- Which of the following describes the bank's rights with respect to the royalties? Select one.
Answer: The bank has an enforceable right against the inventor to have the royalties paid to it, but no right against the company until the company is notified.
The correct answer is C. The assignment of the right to receive future royalty payments under an existing contract is a valid present assignment of a contract right. It is not an invalid assignment of 'future rights' because the right stems from an existing contract. The assignment is effective between the inventor (assignor) and the bank (assignee) immediately. However, to make the assignment effective against the company (the obligor), the bank must give notice. Until the company receives notice, it is entitled to continue paying the inventor, and such payments will discharge its duty for that period. Therefore, the bank has rights against the inventor but cannot enforce them against the company until notice is given. Choice A is incorrect; while the delegation of duties under a patent license might be restricted, the right to receive payment (royalties) is generally assignable. Choice B is incorrect because the rights arise from an existing contract. Choice D is incorrect because notice to the obligor is required to bind it to pay the assignee.
- If the software company seeks to terminate the license, what is its strongest argument? Select one.
Answer: The transfer of the license to the competitor constituted a void assignment in breach of the agreement.
The correct answer is A. When a contract contains a clear and unambiguous clause that not only prohibits assignment but also explicitly states that any attempted assignment is 'void,' courts will generally enforce the clause as written. The transfer of the license as part of a corporate acquisition is considered an assignment. Therefore, the transfer to the competitor was a direct violation of this 'voiding' clause, giving the software company the right to terminate the license. Choice B states a valid independent reason why some assignments may be prohibited (material increase in risk), but the explicit language of the contract in Choice A provides a more direct and powerful argument. Choice C is incorrect; a transfer of contract rights as part of a merger or acquisition is generally treated as an assignment for these purposes. Choice D is incorrect; a successor corporation that acquires assets and liabilities is generally bound by the terms of the contracts it assumes.
- Has a valid assignment of the right to the fee occurred? Select one.
Answer: No, because the contract language made the attempted assignment of the right to the fee ineffective.
The correct answer is C. When an anti-assignment clause explicitly states that an attempted assignment is 'void,' courts strictly construe and enforce that language. Such a provision extinguishes the power to assign, meaning any attempt to do so is a legal nullity. The assignment to the new firm was therefore ineffective from the outset. Choice A is incorrect because one cannot 'waive' an act that is legally void. The client's silence cannot breathe life into a void assignment, although the client could potentially form a new contract with the new firm. Choice B is incorrect as there is no general exception for law firm mergers that overrides explicit contract terms. Choice D is incorrect because while the duty to represent the client is personal and non-delegable, the right to a fee is a right to payment, which is generally assignable, absent a valid anti-assignment clause. The clause itself, not the nature of the right, is what prevents the assignment here.
- Under UCC Article 2, which of the following is the most accurate statement of the manufacturer's rights? Select one.
Answer: The manufacturer may treat the assignment as creating reasonable grounds for insecurity and may demand assurances of performance.
The correct answer is B. Under UCC ยง 2-210, an assignment of 'the contract' is construed as both an assignment of rights and a delegation of duties. While the delegation is generally permissible, the original obligee (the manufacturer) has a substantial interest in having their original contracting party perform. The UCC provides that the obligee may treat any assignment which delegates performance as creating reasonable grounds for insecurity. This gives the obligee the right to demand assurances of due performance from the assignee (the second retailer) without prejudice to their rights against the assignor. The manufacturer is not required to ship until such assurance is received. Choice A is incorrect because the right to demand assurances qualifies the duty to perform. Choice C is incorrect because the delegation of the duty to pay is generally permissible. Choice D is incorrect because while the first retailer does remain liable, this does not negate the manufacturer's right to demand assurances from the party who is now expected to perform.
- In a jurisdiction that follows the majority American rule for successive assignments for value, which assignee has priority to the $10,000 payment? Select one.
Answer: Assignee A, because its assignment was first in time.
