A Third Party Beneficiary’s Status Occurs

BUS 115 Chapter 16 Quiz

Someone who might have benefited from a contract between two others but has no right to enforce that agreement is _____.

a donee beneficiary

an incidental beneficiary

a creditor beneficiary

a contractual beneficiary

an incidental beneficiary
Which statement regarding assignments is accurate?

Gratuitous assignments are generally revocable regardless of whether they are oral or written.

An assignment for consideration is irrevocable.

An assignment becomes valid when the obligor receives notice of the assignment.

An assignment must be written and follow all legal formalities.

An assignment for consideration is irrevocable.
Jerry purchased a state-of-the-art computer for his personal use from Computer City on an installment loan contract thinking he would make monthly payments directly to Computer City. The sales contract stated that in the event the contract is assigned to a third party, the purchaser (Jerry) promises he will not assert any claim or defense against the assignee which he might have against Computer City. Computer City immediately assigns the contract rights to Finance USA. The computer stops working within two weeks of the purchase.

This is a valid waiver of defense clause. Jerry signed the contract, so he can’t raise a defense to Finance USA.

Finance USA is an intended third party beneficiary and may therefore enforce the contract.

In general, this type of waiver is not permitted in consumer contracts, so Jerry can raise his claim against Finance USA.

This is a delegation of Jerry’s duties and the delegator remains liable on the contract unless a novation agreement is made.

In general, this type of waiver is not permitted in consumer contracts, so Jerry can raise his claim against Finance USA.
When is an assignment valid and enforceable against an obligor?

From the moment it is made.

From the moment the obligor signs the contract.

From the moment the assignee gives consideration.

From the moment the obligor is notified of the assignment.

From the moment the obligor is notified of the assignment.
A third party beneficiary’s status occurs ______.

after an assignment and delegation

when the third party is informed of the contract

when the third party beneficiary agrees to the contract terms

when the contract is created

when the contract is created
Cheryl enters into a contract with Gary. In this contract, Cheryl asks Gary to pay the money he owes her from the contract to her friend Leah because Leah is having financial troubles. Leah is _____.

a third party creditor beneficiary

a third party donee beneficiary

a third party incidental beneficiary

the promisee in the contract

A spouse who is named the beneficiary of a life insurance policy would ordinarily be ____.

a creditor beneficiary

an incidental beneficiary

a donee beneficiary

a debtor beneficiary

a donee beneficiary
Wright Company contracted with the city of Saint Louis to train and employ disadvantaged youth. If Wright fails to fulfill the contract and is sued by one of the disadvantaged youths, the youth would ___.

win, as he is an intended beneficiary

win, as he is a donor beneficiary

lose, as he is a creditor beneficiary

lose, as he is an incidental beneficiary

lose, as he is an incidental beneficiary
Linda assigns to Ben a right to receive rent payments. The law implies the following warranty on Linda’s part _____.

the tenant is solvent

Linda actually has a right to the rental payments

the tenant will actually pay

no warranties are implied by law in an assignment

Linda actually has a right to the rental payments
Susan took out a life insurance policy on herself, paying all of the premium payments. She named her daughter, Jessica, as the beneficiary under the policy. Jessica has not given anything in consideration for the policy. Jessica is ______.
a) a donee beneficiary who has rights to enforce the policy once Susan dies.
b) a creditor beneficiary who has the rights to enforce the policy once Susan dies.
c) an incidental beneficiary because Jessica did not give any consideration for the policy and therefore cannot enforce the policy even when Susan dies.
d) None of the above.
a) a donee beneficiary who has rights to enforce the policy once Susan dies.