary.

  • B. successful, because Smith is a proper assignee of Jones’s rights under the insurance policy

  • C. unsuccessful, because Smith was not the owner of the policy.

  • D. unsuccessful, because Smith did not pay any of the premiums.

Explanation

Question 18 of 18

1

Baxter, Inc., and Globe entered into a contract. After receiving valuable consideration from Clay, Baxter assigned its rights under the contract to Clay. In which of the following circumstances would Baxter notbe liable to Clay?

Select one of the following:

  • A. Clay released Globe.

  • B. Globe paid Baxter.

  • C. Baxter released Globe.

  • D. Baxter breached the contract.

Explanation

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