The correct answer is A. The majority American rule for successive assignments for value is that the first assignment in time prevails, regardless of which assignee gives notice first. This is often summarized as 'first in time, first in right.' An exception exists if a subsequent assignee for value (a BFP) takes without notice and is the first to obtain payment, a judgment, a novation, or indicia of ownership. Here, neither assignee has obtained payment or a judgment. Therefore, the general rule applies, and Assignee A, as the first assignee for value, has priority. Choice B reflects the 'English rule,' which gives priority to the first assignee to give notice, but this is the minority rule in the United States. Choice C is incorrect because the amount of value paid is not the determining factor for priority. Choice D is incorrect as there is no pro rata rule for successive assignments.
- Is the supplier obligated to fill the conglomerate's order? Select one.
Answer: No, because the assignment is invalid as it would impose a burden on the supplier not contemplated by the original parties.
The correct answer is D. While rights under a requirements contract can be assignable under the UCC, the assignment is invalid if the assignee's requirements are unreasonably disproportionate to the original party's stated estimates or normal prior requirements. An assignment is prohibited if it would materially change the duty of the other party or materially increase the burden or risk imposed on them. Here, shifting from a small, local business to a national conglomerate with a tenfold increase in demand represents a massive and unforeseeable increase in the supplier's burden. This material alteration of the duty makes the assignment invalid and unenforceable against the supplier. Choice B is incorrect because if the assignment itself is invalid due to the material change in burden, the supplier is not obligated to supply any amount to the assignee. The proper analysis is that the assignment fails. Choice A is too general and ignores the critical limitation on assignability. Choice C is too absolute; not every assignment of a requirements contract is invalid, only those that unreasonably alter the burden.
- Against whom does the homeowner have a right to recover damages for the breach of contract? Select one.
Answer: Both the original company and the buyer.
The correct answer is C. This fact pattern involves a delegation of duties (servicing the lawn) and an assumption of those duties by the delegatee (the buyer). When a delegatee expressly assumes the duties of the contract, the delegatee becomes directly liable to the obligee for performance. The obligee (homeowner) is an intended third-party beneficiary of the assumption agreement between the delegator and the delegatee. At the same time, the original obligor (the landscaping company/delegator) is not released from its liability simply by delegating its duties. It remains in privity of contract with the homeowner. Therefore, the homeowner can sue both the original company (on the original contract) and the buyer (on the third-party beneficiary assumption agreement). Choice A is incorrect because the assumption creates liability for the buyer. Choice B is incorrect because an assumption does not create a novation without the obligee's express consent to release the original obligor. Choice D is incorrect because the buyer's liability stems from its promise to perform, not from its competence or solvency.
- What is the hospital's best course of action to recover the $50,000? Select one.
Answer: Sue the insurance company, because it failed to honor the assignment after receiving notice.
The correct answer is B. The patient made a valid assignment of a future right (proceeds from a lawsuit) to the hospital. Once the right came into existence (upon judgment), the assignment attached. The insurance company (the obligor) had notice of this assignment. When an obligor has notice of a valid assignment, it must pay the assignee to discharge its duty. By paying the patient (the assignor) instead of the hospital (the assignee), the insurance company did not discharge its obligation to the hospital. Therefore, the hospital can sue the insurance company directly for the assigned amount. While the hospital also has a claim against the patient for conversion of the funds (Choice A), the stronger and more direct claim is against the obligor who ignored the notice. Choice C is incorrect because the assignment is a valid contractual device. Choice D is incorrect because the attorney's primary duty is to the client, not the client's creditors, although some jurisdictions do have rules regarding protecting known lienholders.
- To whom is the debtor legally obligated to pay the $5,000? Select one.
Answer: The buyer, because the client's gratuitous assignment to the friend was revocable.
