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Exam 18: Third Party Rights

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Question 31

Multiple Choice

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Kay enters into a contract with Life Insurance Company for a policy that designates Mia as the beneficiary. Kay reserves the right to change the designated beneficiary. Mia's rights under the policy are

A) not affected by the reservation.
B) subject to any change that Kay makes.
C) subject to the first-in-time rule.
D) terminated by the reservation.

E) A) and B)
F) C) and D)

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Question 32

True/False

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A third party's right to control the details of performance of a contract indicates that the third party is an intended beneficiary.

A) True
B) False

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Question 33

True/False

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When the performance of a contract depends on the personal skill of the obligor, a delegation of the duty is prohibited.

If performance under a contract will vary materially on a delegation of its duties to a third party from that expected by the obligee, the delegation is

A contract between Max and Nick provides for an "assignment of all rights." Max "assigns the contract" to Olin. Because a court will normally construe this wording as implying both an assignment of rights and a delegation of duties, if Olin fails to perform

Expressly designating a third party as a beneficiary in a contract indicates that the beneficiary is intended.

A-One Landscapers, Inc., owes Friendly Finance Company $5,000. A-One enters into a contract with Suburban Office Park under which A-One promises to maintain the landscaping on Suburban's property. Under the contract, Suburban promises to pay Friendly Finance the amount that will be due A-One until A-One's debt to Friendly Finance is paid. A-One performs as promised, but Suburban does not pay Friendly Finance. Can Friendly Finance succeed in a suit against Suburban? Why or why not?

When the original parties to a contract agree that its performance should directly benefit a third party, that party can sue the promisor directly for breach.

Leo contracts to install watering troughs in Ken's dairy barn. When Leo becomes seriously ill, he contracts with Jay to do the work. Jay is unreliable and never shows up. Ken hires Ike to do the installation. To recover for any loss on the deal, Ken can sue

Any beneficiary to a contract who is not deemed an intended beneficiary is an incidental beneficiary.

The rights under a contract for personal services can normally be assigned

If a statute expressly prohibits assignment, the particular right in question cannot be assigned.

Following a transfer by a lender of a right to receive payments on a mortgage, the homebuyer must continue to make those payments to the original lender.

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 legitimately refuse to pay Rapid? Explain.

A contracting party's transfer of the contract rights or duties to another person is an exception to the rule of privity of contract.

Steel Mill Inc. and Transport Delivery LLC enter into a contract. UniOil Corporation will indirectly benefit from the deal. Under the principle of privity, UniOil has the right to

Molly is a third party beneficiary under a contract between Ned and Otis. Ned and Otis can modify or rescind their contract to take away Moly's rights under the contract without her consent

If a contract stipulates that it cannot be assigned, then it cannot be assigned unless the assignment

An accountant can delegate his or her contractual duty to another accountant, even if the contract expressly prohibits it, because accounting is a delegable skill.

Ira owes Jessie $1,000. Kerry owes Ira $1,000. Ira unconditionally assigns to Jessie the right to Kerry's payment. Jessie's right to the $1,000 is subject to the defenses that