- What is the most likely outcome of the son's lawsuit? Select one.
Answer: The son will win, because he is an intended donee beneficiary of the contract.
The son is an intended donee beneficiary. The purpose of the contract between the mother (promisee) and the builder (promisor) was to confer the benefit of a completed house upon the son as a gift. As an intended beneficiary whose rights have vested (at the latest, upon completion of the house), the son has the right to sue the promisor directly for breach. Choice A is incorrect because the third-party beneficiary doctrine creates an exception to the privity requirement. Choice B is incorrect because while the mother (promisee) could also sue the builder, the intended beneficiary (son) also has standing to sue. Choice D is incorrect; the son's damages would be measured by the cost to repair the defects or the diminution in value of the home, not limited to the contract price.
- Is the union likely to succeed? Select one.
Answer: Yes, because the union is an intended creditor beneficiary of the buyer's promise to the corporation.
The union, on behalf of the employees, is an intended creditor beneficiary of the sale contract. The corporation (the promisee) had a pre-existing duty to its employees under the CBA. The buyer (the promisor) made a promise to the corporation that was intended to discharge that duty. Therefore, the union can sue the buyer directly to enforce the promise to honor the CBA. Choice B is incorrect because it ignores the third-party beneficiary doctrine. Choice C is a plausible distractor, but while federal labor law governs many aspects of CBAs, it does not prevent the enforcement of an assumption agreement through basic third-party contract principles. Choice D is an overstatement; a successor employer does not automatically assume all labor contracts, which is why the express assumption clause in the contract is the key fact here.
- If the cafe sues the retail company for breach of the lease agreement, is the cafe likely to prevail? Select one.
Answer: No, because the cafe is, at most, an incidental beneficiary of the lease.
This question tests your understanding of third-party beneficiaries in contract law. When a contract is made between two parties, you need to determine whether a third party has enforceable rights under that agreement.
The correct answer is B because the cafe is merely an incidental beneficiary. For a third party to have enforceable contract rights, they must be an intended beneficiary—meaning the contracting parties specifically intended to benefit that third party when forming the contract. Here, the lease between the mall owner and retail company focused on the retailer's operational obligations, with no mention of benefiting other tenants. The cafe's benefit from increased foot traffic was a side effect, not a primary purpose of the hours-of-operation clause.
Choice A is wrong because a donee beneficiary receives a gift through the contract, which doesn't apply here. The cafe isn't receiving anything as a gift from the contracting parties.
Choice C incorrectly suggests that foreseeability alone creates enforceable third-party rights. While it may have been foreseeable that other tenants would benefit from the retail store's extended hours, foreseeability doesn't transform an incidental beneficiary into an intended one.
Choice D focuses on damages, but this isn't the core issue. Even if damages were easily calculable, the cafe still lacks standing to sue because it has no enforceable rights under the contract.
Key takeaway: Third-party beneficiary questions hinge on intent, not foreseeability or harm. Look for clear evidence that the contracting parties intended to benefit the third party—without that intent, the third party is merely incidental and cannot enforce the contract.
- If the lender sues the buyer for $100,000, what is the most likely outcome? Select one.
Answer: The lender will win, because the lender is an intended creditor beneficiary whose rights have vested.
The lender is an intended creditor beneficiary because the buyer's performance was intended to satisfy a pre-existing debt owed by the promisee (developer) to the lender. As an intended beneficiary, the lender has enforcement rights once those rights have vested. A third party's rights vest when the party learns of the contract and manifests assent to it. Here, the lender assented by sending an approval letter. Therefore, the lender can sue the promisor (buyer) directly. Choice B is incorrect because lack of privity is the very issue the third-party beneficiary doctrine overcomes. Choice C is incorrect because both the promisee and the intended beneficiary have the right to sue the promisor. Choice D is incorrect because third-party beneficiary rights are created by the contract itself and are distinct from rights created by a subsequent assignment.
- The philanthropist's estate has brought suit against the university for breach of contract. What is the estate's strongest argument for relief? Select one.
Answer: The estate, standing in the shoes of the philanthropist, can sue as the promisee to enforce the university's promise.