The correct answer is C. The client's promise to her friend was a gratuitous assignment because it was not supported by consideration. A gratuitous assignment is generally revocable by the assignor. One way to revoke a gratuitous assignment is by making a subsequent assignment of the same right to another person for value. Here, the client's subsequent assignment to the buyer for $4,500 was an assignment for value, which automatically revoked the prior gratuitous assignment to the friend. Therefore, the buyer holds the only valid right to the payment. Choice A is incorrect because the 'first in time' rule applies to successive assignments for value, not when a gratuitous assignment is followed by one for value. Choice B states a correct principle of law (oral assignments are generally valid) but is not dispositive because the issue is revocability, not validity. Choice D is incorrect because while giving notice is important for protecting the assignee's right against the obligor, it does not determine priority between a prior gratuitous assignee and a subsequent assignee for value; the subsequent assignment for value itself revokes the prior one.
- Is the tenant obligated to pay the niece? Select one.
Answer: Yes, because the property owner's gratuitous assignment became irrevocable when the niece detrimentally relied on it.
The correct answer is A. The property owner made a gratuitous assignment to his niece. Generally, a gratuitous assignment is revocable. However, an exception exists where the assignee detrimentally relies on the assignment in a way that is reasonable and foreseeable to the assignor. In such a case, the assignor may be estopped from revoking the assignment. Here, the niece's purchase of a $1,500 non-refundable plane ticket in reliance on the promised $2,000 would likely be seen as reasonable and foreseeable detrimental reliance. This reliance makes the otherwise revocable assignment irrevocable. Therefore, the property owner's attempted revocation was ineffective, and the tenant's duty is owed to the niece. Choice B is incorrect because gratuitous assignments are generally revocable. Choice C is incorrect because the niece's reliance made the assignment irrevocable before the attempted revocation. Choice D is incorrect; a valid, unrevoked assignment is enforceable against the obligor, regardless of whether it was gratuitous.
- Which of the following best describes the landlord's rights? Select one.
Answer: The landlord can sue the original tenant for the unpaid rent because the tenant remains in privity of contract.
The correct answer is B. When a tenant assigns a lease, the original tenant remains liable to the landlord for the obligations under the lease, including the payment of rent. This is because the original tenant and landlord remain in 'privity of contract.' The assignment creates 'privity of estate' between the landlord and the assignee, making the assignee also liable for rent. However, the original tenant is not released from their contractual promises unless the landlord expressly agrees to a novation. Here, there was no novation. Therefore, the landlord can sue the original tenant for the rent the assignee failed to pay. Choice A is incorrect because the tenant's obligations are not terminated. Choice C is incorrect because an assignee's assumption of obligations does not, by itself, create a novation; a novation requires a specific agreement by the landlord to release the original tenant. Choice D is incorrect because the landlord retains the right to sue the original tenant on the contract for damages (unpaid rent).
- The roofing company has sued the homeowner for the $15,000 contract price. Which of the following is the homeowner's best defense? Select one.
Answer: The subcontractor's failure to use the specified shingles constituted a material breach of the contract.
The correct answer is C. Even if a duty is properly delegated, the delegator remains liable for performance of the contract. The obligee's contractual rights are against the delegator. Here, the contract required a specific brand of high-end shingles. The subcontractor's use of an inferior brand constituted a failure of performance and, given the likely difference in quality and value, would be considered a material breach. This material breach by the subcontractor is treated as a material breach by the original roofing company, giving the homeowner a defense to her duty to pay the contract price. Choices A and B are incorrect because roofing work, while skilled, is generally considered delegable, and consent is not typically required unless the contract so provides or it's a unique personal service. The duty was delegable, but the performance was defective. Choice D is incorrect; a delegation does not terminate the original contract.
- Assuming the bank gave proper notice of the assignment to the grain company, what is the bank's most likely recovery from the grain company? Select one.
Answer: The value of the wheat that was delivered, because the grain company improperly paid the farmer after notice.
