Chapter 16 Third Party Rights. All Answers..

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 inc ...

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 A1. A transfer of contract rights to a third party is an assignment. T PAGE: 304 TYPE: = NAT: AACSB Analytic AICPA Legal A2. When rights under a contract are assigned unconditionally, the rights of the assignor are extinguished. T PAGE: 304 TYPE: N NAT: AACSB Reflective AICPA Legal A3. The person to whom rights in a contract are assigned is the assignor. F PAGE: 304 TYPE: = NAT: AACSB Analytic AICPA Legal A4. An assignee’s rights are free of the defenses that the obligor has against the assignor. F PAGE: 305 TYPE: N NAT: AACSB Reflective AICPA Legal A5. Oral assignments are prohibited. F PAGE: 305 TYPE: = NAT: AACSB Analytic AICPA Legal A6. A contract can prevent an assignment of a right to receive funds. F PAGE: 308 TYPE: N NAT: AACSB Reflective AICPA Legal A7. Alienation is a transfer of the ownership of land. T PAGE: 308 TYPE: = NAT: AACSB Reflective AICPA Legal A8. An assignment is effective only after notice is given to the obligor. F PAGE: 308 TYPE: = NAT: AACSB Analytic AICPA Legal A9. Contract duties cannot be assigned but they can be delegated. T PAGE: 308 TYPE: N NAT: AACSB Analytic AICPA Legal A10. An “as¬signment of all rights” creates an assignment of rights but not a delegation of duties. F PAGE: 310 TYPE: N NAT: AACSB Reflective AICPA Legal A11. When the parties to a contract agree that its performance should directly benefit a third person, the third person is an intended third party beneficiary. T PAGE: 311 TYPE: N NAT: AACSB Analytic AICPA Legal A12. An intended third party beneficiary can sue a promisor directly for breach of contract. T PAGE: 311 TYPE: + NAT: AACSB Analytic AICPA Legal A13. In a bilateral contract, a party who makes a promise that benefits a third party is a promisor. T PAGE: 311 TYPE: N NAT: AACSB Analytic AICPA Legal A14. A creditor beneficiary benefits from a contract in which one party promises another to pay a debt that the promisee owes to a third party. T PAGE: 311 TYPE: N NAT: AACSB Analytic AICPA Legal A15. A donee beneficiary cannot sue a promisor directly for breach of contract. F PAGE: 311 TYPE: + NAT: AACSB Analytic AICPA Legal A16. The vesting of contractual rights in a third party terminates the right of the original parties to change the contract. F PAGE: 313 TYPE: + NAT: AACSB Analytic AICPA Legal A17. If a contract requires that performance be rendered directly to a third party, the third party is an incidental beneficiary. F PAGE: 313 TYPE: + NAT: AACSB Analytic AICPA Legal A18. Any beneficiary who is not deemed an intended beneficiary is considered incidental. T PAGE: 313 TYPE: N NAT: AACSB Analytic AICPA Legal A19. If a third party has the right to control the details of contract performance, the third party is an incidental beneficiary. F PAGE: 313 TYPE: N NAT: AACSB Analytic AICPA Legal A20. An incidental third party beneficiary can sue directly to enforce the contract. F PAGE: 313 TYPE: + NAT: AACSB Analytic AICPA Legal MULTIPLE CHOICE QUESTIONS A1. Dwayne and Ewell enter into a contract for the design of an addition to Dwayne’s house for which he agrees to pay Ewell. Ewell transfers his right to payment under the contract to Flex Construction Company. Flex is a. a delegatee. b. an assignee. c. an obligee. d. an alien. B PAGE: 304 TYPE: = NAT: AACSB Reflective AICPA Legal A2. Loren and Kendra enter into a contract for the distribution of Loren’s produce to local restaurants for which he agrees to pay Kendra. Kendra transfers her right to payment under the contract to County Bank. This transfer is a. a delegation. b. an assignment. c. an alienation. d. prohibited. B PAGE: 304 TYPE: + NAT: AACSB Reflective AICPA Legal A3. Trudy and Uri enter into a contract for the sale of Trudy’s house for which Uri agrees to pay her $200,000. Uri wants to transfer his right to the ownership of the house to Val, his niece. This transfer a. is prohibited. b. may be oral or written. c. must be implied. d. must be in writing. D PAGE: 305 TYPE: = NAT: AACSB Reflective AICPA Legal A4. Joaquin wants to transfer his right to the payment of his wages under an employment contract with Free-Flo Plumbing Company to Inez. In most states, this transfer a. is prohibited. b. may be oral or written. c. must be implied. d. must be in writing. D PAGE: 305 TYPE: N NAT: AACSB Reflective AICPA Legal A5. Ralph and Sven enter into a contract under which Sven agrees to guide Ralph’s expedition through Tibet for which Ralph agrees to pay Sven. This contract may not be assigned if a. the assignment will significantly change 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 choices. D PAGE: 307 TYPE: = NAT: AACSB Analytic AICPA Legal A6. Equity Company and Faye enter into a contract for Faye to cater a meeting of Equity’s shareholders. When Faye’s schedule conflicts, she asks Gudren to serve Faye’s coffee and pastries at the meeting. This transfer of duties is a. a delegation. b. an assignment. c. an alienation. d. prohibited. A PAGE: 308 TYPE: + NAT: AACSB Reflective AICPA Legal A7. Rural Development Corporation (RDC) and Sid enter into a contract for the clear-cutting of RDC’s fifty-acre tract for which RDC agrees to pay Sid. Sid transfers his duty under this contract to