The estate represents the interests of the philanthropist, who was the promisee in the contract with the university (the promisor). A promisee has the right to sue the promisor for breach of contract, regardless of whether a third-party beneficiary also has rights. Here, the university breached its promise to name the library. The estate can enforce this promise. Choice A is incorrect because the philanthropist (and thus her estate) is the promisee, not a third-party beneficiary. Choice C is incorrect because the promisee can always sue the promisor for breach, and the deceased spouse's estate could also potentially sue as a donee beneficiary. Choice D is incorrect because courts can award damages for such a breach, and specific performance might also be an available remedy, making it an inaccurate statement of the available relief.
- What is the best legal theory for your client to assert in a claim against the bank for the final payment? Select one.
Answer: Intended third-party beneficiary, because the bank's promise to pay was intended to benefit your client.
Your client is an intended creditor beneficiary of the loan agreement between the homeowner (promisee) and the bank (promisor). The performance of the promise (payment of loan proceeds) was intended to satisfy a duty owed by the promisee to your client. The contract expressly directed payment to your client, showing clear intent. Therefore, your client can sue the bank directly to enforce the promise. Choice A is less direct; a contract claim is stronger than an equitable claim of promissory estoppel. Choice B is inapplicable. Choice D is incorrect; while similar in effect, the rights arise from the original contract itself (beneficiary rights) rather than a subsequent transfer of rights (assignment).
- If the agent sues the publisher for 10% of the advance, what is the publisher's best argument for non-payment? Select one.
Answer: The author, as promisee, modified the contract with the publisher before the agent's rights had vested.
The agent is an intended creditor beneficiary, as the publisher's performance satisfies a debt (commission) owed by the author to the agent. However, the original parties (author/promisee and publisher/promisor) can modify or rescind the third-party provision until the beneficiary's rights vest. The facts do not state that the agent assented to, sued upon, or relied on the promise before the author's revocation. Therefore, the author's instruction to the publisher was an effective modification of the payment term, extinguishing the agent's right to sue the publisher. Choice A is incorrect; the agent is a classic creditor beneficiary. Choice C is plausible, but the contract right, once vested, would survive the termination of the agency relationship; the key is that it didn't vest. Choice D is incorrect because the contractual language is strong enough to create a third-party right, not just a suggestion for payment.
- Who is entitled to the insurance proceeds? Select one.
Answer: The son, because the woman manifested her clear intent to change the beneficiary before she died.
The rights of a third-party beneficiary to an insurance policy are subject to any provision in the contract allowing the policyholder to change the beneficiary. The beneficiary's rights are not fully vested and are subject to divestment until the policyholder's death. Here, the woman complied with the policy's requirements for changing the beneficiary by sending written notice. Most courts hold that if the policyholder does all they can to effect the change, it will be given effect, even if ministerial acts (like the company's receipt of the notice) occur after death. The woman's act of sending the signed letter manifested her intent and substantially complied with the policy terms. Choice A is incorrect because the rights of a beneficiary on a changeable policy do not vest indefeasibly until the insured's death. Choice B is incorrect for the reasons stated above. Choice D states a rule that exists in some jurisdictions by statute, but it is not a universally applied common law contract principle, and C is the better answer based on general contract law.
- Can the bank obtain a deficiency judgment against the original homeowner? Select one.
Answer: Yes, because the original homeowner remains secondarily liable as a surety unless the bank expressly released him.
When you encounter mortgage assumptions and deficiency judgments, focus on the distinction between who becomes primarily liable versus who remains secondarily liable as a surety.
When a buyer assumes a mortgage, they become primarily liable to the lender for the debt. However, this assumption doesn't automatically release the original borrower unless the lender specifically agrees to a novation (complete substitution of parties). Instead, the original homeowner typically becomes a surety - secondarily liable if the primary obligor defaults.
Answer D is correct because absent an express release from the bank, the original homeowner remains secondarily liable as a surety. The bank can pursue a deficiency judgment against him after the buyer's default, since his liability continues despite the assumption.
