Third Party Rights

Question 1

Assignment exceptions are prohibited by:

Answer 1

1. Contract terms
2. Statute
3. Personal contracts
4. Increased material risk

Question 2

Delegation exceptions are prohibited by:

Answer 2

1. Contract terms
2. Personal skill of the obligor
3. Performance is materially different

Question 3

T/F: A novation is not required to substitute parties to a contract.

Answer 3

False. A novation requires that all 3 parties agree to the substitution and release of the assignor.

Question 4

What is an incidental beneficiary?

Answer 4

A third party who receives unintended benefit has no legal rights in a contract between 2 parties.

Question 5

What are the elements must be in place for a creditor beneficiary to exist?

Answer 5

1. A debtor-creditor relationship.

2. The debtor forms a contract w/ 3rd party that benefits the creditor.

Question 6

List the various types of 3rd party beneficiaries.

Answer 6

1. Donee (intended)
2. Creditor (intended)
3. Incidental (not intended)

Question 7

When is an assignment binding on the parties to the original contract?

Answer 7

When the original parties receive the notice of the assignment.

Question 8

List the various types of 3rd party contracts.

Answer 8

1. Assignments
2. Delegations
3. 3rd Party Beneficiary Contracts

Question 9

Define delegation.

Answer 9

Transfer of the detriment to a 3rd party.

Question 10

Define assignment.

Answer 10

Transfer of the benefits to a 3rd party.

Question 11

T/F: One of the criteria for a valid assignment of a sales contract to a third party is that the assignment must be supported by adequate consideration from the assignee.

Answer 11

False. It must not materially increase the other party’s risk or duty.

Question 12

T/F: One of the criteria for a valid assignment of a sales contract to a third party is it must not materially increase the other party’s risk or duty.

Answer 12

True