Question 1

Sprawlmaker,Inc.was a developer of shopping malls and other shopping centers.Sprawlmaker was developing a shopping mall in suburban Detroit.Sprawlmaker approached Cindy about the development of a strip mall across the street from this shopping mall.Cindy and Sprawlmaker reached an agreement where Sprawlmaker would construct the strip mall for Cindy.She would become the owner,and would lease it out to tenants.The mall was already under construction at this point.Because Cindy's project was much smaller and simpler,it was finished before the shopping mall.Cindy paid Sprawlmaker all amounts due under their contract.There began to be problems with the construction of the shopping mall.Eventually Sprawlmaker and the construction company building the mall stopped communicating and construction stopped.Meanwhile,Cindy was unable to secure leases for most of the space in her strip mall.Cindy wants to sue to recover for lost rent.Discuss Cindy's options and the likely outcome of a suit.

Accepted Answer

The answer of Sprawlmaker,Inc.was a developer of shopping malls and...

Question 2

Which of the following is true about personal satisfaction clauses in contracts?

Accepted Answer

A)  These clauses are usually unenforceable due to their subjective nature. 
B)  Where the personal satisfaction depends on personal taste and comfort,an objective standard applies. 
C)  Personal satisfaction is always evaluated on a subjective basis. 
D)  Personal satisfaction cannot be based on the satisfaction of a third party. 
E)  In commercial contracts,such as building construction,personal satisfaction is evaluated on an objective basis.

Question 3

Husband buys an insurance policy with a face value of $100,000 and names his wife as sole beneficiary.When husband dies,the insurance company refuses to pay her the $100,000.Which of the following best describes this situation?

Accepted Answer

A)  The wife cannot sue the insurance company because she was not a party to the contract and does not have privity. 
B)  The wife can sue the insurance company because she was a party to the contract and does have privity. 
C)  The wife cannot sue the insurance company because she does not have an insurable interest in her husband. 
D)  The wife can sue the insurance company because she is a third-party beneficiary to this contract.

Question 4

A contract for decorating someone's home that contains a personal satisfaction test would allow the homeowner to judge the satisfaction based on the homeowner's own personal tastes,so long as the homeowner acted in good faith.

Accepted Answer

A) True 
 B)False

Question 5

Which of the following is true?

Accepted Answer

A)  A seller's duty to sell goods is discharged due to impossibility if the seller is unable to acquire the goods from its normal supplier. 
B)  If a contract can be performed,but doing so has become illegal,performance will be discharged on the basis of impossibility. 
C)  Death of a party will always result in discharge of that party's duties. 
D)  A party can get out of a contract by destroying the subject matter of the contract.

Question 6

Amy agrees to build a barn for Sally.The contract provides that Sally must be "personally satisfied with the barn." If the barn is completed in a workmanlike manner,which of the following tests would be used to test Sally's satisfaction?

Accepted Answer

A)  The personal satisfaction test. 
B)  The reasonable person test. 
C)  The workmanlike construction test. 
D)  The third-party satisfaction test. 
E)  Either test A or B would produce the same results.

Question 7

In a condition subsequent,the duty of performance is discharged upon the failure to meet a condition after the duty has already arisen.

Accepted Answer

A) True 
 B)False

Question 8

Cathy signed a contract on July 1 with the local Ford dealer to purchase a Ford Venus for $18,000.This car was supposed to be delivered on August 5.On July 15,Cathy's grandmother unexpectedly died,and left approximately $50,000 to Cathy.Cathy's car had not arrived at the dealer by August 5.On August 7,she decides that with her inheritance she would prefer a nicer car.She goes to the dealer on August 8 and is told that her Venus will be in the next day.She tells the dealer that she is upset that the car is not in and that she would prefer a Ford Muskrat,which is a luxury model.She and the dealer agree on a price of $42,000 for a Muskrat to be delivered by September 15.By September 20,the Muskrat has not arrived.Cathy starts thinking that it would be wiser to use her grandmother's inheritance to purchase a house.She goes to the dealer and says that she does not want the Muskrat,and that she will take the Venus,which is still in inventory,for the $18,000 previously agreed to.Can Cathy get out of the contract to purchase the Muskrat? Can she force the dealer to sell her the Venus for $18,000?

Accepted Answer

The answer of Cathy signed a contract on July 1...

Question 9

The rule on delegation says that duties involving the exercise of personal skills or expertise cannot be assigned.Given this,how can accounting firms,law firms,and consulting firms delegate their work to subordinates? In the case of CPA firms,this is often to someone who is not yet even a CPA.Clients of these firms often get upset when they find out that someone at the firm other than the person they dealt with personally is doing the work on their matter.In one of these firms,how could you prevent clients from getting upset about this?

Accepted Answer

The answer of The rule on delegation says that duties...

Question 10

The City of Monroe enters into an oral contract with Allied Construction Co.to pave a gravel road.The gravel road passes in front of John's home.Once the road is paved,John's home would increase significantly in value.Allied fails to pave the gravel road.If John sued Allied for breach of contract,then which of the following is true?

Accepted Answer

A)  John would prevail,because John is an intended third-party beneficiary. 
B)  John would not prevail,because John is only an incidental third-party beneficiary. 
C)  John would prevail,because he is a party to the contract and has privity. 
D)  John would not prevail,because the Statute of Frauds applies.