Answer A mischaracterizes the legal effect of mortgage assumption. A novation requires the lender's agreement to release the original borrower and substitute the new one entirely. Mere assumption by the buyer doesn't create this release.
Answer B incorrectly applies waiver doctrine. The bank accepting payments from the buyer doesn't constitute waiver of rights against the original borrower. Lenders routinely accept payments from assumptors while preserving their rights against original borrowers.
Answer C misuses contract terminology. The bank isn't a "beneficiary" of the assumption agreement - it's the creditor in the original mortgage relationship. The assumption affects who owes the debt, not the bank's creditor status.
Remember: In mortgage assumptions, look for express language releasing the original borrower. Without clear release terms, the original borrower typically remains secondarily liable even after assumption.
- What is the company's best defense against the breach of contract claim? Select one.
Answer: The residents lack standing because they are merely incidental beneficiaries of the city's contract.
Generally, members of the public are considered incidental beneficiaries of government contracts, even if the contract's purpose is to serve the public. To have standing as an intended beneficiary, the contract must show a clear intent to confer a right of enforcement upon that specific party or class of persons. Here, the contract was for the benefit of the public as a whole, not for specific, individual residents, making them incidental beneficiaries who cannot sue for breach. Choice B is incorrect because while a tort claim may exist, it doesn't automatically preclude a contract claim if one were available. Choice C is incorrect as sovereign immunity typically protects the government entity, not the private contractor. Choice D is incorrect because notice and cure provisions are relevant to the duties between the contracting parties (the city and the company), not to the standing of a third party.
- If the farmer sues the new owner for damages based on the promise in the original sales contract, which legal doctrine is most relevant to the farmer's claim? Select one.
Answer: Real covenant running with the land.
This question tests the ability to distinguish third-party beneficiary rights from other legal concepts. The farmer's claim is not based on being a beneficiary of the contract between the neighbor and the new owner. Instead, the farmer is trying to enforce a promise made in the original contract against a successor in ownership of the burdened land. This is the domain of real property law, specifically the concept of real covenants that 'run with the land' and bind subsequent owners. Choices A, B, and D are incorrect because they relate to personal contract rights, not to obligations that attach to and pass with the ownership of real property.
- Is the tenant likely to succeed in her lawsuit against the painter? Select one.
Answer: No, because the original contracting parties were free to rescind the contract before her rights had vested.
Even assuming the tenant could qualify as an intended beneficiary (which is questionable, as she is more likely incidental), her rights had not yet vested. A beneficiary's rights vest upon assent, bringing suit, or material reliance. The facts do not indicate any of these occurred. The tenant was merely 'excited.' Before a third party's rights vest, the original contracting parties are free to modify or rescind the contract without the third party's consent. Because the landlord and painter rescinded the contract before the tenant's rights could have vested, the tenant has no enforceable claim. Choice A is incorrect because there is no evidence of detrimental reliance. Choice B is incorrect because she is not a creditor beneficiary and rights do not vest automatically upon formation. Choice D is incorrect because an intended beneficiary with vested rights can sue the promisor.
- If the hospital sues the insurance company, which theory gives the hospital the strongest ground for recovery? Select one.
Answer: The hospital is a creditor beneficiary whose rights vested when it detrimentally relied on the insurer's promise.
The hospital is an intended creditor beneficiary of the insurance contract between the patient (promisee) and the insurance company (promisor), as the insurer's performance satisfies the patient's debt to the hospital. The hospital's rights vested when it materially changed its position in justifiable reliance on the insurer's promise to pay (by refraining from collection efforts against the patient). Once vested, the insurer cannot unilaterally refuse to perform based on a defense it might have against the patient, unless that defense relates to the formation of the contract itself. Detrimental reliance provides a strong basis for vesting. While B and C are plausible theories, A is the most direct application of third-party beneficiary doctrine to these facts. D is a possibility but is not stated in the facts, whereas the beneficiary status is clear.
- If the friend sues the seller for breach of contract, what is the friend's legal status? Select one.
Answer: An assignee of contract rights.
