156
D. Assignment and Delegation
39. (b) Assignment is the transfer of a right under a
contract by one person to another. Almost allcontract rights
are assignable as long as the parties agree to it, but there are'
some exceptions. Contracts involving personal services,
trust or confidence are not assignable. If assignment would
materially change the risk or burden of the obligor, it is not
allowed. For example, a contract for insurance against cer-
tain risks are not assignable because they were made upon
the character of the contracting party (the insured). Assign-
ing the rights to another party would alter the risk. There-
fore, malpractice insurance policy rights are not assignable.
A further exception is that future rights are not assignable,
with the exception under the UCC that future rights for the
sale of goods are assignable, whether based on an existing or
nonexisting contract. As the assignment of option contract
rights does not fall 'under any exception, they would be as-
signable.
40. (c) Assignment is the transfer of a right under a
contract by one person to another. No consideration is
needed for valid assignment. Normally an assignment is
done in writing, but any act, oral or written, is sufficient if it
gives clear intent of the assignment. Only situations in-
cluded under the Statute of Frauds are required to be in
writing. When consideration is given in exchange for an
assignment, it is irrevocable. Also, asa general rule a gra-
tuitous assignment is revocable unless it is evidenced by a
writing signed by the assignor, effected by a delivery of a
writing used as evidence of the right (i.e., bill of lading), and
the assignment is executed. A contract right cannot be as-
signed if it would materially change the risk or burden of the
obligor.
41. (c) Assignment is the transfer of a right under a
contract by one person to another. If the obligor has notice
of the assignment, s/he must pay the assignee, not the as-
signor. The contract between Barton and Egan provided for
both payments on the purchase price and the insurance pol-
icy in case of Egan's death. Because Bartonassigned his
contract rights to Vim, Vim was then entitled to payments
on the purchase price and the insurance proceeds. Since
Barton received payments on the purchase price and insu('-
ance 'proceeds after the assignment, Vim is entitled to sue
Barton for these amounts.
E. Third-Party Beneficiary Contracts
42. (d) When a debtor contracts with a second party to
pay the debt owed to a creditor, the creditor becomes a
creditor beneficiary. Barton contracted with Egan for Egan
to pay Ness the business' 'debts. The contract also required
Egan to provide a life insurance policy to pay Ness if Egan
died. In both the contract and the insurance policy, Ness
was a creditor beneficiary. Neither the contract nor the in-
surance policy were entered into to confer a gift to Ness, and
therefore he was not a donee beneficiary.
43. (d) Bugle would have received an unintended bene-
fit under the contract between Fargo and ABC Company.
Therefore, Bugle is an incidental beneficiary, not an in-
tended beneficiary and, thus, has no legal rights against ei-
ther Fargo or ABC. No matter who breached the contract,
Bugle has no rights against either party.
MODULE 23 CONTRACTS
44. (a) In an assignment, the assignee (Clay) acquires
the assignor's (Baxter) rights against the obligor (Globe) and
has the right to performance. Baxter is still liable to the
assignee if Globe does not perform. However, if Clay re-
leased Globe from the contract, Baxter would also be re-
leased and no longer liable to Clay. Answer (b) is incorrect
because if the obligor has no notice of the assignment, s/he
may pay the assignor, and the assignee must recover from
the assignor. Thus, if Globe was unaware of the assignment
and paid Baxter, Clay would have to collect from Baxter.
Answers (c) and (d) are incorrect because even if Baxter
released Globe or breached the contract, Baxter would still
beliable to Clay.
45. (a) Mann is a donee beneficiary and, thus, can bring
suit against the promissor, Manus, only. He cannot maintain
a suit against Mackay, who was just giving a gift. Mann
cannot maintain any action against Mackay either alone or in
combination with Manus.
46. (c) When a debtor contracts with a second party to
pay the debt owed to a creditor, the creditor becomes a
creditor beneficiary. A creditor beneficiary has the right to
enforce the contract whioh gives him the intended benefits
and may commence an action for nonperformance against
either of the contracting parties. For this reason, Ferco
(creditor beneficiary) will prevail in a lawsuit against Bell
because Ferco has an enforceable right to receive payment.
Answer (a) is incorrect because Ferco, as a creditor benefici-
ary, has the right to recover from either Bell or Allied. An-
swer (b) is incorrect because the creditor beneficiary is not
required to give consideration to have an enforceable right.
Answer (d) is incorrect because having knowledge of the
contract between Bell and Allied at the time the contract was
made is not necessary to later enforce this legal action.
Ferco must establishthat he is a creditor beneficiary to
maintain an action for nonperformance.
F. Performance of Contract
47. (b) Under the doctrine of substantial performance, a
contract obligation may be discharged even though the per-
formance tendered was not in complete conformity with the
terms of the agreement. Under this doctrine, if it can be
shown that the defect in performance was only minor in
nature, that a good-faith effort was made to conform com-.
pletely with the terms of the agreement, and if the perform-
ing l1arty is willing to accept a decrease in compensation
equivalent to the amount of the minor defect in performance,
the contractual obligation will be discharged. Since the de-
fect in Glaze's performance was only minor in nature, and
since Pare refused to allow Glaze to complete the project,.
Glaze will prevail in its action against Parco Anticipatory
breach applies only to executory bilateral contracts. An
executory contract is a contract wherein both parties have
yet to perform. In this instance, Glaze has substantially per-
formed its part of the agreement.
.48. (a) The duty to perform a contract may. depend upon
a condition. Conditions that could be present include: con-
dition precedent, which is One that must occur before there is
duty to perform; condition subsequent, which is one that
removes a preexisting duty to perform; or condition concur-
rent, which is mutually dependent upon performance at
nearly the same time.