Defenses Against Third Parties in Contracts: Comprehensive Learning Quizzes

Question 1

In which of the following situations is a promisor liable to an incidental beneficiary?

Accepted Answer

The promisor knows that the promisee intends to benefit the third party.

Answer

The third party is closely related to the promisee.

Answer

The third party has a legal right to enforce the promise.

Answer

The promisor has promised the promisee that the incidental beneficiary will benefit.

Question 2

Which of the following is NOT a valid defense available to an obligor against a claim by a third-party beneficiary?

Accepted Answer

Lack of privity of contract

Answer

Lack of capacity by the third-party beneficiary

Answer

Fraud in the inducement of the contract

Answer

Breach of contract by the promisee

Question 3

When may a third party enforce a contract as a donee beneficiary?

Accepted Answer

When the contract explicitly states that the third party is intended to benefit

Answer

When the benefits to the third party are incidental to the main purpose of the contract

Answer

When the third party has provided consideration for the contract

Answer

Never

Question 4

In the context of third-party rights, an 'assignment' involves:

Accepted Answer

Transferring a right from the obligee to a third party

Answer

Transferring a duty from the obligor to a third party

Answer

Creating a new contract between the obligor and a third party

Answer

Terminating the contract between the obligee and the obligor

Question 5

In a donee beneficiary contract, the third party:

Accepted Answer

Has an immediate and irrevocable right to enforce the contract

Answer

Has a contingent right to enforce the contract if the promisee breaches

Answer

Has no right to enforce the contract unless assigned by the promisee

Answer

Has a right to enforce the contract only if the promisor becomes insolvent

Question 6

In the context of third-party rights, 'novation' refers to:

Accepted Answer

Replacing an existing obligation with a new one

Answer

Releasing an obligor from their duty

Answer

Creating a new contract between the obligee and a third party

Answer

Assigning a right from the obligee to the obligor

Question 7

Which defense is rooted in the performance or non-performance of contractual obligations?

Accepted Answer

Impossibility of performance

Answer

Statute of limitations

Answer

Unconscionability

Answer

Mistake

Question 8

Which of the following is NOT necessary for an enforceable third-party beneficiary contract?

Accepted Answer

Consideration provided by the third party

Answer

Intent to benefit the third party

Answer

Direct benefit to the third party

Answer

Clear and unambiguous language

Question 9

An obligor under a contract argues that an assignment is invalid because it was made without their consent. Generally, will this argument be successful?

Accepted Answer

No, an assignment is typically valid even without the consent of the obligor

Answer

Yes, an assignment generally requires the consent of all parties to the contract

Answer

It depends on whether the assignment was made in bad faith

Answer

It depends on whether the assignment was made for an illegal purpose

Question 10

Which of the following defenses is NOT applicable to a third-party tort claim?

Accepted Answer

Lack of privity.

Answer

Lack of causation.

Answer

Statute of limitations.

Answer

Contributory negligence.

Question 11

Which type of novation involves a change in both parties and obligations?

Accepted Answer

Both A and B.

Answer

Substitution of parties.

Answer

Substitution of obligations.

Answer

Extinguishment of obligations.

Question 12

Which of the following is considered a discharge by operation of law?

Accepted Answer

Bankruptcy.

Answer

Accord and satisfaction.

Answer

Novation.

Answer

Mutual rescission.

Question 13

In relation to accord and satisfaction, which element is NOT required for a valid accord?

Accepted Answer

Written documentation.

Answer

Mutual agreement.

Answer

Consideration.

Answer

Acceptance of performance.

Question 14

Which of the following defenses is **not** available to an obligor sued by a third-party donee beneficiary?

Accepted Answer

Lack of consideration moving from the beneficiary

Answer

Fraud or misrepresentation in the formation of the contract

Answer

Breach of contract by the promisee

Answer

Illegality of the original contract

Question 15

In the context of third-party beneficiary contracts, the beneficiary's rights:

Accepted Answer

Are subject to the defenses available to the promisor against the promisee.

Answer

Cannot be assigned to another party.

Answer

Vest immediately upon the formation of the contract.

Answer

Are always enforceable, regardless of the circumstances.

Question 16

Which of the following is a potential liability for third parties who interfere with contractual relations?

Accepted Answer

Tortious interference with contract

Answer

Breach of contract

Answer

Fraudulent misrepresentation

Answer

Unjust enrichment

Question 17

In the context of third-party beneficiary contracts, which of the following is NOT a right of the promisee?

Accepted Answer

Modify or rescind the contract without the beneficiary's consent.

Answer

Assign the beneficiary's rights to another party.

Answer

Release the promisor from its obligations under the contract.

Answer

Enforce the contract on behalf of the beneficiary.

Question 18

Which defense is generally unavailable to an obligor facing a lawsuit from a third party who was not an intended beneficiary of the contract?

Accepted Answer

Lack of Privity

Answer

Statute of Frauds

Answer

Unconscionability

Answer

Illegality

Question 19

In the context of third-party beneficiary contracts, which of the following statements is FALSE?

Accepted Answer

Only incidental beneficiaries can sue on the contract.

Answer

An intended beneficiary can enforce the contract even if they are not specifically named.

Answer

The promisor cannot always modify or terminate the contract without the consent of the intended beneficiary.

Question 20

True or False: A third party may be liable for tortious interference with a contract if they induce one of the parties to breach the contract only if they benefit from the breach.

Accepted Answer

False

Answer

True

Answer

Only if the contract is in writing

Question 21

True or False: A joint and several liability clause in a contract means that each obligor is liable for only their proportionate share of the damages.