The correct answer is B. The bank, as the assignee, stands in the shoes of the farmer (assignor). The grain company's (obligor's) duty to pay is conditioned on the farmer's delivery of the wheat. Due to the drought, the farmer's duty to deliver the full crop was likely partially discharged under the doctrine of impracticability. However, a duty to pay arose for the wheat that was actually delivered. Because the bank had given notice of the assignment, the grain company's duty to pay for the delivered wheat was owed to the bank, not the farmer. By paying the farmer directly, the grain company did not discharge its obligation to the bank. Therefore, the bank can recover from the grain company the amount that was due for the delivered wheat. Choice A is incorrect because the full contract price was never due, as the condition of delivering the full crop was not met. Choice C is incorrect because a duty to pay arose for the portion of the crop that was delivered. Choice D is incorrect because payment to the assignor after notice does not discharge the obligor's duty to the assignee.
- If the playwright seeks to enjoin the second theater company from performing the play, what is her strongest argument? Select one.
Answer: The contract was a personal services contract, and the theater company's duties were non-delegable.
The correct answer is A. A duty is non-delegable if the obligee has a substantial interest in having the original obligor perform. This is often the case in personal services contracts. While a theater company is a business entity, a contract granting it exclusive rights to perform a new play can be considered personal in nature. The playwright relied on the specific reputation, artistic direction, venue, and production style of the original company. Delegating the performance to a different company with a different venue and style represents a material change that defeats the playwright's legitimate expectations. Therefore, the duty to perform the play was personal to the original company and non-delegable. Choice D is the consequence of the rule in A, but A states the more precise legal doctrine. Choice B is speculative; the new venue might be more successful. The harm is the loss of the bargained-for artistic performance, not necessarily financial. Choice C is incorrect; while it was an exclusive arrangement, that alone does not make the duties non-delegable; the personal nature of the performance is the key.
- If the corporation sues the artist for specific performance, is the corporation likely to prevail? Select one.
Answer: No, because the assignment would materially alter the artist's duty.
The correct answer is D. While the duty to perform a personal service (painting the portrait) is not delegable, the right to receive the performance may be assignable unless the assignment would materially change the obligor's duty. Here, the artist's duty was to paint a portrait of a specific person (the collector's spouse). The assignment to the corporation presumably changes the subject of the portrait to a corporate officer or a different theme for the boardroom. This is a material alteration of the artist's duty. The artist contracted to apply her unique skill to a specific subject, and she cannot be compelled to paint a different one. Therefore, the right was not assignable under these circumstances. Choice C is incorrect because it confuses the non-delegability of the artist's duty with the non-assignability of the collector's right. The personal services nature of the contract is the reason the duty is altered, but the direct legal reason for the assignment's failure is the material change in the obligor's (artist's) duty. Choices A and B are incorrect because they fail to account for the material change in duty limitation on assignability.
- The finance company has sued the homeowner for $10,000. What is the likely outcome of the suit? Select one.
Answer: The finance company will recover nothing, because the painter's nonperformance is a defense the homeowner can assert against the assignee.
The correct answer is C. An assignee takes the assigned right subject to any defenses the obligor could have raised against the assignor. This is often summarized as the assignee 'stands in the shoes' of the assignor. Here, the painter (assignor) failed to perform the contract by not painting the house. This material breach is a complete defense to the homeowner's (obligor's) duty to pay. Because the homeowner could assert this defense against the painter, she can also assert it against the finance company (assignee). Therefore, the finance company will recover nothing from the homeowner. Its remedy is against the painter for breach of warranty of the assignment. Choice A is incorrect because holder-in-due-course status applies to negotiable instruments, not general contract rights. Choice B is incorrect because the amount of consideration paid for the assignment is irrelevant to the amount the assignee can collect from the obligor, which is determined by the underlying contract and any defenses. Choice D is incorrect because rights under an existing contract, even those conditional on future performance, are generally assignable.
- Is the lender likely to succeed in its suit against the corporation? Select one.
Answer: No, because the parties to the original contract can modify it until the obligor receives notice of the assignment.