This question tests your understanding of contract assignments versus third-party beneficiary relationships. When you see a fact pattern involving someone stepping into another's contractual position, you need to determine whether this person is an assignee or a third-party beneficiary.
The friend is an assignee of contract rights because the buyer transferred her existing right to purchase the car directly to the friend. In an assignment, the original party (assignor) transfers their contractual rights to another party (assignee), who can then enforce those rights against the original contracting party. Here, the buyer assigned her purchase rights to the friend, who properly notified the seller and attempted to perform by tendering the contract price.
Answer choice (A) is incorrect because a donee beneficiary is someone who benefits from a contract made for their benefit as a gift, but who wasn't a party to the original contract. The friend didn't benefit from the original contract—she obtained rights through assignment. Answer choice (B) is wrong because a creditor beneficiary is someone to whom one of the contracting parties owes a debt, and the contract is made to satisfy that debt. There's no indication the buyer owed the friend money. Answer choice (C) is incorrect because an incidental beneficiary is someone who coincidentally benefits from a contract but has no enforcement rights, which doesn't describe the friend's position.
Remember this key distinction: assignees step into the shoes of an original contracting party, while third-party beneficiaries are intended to benefit from contracts made between others. Look for language indicating a transfer of existing rights (assignment) versus contracts made to benefit someone else (third-party beneficiary).
- Can the subcontractor successfully sue the property owner for breach of the contract between the owner and the general contractor? Select one.
Answer: No, because the subcontractor is an incidental beneficiary of the promise to obtain a payment bond.
This question tests third-party beneficiary law, which determines when someone who isn't a party to a contract can still enforce it. When you see a subcontractor trying to sue based on a contract between others, analyze whether they're an intended beneficiary with enforceable rights.
The correct answer is D because the subcontractor is merely an incidental beneficiary. While the payment bond requirement was intended to protect subcontractors generally, the primary purpose of the contract between the owner and general contractor was to construct a building, not specifically to benefit this particular subcontractor. The subcontractor's potential benefit from the bond requirement was incidental to the main contractual purpose. Incidental beneficiaries cannot enforce contract terms.
Answer A is wrong because being a "creditor beneficiary" requires that the promisee (general contractor) owed a duty to the third party (subcontractor) that the contract was meant to satisfy. Here, no pre-existing duty existed between the general contractor and this specific subcontractor when the owner-contractor agreement was formed.
Answer B incorrectly suggests that third parties can never sue on contracts made between others. This misstates the law—intended beneficiaries can absolutely enforce contracts even when they weren't parties to the agreement.
Answer C fails because unjust enrichment is a separate legal theory from contract breach. The subcontractor is specifically trying to sue for breach of the owner-contractor contract, not for unjust enrichment, and the owner didn't directly receive the electrical work—the general contractor did.
Remember: distinguish between intended beneficiaries (who can sue) and incidental beneficiaries (who cannot) by examining the contracting parties' primary purpose.
- If the supplier sues the software company for the $30,000, what is the software company's strongest defense? Select one.
Answer: The promisor can assert any defenses against the beneficiary that it could have asserted against the promisee.
A promisor (the software company) can generally assert against the third-party beneficiary (the supplier) any defenses that the promisor would have against the promisee (the consultant). Here, the software company has the defense of fraudulent inducement against the consultant, which allows for rescission of the contract. This defense is equally effective against the supplier, whose rights are derivative of the consultant's. Choice A is incorrect; vesting is about when the parties can no longer modify the contract, not about whether the promisor has defenses to performance. Choice B is incorrect because the modification shows a clear intent to benefit the supplier, making the supplier an intended creditor beneficiary. Choice D is incorrect because under both common law and the UCC, a modification to a contract does not require new consideration to be binding, provided it is made in good faith.
- If the bank sues the accounting firm for breach of contract, is the bank likely to succeed? Select one.
Answer: Yes, because the bank was an intended third-party beneficiary of the audit contract.
