TX Bar Contracts 5

Question 1

A creditor and debtor enter a contract under which the debtor agrees to pay the creditor $10,000.
The debtor then assigns this payment obligation to a third party (assignee), who promises to pay the creditor.
The creditor is a third-party beneficiary.
Which best describes the creditor's status?

Accepted Answer

Creditor beneficiary — the debtor owed a pre-existing obligation to the creditor

Answer

Incidental beneficiary — the creditor has no enforceable rights

Answer

Donee beneficiary — the debtor intended to make a gift to the creditor

Answer

Nominal beneficiary — the creditor must re-negotiate directly with the assignee

Question 2

A third-party beneficiary's rights under a contract vest when:

Accepted Answer

The beneficiary manifests assent, detrimentally relies on the contract, or files suit to enforce it

Answer

The original contract is signed by both contracting parties

Answer

The promisor delivers performance to the promisee

Answer

The beneficiary receives written notice of the contract from both parties

Question 3

An artist assigns her right to receive payment under a commission contract to her creditor. The party who owes payment (the obligor) claims it need not pay the creditor because the artist breached first. Which principle governs?

Accepted Answer

The obligor may assert against the assignee any defense it had against the assignor that arose before notice of the assignment

Answer

An assignment cuts off all defenses the obligor had against the assignor

Answer

The obligor must pay the assignee in full and separately sue the assignor

Answer

The assignment is void because artistic contracts are non-assignable

Question 4

A contractor delegates its duty to paint a house to a subcontractor. The homeowner objects. Under which circumstance is the delegation NOT permitted?

Accepted Answer

When the contract is for services involving the personal skill, reputation, or character of the delegator

Answer

When the delegatee is willing and able to perform

Answer

When the parties did not expressly prohibit delegation in the contract

Answer

When the consideration for the original contract exceeded $500

Question 5

Buyer sends seller a purchase order for widgets at $10 each. Seller responds with an acknowledgment form accepting the quantity and price but adding a mandatory arbitration clause not in the buyer's order. Under UCC § 2-207 (Battle of the Forms), what happens to the arbitration clause?

Accepted Answer

Between merchants, it becomes part of the contract unless the buyer objects within a reasonable time or the buyer's form expressly limits acceptance to its terms

Answer

It automatically becomes part of the contract because the seller included it

Answer

It becomes part of the contract only if the buyer expressly agrees to it in a subsequent writing

Answer

The contract fails for lack of a meeting of the minds on all material terms

Question 6

A general contractor relies on a subcontractor's bid when preparing its own bid for a city project. The general contractor wins the project based on the subcontractor's price, but the subcontractor then refuses to honor its bid. Under promissory estoppel, which element is most critical?

Accepted Answer

That the general contractor detrimentally and foreseeably relied on the subcontractor's promise

Answer

The existence of a signed written contract between the parties

Answer

That the subcontractor received consideration for its bid

Answer

That the city approved the subcontractor's participation

Question 7

A homeowner paid a contractor $15,000 in advance under a contract the contractor never began performing. The contractor later claims the contract is unenforceable because a condition precedent was not met. If the contract is indeed unenforceable, what theory allows the homeowner to recover the $15,000?

Accepted Answer

Restitution / unjust enrichment — the contractor must disgorge the benefit conferred to avoid unjust enrichment

Answer

Specific performance — the court will compel the contractor to perform

Answer

Expectation damages — the homeowner is put in the position she would have been in

Answer

Reliance damages — the homeowner recovers expenses incurred in anticipation of performance