Question 11

Da Vinci,Jr.is hired to paint a portrait of a young woman.The contract calls for the young woman to pay $10,000 for the portrait.Da Vinci,Jr.is contemplating having one of his associates paint the portrait.Generally,what are the rules in such an agreement?

Accepted Answer

A)  Da Vinci,Jr. may assign the work and the payment. 
B)  Da Vinci,Jr. may assign the work but not the payment. 
C)  Da Vinci,Jr. may not assign the work but may assign the payment. 
D)  Da Vinci,Jr. may not assign the work nor may he assign the payment.

Question 12

When there is a substituted contract,the discharge of the duties under the original contract occurs as soon as the substituted contract comes into existence.

Accepted Answer

A) True 
 B)False

Question 13

Which of the following is true?

Accepted Answer

A)  An accord and satisfaction involves a new party,but a substituted contract does not. 
B)  Both an accord and satisfaction and a substituted contract involve a new party. 
C)  An accord and satisfaction discharges the duties under the original contract only when it has been performed,whereas a substituted contract discharges duties under the original contract upon formation of the substituted contract. 
D)  A substituted contract can occur for any kind of contract but an accord and satisfaction can be used only for contracts for the sale of goods.

Question 14

A third party who is not in privity of contract but who has rights under the contract and can enforce the contract against the obligor is said to be an intended beneficiary.

Accepted Answer

A) True 
 B)False

Question 15

Which of the following types of third-party beneficiaries can acquire enforceable rights under the original contract?

Accepted Answer

A)  incidental,donee,creditor 
B)  incidental,donee 
C)  creditor only 
D)  donee only 
E)  creditor,donee

Question 16

Ralph Co.enters into an agreement to sell 500 computers to Buyer.Ralph decides that it cannot fulfill its contract so it transfers all its rights and duties under the contract to George Co.Which of the following is true?

Accepted Answer

A)  The contract is unenforceable because this type of contract cannot be assigned. 
B)  This is an assignment. 
C)  This is a delegation. 
D)  This is an assignment and a delegation. 
E)  This is a novation.

Question 17

Jerry Lee was a professional singer.He entered into a contract to sing at a concert sponsored by ABC Co.He also entered into a contract to sell his house to Mary.Before either contract could be performed,Jerry dies.Both ABC and Mary sue for breach of contract.What results?

Accepted Answer

A)  Jerry's estate wins; both contracts are unenforceable because of Jerry's death. 
B)  Both ABC and Mary win; both contracts are fully enforceable. 
C)  Mary wins,but ABC loses; Jerry's death has made ABC's contract,but not Mary's,impossible to perform. 
D)  ABC wins,but Mary loses; Jerry's death has made Mary's contract,but not ABC's,impossible to perform.

Question 18

Which of the following is true about third-party donee beneficiaries?

Accepted Answer

A)  The donee beneficiary can sue the promisor to enforce the contract. 
B)  The donee beneficiary can sue the promisee to enforce the contract. 
C)  The donee beneficiary can sue either the promisor or the promisee to enforce the contract. 
D)  The donee beneficiary can sue neither the promisor nor the promisee to enforce the contract.

Question 19

The transfer of rights under a contract to a third party is called:

Accepted Answer

A)  an assignment 
B)  an adjudication 
C)  a resolution 
D)  a delegation to an obligee

Question 20

Because of the uncertainty that they add to contracts,conditions must be express.

Accepted Answer

A) True 
 B)False

Exam 15: Third-Party Rights and Discharge

Which of the following is true about personal satisfaction clauses in contracts?

Husband buys an insurance policy with a face value of $100,000 and names his wife as sole beneficiary.When husband dies,the insurance company refuses to pay her the $100,000.Which of the following best describes this situation?

A contract for decorating someone's home that contains a personal satisfaction test would allow the homeowner to judge the satisfaction based on the homeowner's own personal tastes,so long as the homeowner acted in good faith.

Which of the following is true?

Amy agrees to build a barn for Sally.The contract provides that Sally must be "personally satisfied with the barn." If the barn is completed in a workmanlike manner,which of the following tests would be used to test Sally's satisfaction?

In a condition subsequent,the duty of performance is discharged upon the failure to meet a condition after the duty has already arisen.

Da Vinci,Jr.is hired to paint a portrait of a young woman.The contract calls for the young woman to pay $10,000 for the portrait.Da Vinci,Jr.is contemplating having one of his associates paint the portrait.Generally,what are the rules in such an agreement?

When there is a substituted contract,the discharge of the duties under the original contract occurs as soon as the substituted contract comes into existence.

Which of the following is true?

A third party who is not in privity of contract but who has rights under the contract and can enforce the contract against the obligor is said to be an intended beneficiary.

Which of the following types of third-party beneficiaries can acquire enforceable rights under the original contract?

Ralph Co.enters into an agreement to sell 500 computers to Buyer.Ralph decides that it cannot fulfill its contract so it transfers all its rights and duties under the contract to George Co.Which of the following is true?

Jerry Lee was a professional singer.He entered into a contract to sing at a concert sponsored by ABC Co.He also entered into a contract to sell his house to Mary.Before either contract could be performed,Jerry dies.Both ABC and Mary sue for breach of contract.What results?

Which of the following is true about third-party donee beneficiaries?

The transfer of rights under a contract to a third party is called:

Because of the uncertainty that they add to contracts,conditions must be express.