CH17 Business Law by Beatty Samuelson Abril 8th Edition

Question 1

CH17 What is a third party beneficiary?

Answer 1

Someone other than the two parties that made the contract that will benefit from the contract.

P 410

Question 2

CH17 What is an intended beneficiary?

Answer 2

A person that the parties to a contract intended to benefit.

Enforcing the promise will satisfy the duty to the beneficiary,

or the promise intended to make a gift to the beneficiary.

P 410

Question 3

Ch17 What is a promisor and a promisee?

Answer 3

Promisor - the one who makes the promise

Promisee - the other party in the contract

P 410

Question 4

CH17 What must a third party beneficiary show to receive benefit?

Answer 4

The two contracting parties were aware of her and knew that she would receive something of value from their contract.

The promisee wanted to benefit her for one of two reasons: either to satisfy some duty owed or to make her a gift.

P 410

Question 5

CH17 What is the beneficiary called when the promisee is fulfilling some duty?

What is the beneficiary called when the promisee is giving a gift through benefit from a contract?

Answer 5

A creditor beneficiary.

A donee beneficiary.

P 410

Question 6

CH17 When may a third party beneficiary enforce a contract?

Answer 6

When the third party beneficiary is a creditor or a donee beneficiary.

P 410

Question 7

CH17 Can the intended 3rd party donee beneficiary due if the contract is not fulfilled?

Answer 7

Yes.

P 411

Question 8

CH17 What is an incidental beneficiary?

Answer 8

A person who fails to qualify as a creditor or donee beneficiary.

P 412

Question 9

CH17 What is it called when you give contract rights to another?

Answer 9

An assignment of rights.

P 413

Question 10

CH17 What is the person assigning rights to a contract to another called?

What is the recipient of the rights called?

Answer 10

Assignor.

Assignee.

P 413

Question 11

CH17 What is the person who owes the money called?

What is the person that the money is owed to called?

Answer 11

The obligor.

Obligee.

P 413

Question 12

CH17 What is it called when rights are transferred under a contract?

Answer 12

Assignment of rights.

P 412

Question 13

CH17 What is it called when contractual obligations are transferred?

Answer 13

A delegation of duties.

P 413

Question 14

CH17 What can prevent a contractual right from being assigned?

Answer 14

If the assignment would substantially change the obligator’s rights or duties under the contract.

Is forbidden by law or public policy.

Is validly precluded by the contract itself.

P 414

Question 15

CH17 What are the causes of an assignment taking place? (2)

Answer 15

An assignment is prohibited if it would substantially change the obligator’s situation.

When the obligor is agreeing to perform personal services.

P 415

Question 16

CH17 Why would an assignment not be allowed to take place due to public policy?

Answer 16

Some assignments are prohibited by public policy. As a matter of public policy, all states have decided that the sale of personal injury claims could create an unseemly and unethical marketplace.

P 415

Question 17

CH17 Why would an assignment not be able to take place?

Answer 17

Finally, one of the contracting parties may try to prohibit assignment in the agreement itself.

Example: Subleasing disputes between landlord and tenant are common.

Most leases have a clause preventing assigning without the landlord’s written permission.

P 415

Question 18

CH17 How are rights assigned?

Answer 18

In writing: an assignment may be written or oral. No particular formalities are required.

When someone wants to assign rights governed by the Statute of Frauds, she must do it in writing.

P 416

Question 19

CH17 How does an assignment take place through consideration?

Answer 19

An assignment can be valid with or without consideration.

Lack of consideration may have consequences.

P 416

Question 20

CH17 Can an assignment for consideration be revoked?

Answer 20

An assignment for consideration is irrevocable.

P 416

Question 21

CH17 What is a gratuitous assignment?

Answer 21

If contract rights are assigned as a gift, this is a gratuitous assignment can be revoked. No consideration is involved.

This can be revoked if it is an oral assignment.

