Third party rights Flashcards
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
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.
A. Recover the policy proceeds because it is a creditor beneficiary.
A person is a creditor beneficiary if two things are in place: one party to a contract in question owed the creditor money, and the contract in question was made specifically to satisfy that debt. Here, Wagner owed Union money and named Union as beneficiary in the life insurance contract to partially satisfy that debt. A creditor beneficiary may sue to enforce the contract.
Wrong answer
C. Not recover the policy proceeds because it is not in privity of contract with the insurance company.
No privity is required, because Union is a creditor beneficiary. A person is a creditor beneficiary if two things are in place: one party to a contract in question owed the creditor money and the contract in question was made specifically to satisfy that debt. Here, Wagner owed Union money and named Union as beneficiary in the life insurance contract to partially satisfy that debt. A creditor beneficiary may sue to enforce the contract.
Yost contracted with Egan for Yost to buy certain real property. If the contract is otherwise silent, Yost’s rights under the contract are
A. Assignable only with Egan’s consent.
B. Nonassignable because they are personal to Yost.
C. Nonassignable as a matter of law.
D. Generally assignable.
D. Generally assignable.
This answer is correct because unless the contract terms prohibit assignment, or the rights are personable to the person rendering them, or the assignment will materially increase or alter the risk or duties of the obligor, contract rights are generally assignable.
A. Assignable only with Egan’s consent.
If Yost’s assignment is valid (permitted), the assignment to a third party can be accomplished without Egan’s consent.