The correct answer is C. The assignor and the obligor are free to modify the contract, and such a modification is effective against the assignee, so long as the obligor has not yet received notice of the assignment. Here, the lender (assignee) never notified the corporation (obligor) of the assignment. Therefore, the consulting firm (assignor) and the corporation were free to modify their contract, which they did by terminating it early. This modification is effective against the lender. The right to the twelfth payment, which was the subject of the assignment, was extinguished by this valid modification. Choice A is incorrect because the irrevocability of the assignment as between the assignor and assignee does not prevent the assignor and obligor from modifying the contract before notice. Choice B is incorrect because the assignee's rights have not 'vested' against the obligor until the obligor receives notice. Choice D is close, but C states the more precise legal rule: the ability to modify exists until notice is given.
- What is the most accurate advice to give your client regarding the arrangement with the second furniture maker? Select one.
Answer: The delegation is proper, but your client remains liable to the developer if the desks are non-conforming.
The correct answer is B. Contractual duties are generally delegable, unless the contract prohibits delegation or the duty is of a personal nature that requires the specific skill or talent of the obligor. Here, the contract is for 100 identical, standard-model desks. This is a contract for goods that can be produced to specifications and does not involve unique personal skill. Therefore, the duty is delegable. However, a delegation of duties does not discharge the liability of the delegating party (the delegator). Your client remains liable to the developer for the performance of the contract. If the second maker fails to perform or performs defectively, the developer can sue your client for breach. Choice A is incorrect because despite the business being 'custom furniture,' the specific items are standard-model desks, making the duties delegable. Choice C is incorrect because a delegation does not discharge the delegator's liability; only a novation, which requires the obligee's consent, can do that. Choice D is incorrect because the law presumes duties are delegable, not non-delegable.
- In a suit by the bank against the landowner for the $500,000, which party is likely to prevail? Select one.
Answer: The bank, because the landowner's payment to the construction company after receiving notice of the assignment was improper.
The correct answer is D. Courts generally construe clauses that prohibit the 'assignment of the contract' narrowly. Such a clause is typically interpreted to bar only the delegation of the assignor's duties, not the assignment of the right to receive payment. To effectively prohibit the assignment of rights, the language must be very specific (e.g., 'any assignment of rights under this contract is void'). Therefore, the assignment of the right to payment to the bank was valid (Choice C correctly states the legal principle, but D provides the ultimate outcome). Once an obligor receives notice of a valid assignment, their duty to pay is owed to the assignee. Payment to the original obligee (the assignor) does not discharge the duty. Here, the landowner had notice of the valid assignment to the bank but paid the construction company anyway. This payment was improper, and the landowner remains liable to the bank. Choice A is incorrect because the clause is not sufficient to void the assignment of rights. Choice B is incorrect because payment to the assignor does not discharge the duty after notice of assignment.
- If the chef sues the restaurant for breach of contract, what is the restaurant's strongest defense? Select one.
Answer: The chef's duties were non-delegable because they involved unique personal skill and judgment.
The correct answer is B. Duties under a contract that involve unique personal skill, taste, or judgment are non-delegable. A contract with a renowned chef for his services is a classic example of such a personal services contract. The restaurant bargained for this specific chef's unique talents, and those duties cannot be delegated to another, even a highly skilled one, without the restaurant's consent. Choice A is plausible, but B is a stronger defense because even without the anti-assignment clause, the duty would be non-delegable due to its personal nature. The clause adds strength, but the fundamental nature of the service is the core issue. Choice C is incorrect because an improper delegation is a breach but does not necessarily rise to the level of an anticipatory repudiation unless it is a clear statement of an unwillingness to perform. Here, the chef intended for the contract to be performed, albeit improperly. Choice D is incorrect because the right to demand assurances arises when there are reasonable grounds for insecurity about performance; here, the delegation itself is the breach, and the restaurant is entitled to reject the performance outright, not merely seek assurances.