Timber Logging Company. Timber is a. a delegatee. b. an assignee. c. an obligee. d. an alien. A PAGE: 308 TYPE: + NAT: AACSB Reflective AICPA Legal A8. Jordan and Isabel enter into a contract under which Jordan agrees to cater Isabel’s wedding in exchange for $5,000. The contract can expressly prohibit and prevent the transfer of a. Jordan’s right to receive funds. b. Isabel’s right to receive personal services. c. no rights under the contract. d. all rights under the contract. B PAGE: 308 TYPE: N NAT: AACSB Reflective AICPA Legal A9. Phaedra and Raul contract with Sheldon to transfer the ownership of their lake cottage to him. This is a. a delegation. b. an assignment. c. a third party beneficiary contract. d. an alienation. D PAGE: 308 TYPE: N NAT: AACSB Reflective AICPA Legal A10. Floyd and Gert enter into a contract by which Floyd promises to deliver fer-tilizer to Gert. Floyd subsequently transfers this duty to Hazel. Floyd is a. a delegatee. b. an obligee. c. an obligor. d. an assignee. C PAGE: 309 TYPE: + NAT: AACSB Reflective AICPA Legal A11. Jean Paul and Hermosa enter into a contract under which Jean Paul agrees to provide greensward services for Hermosa’s Golf Links. Under an antidelegation clause, their contract can prohibit and prevent the transfer of a. duties that are personal in nature. b. duties that are impersonal in nature. c. no duties under the contract. d. all duties under the contract. A PAGE: 309 TYPE: N NAT: AACSB Analytic AICPA Legal A12. Peri, a world famous musician and composer, agrees to give ten piano les¬sons to Quinn in exchange for $1,000. Peri’s attempt to transfer her contract duties to Roth, an in¬experienced 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 Peri and Roth have very different skill levels. D PAGE: 309 TYPE: = NAT: AACSB Reflective AICPA Legal A13. Consumers Credit Company is a creditor beneficiary in a deal that involves Devon and Elena. Consumers Credit, like most creditor beneficiaries, is a. a donee beneficiary. b. an incidental beneficiary. c. an intended beneficiary. d. one of the original contracting parties. C PAGE: 311 TYPE: + NAT: AACSB Reflective AICPA Legal A14. Joy and Kris enter into a contract for Kris to lay sod in Joy’s yard for which she agrees to pay Kris. When Kris’s schedule conflicts, she contacts Leza, to whom Kris “assigns all rights under the contract.” Kris is a. absolved of any liability under the contract. b. in breach of the contract with Joy. c. liable to Joy if Leza does not perform. d. liable to Leza for inducing a prohibited contract. C PAGE: 311 TYPE: = NAT: AACSB Reflective AICPA Legal A15. Vicky contracts with Rashad for the delivery of hospice services to benefit Sigmund. This is a. a delegation. b. an assignment. c. a third party beneficiary contract. d. an alienation. C PAGE: 311 TYPE: + NAT: AACSB Reflective AICPA Legal A16. Dale signs a contract with Everbest Insurance Company that intentionally confers a benefit on Flo as the designated beneficiary. Flo’s rights under the contract will vest a. automatically. b. if she demonstrates her consent to the promise at Dale’s request. c. if Everbest attempts to modify the terms of the contract. d. never. B PAGE: 313 TYPE: N NAT: AACSB Reflective AICPA Legal A17. Nick contracts for the sale of this year’s strawberry crop to Phoenix, with payment to go to Rural Cooperative Association. The contract reserves to Nick and Phoenix the right to modify its terms. Rural Cooperative’s right to payment is a. not affected by the reservation. b. subject to any change that Nick and Phoenix make. c. limited only if Rural Cooperative agrees to any changes. d. terminated by the reservation. B PAGE: 313 TYPE: N NAT: AACSB Reflective AICPA Legal A18. Lois takes out a life insurance policy with Mega Insurance Corporation that names her son, Nero, as the bene¬ficiary. This is a. a delegation. b. an assignment. c. a third party incidental beneficiary contract. d. a third party intended beneficiary contract. D PAGE: 313 TYPE: = NAT: AACSB Reflective AICPA Legal A19. Esther and Faisal agree that Esther will fix Faisal’s car in exchange for his paying a debt owed by Esther to Gladys. Gladys is a. a delegatee. b. an intended beneficiary. c. an incidental beneficiary. d. an alien to the contract. B PAGE: 313 TYPE: + NAT: AACSB Reflective AICPA Legal A20. Linus and Marlena agree that Linus will fix Marlena’s roof in exchange for $8,000. Linus spends half of the amount due under the contract to acquire the materials for the job from Natural Roofing Supplies. Natural Roofing is a. a delegatee. b. an intended beneficiary. c. an incidental beneficiary. d. an alien to the contract. C PAGE: 313 TYPE: N NAT: AACSB Reflective AICPA Legal ESSAY QUESTIONS A1. 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 legiti¬mately refuse to pay Rapid? Explain. A2. Evergreen Landscapers, Inc., owes Friendly Finance Company $5,000. Evergreen enters into a contract with Suburban Office Park under which Evergreen promises to maintain the landscaping on Suburban’s property. Under the contract, Suburban promises to pay Friendly Finance the amount that will be due Evergreen until Evergreen’s debt to Friendly Finance is paid. Evergreen performs as promised, but Suburban does not pay Friendly Finance. Can Friendly Finance succeed in a suit against Suburban? Why or why not?