The bank is an intended third-party beneficiary. The test is whether the contracting parties (the company and the accounting firm) intended to confer a benefit on the third party. Here, the contract itself specified that the audit was for the purpose of providing it to that specific bank for a loan application. The accounting firm knew the bank would receive and rely on the report. This demonstrates a clear intent to benefit the bank, giving it standing to sue for breach of contract. Choice C is incorrect because it ignores the third-party beneficiary doctrine. Choice B is incorrect because while a tort claim may also exist, a contract claim is not precluded. Choice D states the foreseeability standard for a negligent misrepresentation tort claim, but A provides the more direct basis for a contract claim.
- Is the daughter likely to succeed in her lawsuit? Select one.
Answer: Yes, because her rights as a donee beneficiary vested when she materially relied on the promise by hiring a replacement.
This question tests third-party beneficiary law, which determines when someone who isn't a party to a contract can still sue for its breach. When you encounter contract questions involving non-parties seeking remedies, focus on whether they qualify as intended beneficiaries and whether their rights have vested.
The daughter can sue because she's a donee beneficiary whose rights vested through detrimental reliance. A donee beneficiary receives a gift through someone else's contract - here, the father contracted for catering services as a gift for his daughter's wedding. The contract clearly identified the daughter and wedding date, showing the father intended to benefit her. Crucially, her rights vested when she detrimentally relied on the contract's performance by hiring a replacement caterer after the breach, making her rights legally enforceable.
Answer A is wrong because third-party beneficiaries can sue for breach when their rights have vested - it's not limited to the original promisee. Answer B incorrectly focuses on consideration; donee beneficiaries don't need to provide consideration since they receive contract benefits as gifts. Answer C creates a false rule - there's no automatic intended beneficiary status for "specific event" contracts. The analysis requires examining whether the promisee actually intended to benefit the third party.
Remember this pattern: for third-party beneficiary questions, ask (1) is this person an intended beneficiary (creditor or donee), and (2) have their rights vested through performance beginning, detrimental reliance, or manifestation of assent? Both elements must be present for a successful lawsuit.
- The buyer has asked for your advice on its liability to the supplier. What is the key factual question you need to answer to determine if the rescission was effective against the supplier? Select one.
Answer: Whether the supplier, after learning of the promise, assented to it or materially relied on it before the rescission.
The supplier is an intended creditor beneficiary. The critical issue is whether the supplier's rights had vested before the original parties (your client and the buyer) attempted to rescind the contract. A beneficiary's rights vest if, after learning of the contract, the beneficiary (1) manifests assent to the promise, (2) brings suit to enforce it, or (3) materially changes position in justifiable reliance on it. If any of these occurred before the rescission, the rescission is ineffective against the supplier, and the buyer remains liable. The other options are less relevant. A is a formation issue, but the facts assume a valid agreement. B is irrelevant as a beneficiary need not give consideration. D is irrelevant to the vesting of the supplier's rights.
- If the roofer sues the homeowner for the $5,000, is the homeowner obligated to pay? Select one.
Answer: No, because the modification constituted a valid novation that discharged the homeowner's original duty.
When you encounter contract modification questions involving third parties, focus on distinguishing between novations, accord and satisfaction, and third-party beneficiary arrangements. The key is identifying whether the original obligor's duty has been completely discharged.
Here, the written modification explicitly states that the homeowner's payment obligation "is hereby discharged" and replaced with the brother's promise to pay the same amount. This creates a novation—a three-party agreement that substitutes a new obligor (the brother) for the original obligor (the homeowner), completely discharging the original duty. The roofer accepted this substitution by agreeing to the modification and performing the work. Since the homeowner's obligation was validly discharged through novation, he cannot be held liable.
Looking at the wrong answers: (A) incorrectly focuses on the Statute of Frauds, but even if the brother's promise were unenforceable, this wouldn't revive the homeowner's discharged obligation under the novation. (C) mischaracterizes the arrangement—the roofer isn't a beneficiary of an agreement between the homeowner and brother; rather, the roofer is a party to the novation itself. (D) confuses accord and satisfaction with novation. An accord involves a new agreement to discharge an existing duty through different performance, but here the duty itself was transferred to a new party.
Remember: In novation questions, look for clear language of discharge combined with substitution of parties. The original obligor is completely released, regardless of whether the substitute performs.