Accepted Answer

False

Answer

Only if the contract is in writing

Answer

True

Question 22

In which of the following situations would an obligor be liable to an intended third-party beneficiary?

Accepted Answer

The third party has suffered a detriment in reliance on the contract

Answer

The third party is a creditor of the promisee

Answer

The contract expressly excludes the third party's rights

Question 23

When is a third party considered an incidental beneficiary?

Accepted Answer

When the third party benefits from the contract only indirectly

Answer

When the third party is explicitly named in the contract

Answer

When the third party provides consideration for the contract

Question 24

Which of the following is a potential risk for an obligor when contracting with a third-party beneficiary?

Accepted Answer

The obligor may be liable to both the original parties and the third-party beneficiary

Answer

The obligor's performance may be excused by the original parties

Answer

The third-party beneficiary cannot enforce the contract

Question 25

In which of the following situations would an assignee have standing to sue on a contract?

Accepted Answer

The assignment is absolute and in writing.

Answer

The assignment is made for security purposes.

Answer

The assignment is made after a breach of contract.

Answer

The assignment is prohibited by statute.

Question 26

Under the doctrine of equitable subrogation, a third party who pays the debt of another is entitled to:

Accepted Answer

The same rights as the original creditor, including the right to enforce the original debt.

Answer

A pro rata share of the original creditor's recovery.

Answer

No rights against the original debtor.

Answer

Only the amount paid to the original creditor.

Question 27

In which of the following situations would a third party be able to enforce a contract despite not being an intended beneficiary?

Accepted Answer

The third party is a creditor of the promisee and the promise is made to satisfy the debt.

Answer

The third party is a donee beneficiary.

Answer

The third party is a remote beneficiary.

Answer

The third party is an incidental beneficiary.

Question 28

Which of the following is a requirement for a third party to have a vested right in a contract?

Accepted Answer

The third party must be sufficiently identified in the contract.

Answer

The third party must be aware of the contract.

Answer

The third party must have given consideration for the promise.

Answer

The third party must have relied on the promise.

Question 29

A homeowner contracts with a builder to construct a house. The homeowner then assigns their right to receive the completed house to a third party.  The builder fails to finish the house on schedule. Which of the following is true?

Accepted Answer

The third party can sue the builder for breach of contract.

Answer

The homeowner can still sue the builder despite assigning their rights.

Answer

The builder is only liable to the original homeowner, not the third party.

Answer

The third party cannot sue the builder because they were not originally part of the contract.

Question 30

A manufacturer contracts with a distributor to sell its products. The contract contains a clause that prohibits the distributor from assigning its rights under the contract. Which of the following accurately describes this clause?

Accepted Answer

Generally enforceable, preventing the distributor from assigning its rights.

Answer

Only prevents assignment of the entire contract, not individual rights.

Answer

Invalid, as the manufacturer cannot restrict the distributor's right to assign.

Answer

Unenforceable due to violating public policy.

Question 31

A landlord leases an apartment to a tenant. The lease agreement includes a clause prohibiting subleasing without the landlord's consent. The tenant subleases the apartment without the landlord's permission. What is the most likely legal outcome?

Accepted Answer

The landlord can evict the tenant for violating the lease terms.

Answer

The sublease is valid only if the subtenant agrees to abide by the original lease terms.

Answer

The sublease is valid, and the landlord cannot evict the tenant.

Answer

The sublease is valid, but the landlord can sue the subtenant for breach of contract.

Question 32

A homeowner hires a contractor to renovate their kitchen. The contractor delegates the duty to install cabinets to a subcontractor. The subcontractor installs the cabinets incorrectly, causing damage. Who is legally liable to the homeowner for the damage?

Accepted Answer

Both the contractor and the subcontractor are liable to the homeowner.

Answer

Only the subcontractor is liable because they performed the work improperly.

Answer

The homeowner is liable for failing to properly supervise the subcontractor.

Answer

Only the contractor is liable because they are ultimately responsible for the work.

Question 33

A musician signs a contract with a record label to produce an album. The contract includes a non-competition clause prohibiting the musician from recording for other labels during the contract term. The record label assigns the contract to a different label without the musician's consent. Is this assignment valid?

Accepted Answer

No, the assignment is likely invalid because it significantly alters the musician's obligations under the non-competition clause.

Answer

Yes, the assignment is valid as long as the musician agrees to the new label.

Answer

Yes, the assignment is valid because non-competition clauses are always assignable.

Answer

No, the assignment is invalid because the musician's consent is always required for any contract assignment.

Question 34

A company enters into a contract with a supplier for a year's supply of raw materials. The company then merges with another company, transferring all its assets and liabilities. What happens to the contract with the supplier?

Accepted Answer

The contract is automatically assigned to the new company as part of the merger.

Answer

The new company must renegotiate the contract with the supplier.

Answer

The original company remains responsible for the contract obligations even after the merger.

Answer

The contract is automatically terminated by the merger.

Question 35

A manufacturer contracts with a distributor to sell its products. The contract includes a clause stating the manufacturer is not liable for any consequential damages arising from product defects. Is this clause enforceable?

Accepted Answer

Yes, such clauses are generally enforceable but may be subject to limitations based on unconscionability or other legal doctrines.

Answer

No, such clauses are only enforceable if agreed to by both parties in writing.

Answer

Yes, such clauses are always enforceable and cannot be challenged.

Answer

No, clauses limiting liability for consequential damages are always unenforceable.