It is irrevocable if it is written.

P 416

Question 22

CH17 With a valid assignment, when should an assignor notify an obligor?

Answer 22

Preferably immediately, but the assignment is valid from the moment it is made,

regardless of whether the assignor notified the obligor.

P 416

Question 23

CH17 What are the rights after the assignment?

Answer 23

Once the assignment is made and the obligor is notified,

the assignee may enforce her contractual rights against the obligor.

However, in a lawsuit, the obligor may generally raise all defenses against the assignee

that she could have raised against the assignor.

P 417

Question 24

CH17 What is an assignor’s warranty?

Answer 24

The law implies certain warranties (assurances) on the part of the assignor. Unless the parties expressly agree to exclude them, the assignor warrants that:

the rights he is assigning actually do exist

there are no defenses to the rights other than those that would be obvious, such as nonperformance.

The assignor does NOT warrant that the obligator is solvent.

P 417

Question 25

Special Issue: Uniform Commercial Code (UCC) and assignments of security interests:

Answer 25

These are very similar to common law rules.

Article 9 of the UCC however has special rules about the assignment of security interests.
(legal rights to personal property that insure payment)

For example a car dealer retains a security interest in a car they sold that payments are being made on.

They have the right to repossess the car if payments are not made.

P 417

Question 26

Under the UCC, what may the obligator do on a sales contract?

Answer 26

The obligator in a sales contract may generally assert any defenses against the assignee

that arise from the contract and any other defenses that arose before notice of assignment.

P 417

Question 27

CH17 Assignment and defenses against the assignee: fact:

A contract may prohibit ab obligator from raising certain defenses against an assignee.

The seller may require a contract that permits the seller to assign and prohibits the buyer from raising defenses against the assignee that he could have raised against the seller.

P 418

Question 28

CH17 UCC Code: Fact: An agreement by a buyer that he will not assert against an assignee any claim or defense that he may have against the seller or lessor is generally enforceable by the assignee if he took the assignment in good faith, for value, without notice of the potential defenses. A waiver clause can be enforceable.

These waiver clauses are generally not valid in consumer contracts.

Question 29

CH17: What is Delegation of duties:

Answer 29

When rights are assigned to another, duties are also delegated.

The promissory notes he signed was a contract and the agreement imposed certain duties,

primarily the obligation to pay what is owed.

However the original owner/debtor is not relieved of their obligation to perform.

Most duties are delegable but delegation does not by itself relieve the delegator of his own liability.

P 419

Question 30

CH17 What duties are delegable?

Answer 30

The rules of delegable duties mirror those about the assignment of rights.

Common law and the UCC agree.

Delegation cannot take place if it would violate public policy,

if the original contract prohibits delegation,

the obligee has a substantial interest in personal performance by the obligor.

P 420

Question 31

CH17 Delegation and public policy: Fact: delegation may violate public policy, such as in a public works contract.

P 420

Question 32

CH17 Delegation and contract prohibition: Fact: contracts often prohibit delegation. Although courts may refuse to enforce a clause that limits one party’s ability to “assign” its contract rights, parties may forbid almost any delegation and the courts will enforce it.

P 420-421

Question 33

CH17 Most duties are delegable provided they do not violate public policy or a contractual clause.

What is substantial interest in personal performance?

Answer 33

Some kinds of work require personal performance.

Obligators may not delegate these tasks.

Services of lawyers, doctors, dentists, etc. may not be delegated.

The test for this is character, skill, discretion and good faith of the obligor.

P 421

Question 34

CH17 What is Improper delegation and repudiation?

Answer 34

Sometimes parties delegate work that they should not.

P 421

Question 35

CH17 What is novation?

Answer 35

A delegator can get rid of his duties by creating a novation, which is a 3 way agreement where the obligor transfers all rights and duties to a third party. The obligee agrees to look only to that third party for performance.

People sometimes fight over whether or not a revised agreement was a novation.