- In Bank's suit against Builder, who prevails?
Answer: Builder, because its defect claim is a claim in recoupment arising from the same transaction as the assigned right, and such claims may be asserted against the assignee regardless of when they accrue.
Whenever you see an assignment of a contractual right, think UCC § 9-404. The statute draws a critical line: defenses or claims in recoupment arising from the same transaction that gave rise to the assigned contract are always available against the assignee, while other defenses or claims are only available if they accrued before the account debtor received notice of assignment.
Here, Builder's defect claim comes from Design Co.'s negligent phase 2 work, and the assigned right is payment for phase 1 work under the same architectural services contract. Because the defect claim is a claim in recoupment arising from the same transaction, it may be asserted against Bank regardless of when it accrued. The timing limitation in § 9-404(a)(2) simply does not apply to recoupment claims under § 9-404(a)(1). So Builder prevails.
The first wrong answer, claiming Bank wins because the recoupment claim accrued after notice, misreads the statute—the "accrues before notice" rule governs only other defenses, not recoupment claims. The second wrong answer, that Bank took for value and is immune from later conduct, invents a protection the UCC does not give assignees. The final wrong answer, conditioning Builder's defense on Bank's knowledge of the risky phase 2 work, also fails: the assignee's knowledge is irrelevant because § 9-404 makes the assignment subject to recoupment claims regardless.
Study tip: on assignment questions, first classify the defense. If it arises from the same contract as the assigned right, it's a recoupment claim and beats the assignee anytime. If it's unrelated, check whether it accrued before notice.
- Which legal issue is most likely dispositive?
Answer: Whether LaunchPad may withhold payment from Spark Finance because of Designworks's nonperformance under the original contract.
Whenever you see a transfer of contract rights, think assignment: the assignee stands in the assignor's shoes. Designworks assigned its right to receive the $80,000 payment, but it did not delegate its duty to perform the campaign, and LaunchPad made no promise directly to Spark Finance. Spark is an assignee, not a third-party beneficiary, and LaunchPad's obligation to Spark is no greater than its obligation to Designworks. Therefore, if the completed campaign genuinely failed to conform to the contract, LaunchPad may withhold payment from Spark Finance because that defense arose from the very contract whose right was assigned. This is the dispositive issue.
The delegation answer is wrong because assigning a right to payment is not delegating a duty; Designworks still owed the duty to create conforming graphics. The third-party beneficiary answer is wrong because LaunchPad never promised anything to Spark Finance; Spark received Designworks's existing right through assignment. The consideration answer is wrong because an assignment need not be supported by consideration to be valid; a lack of consideration may make a gratuitous assignment revocable, but it does not make Spark's claim stronger than Designworks's own claim would have been.
Study tip: for assignment questions, ask two things—what was transferred, a right or a duty, and what defenses can the obligor assert against the assignee? An assignee generally takes the assigned right subject to the obligor's defenses.
- Who is entitled to payment from Dana?
Answer: Finance Co., because its assignment was for value and thereby revoked Paul's earlier gratuitous assignment.
Whenever you see competing assignments of the same right, do not start with notice to the obligor—start with the nature of each assignment. The statute here is designed to resolve exactly this problem: a gratuitous assignment is revocable, while an assignment for value is irrevocable, and a later assignment for value revokes any earlier gratuitous assignment.
Carl's oral gift to Paul was a gratuitous assignment. It may have been effective between Carl and Paul, but it remained revocable. When Carl later assigned the same note right in writing to Finance Co. for $80,000 cash, that assignment was for value. Under the rule, that later for-value assignment automatically revoked Paul's earlier gift. Therefore Dana must pay Finance Co.
The choice saying Paul wins because he notified Dana first misunderstands what notice does: notice to the obligor can protect an assignee against payments made by the obligor to the assignor, but it does not elevate a gratuitous assignee over a later assignee for value. The choice saying Paul's gift was complete and cannot be revoked ignores the statute's explicit rule that gratuitous assignments are revocable. And the choice saying Finance Co. wins only if Paul had not notified Dana adds a condition the statute does not require—the later assignment for value revokes the earlier gratuitous assignment regardless of notice.
Remember: for assignment priority, ask first whether the assignment was for value or gratuitous; notice matters for payment protection, not for the revoking effect of a for-value assignment.
- Which of the following is the most significant legal issue raised by these facts?
Answer: Whether Dana's direction to Apex was an assignment of her right to receive payment, giving Marco a direct claim against Apex.
Whenever you see one party directing another to make a payment to someone else, think assignment of rights. Dana has a contractual right to be paid for her photography; her instruction that Apex pay Marco is an attempt to transfer that right. An assignment gives the assignee, Marco, a direct claim against the obligor, Apex, once the assignment is made. That is why the most significant issue is whether Dana's direction was an assignment of her right to receive payment.
The other choices miss the nature of the instruction. A delegation of her duty to create the images would involve transferring performance obligations, not payment, and Dana remains liable for delivering the images unless Apex agrees otherwise. A third-party beneficiary contract would require that the original Apex–Dana contract intended to benefit Marco, but Marco was not mentioned in the original payment term; this is instead a later transfer of Dana's existing right. Finally, a novation would substitute Marco for Dana entirely, releasing Dana from her duty to provide the images, which is not what happened—only the payment instruction changed.
Study tip: distinguish assignment of rights from delegation of duties. Ask: is the party transferring a right to receive performance, or a duty to perform? If the focus is money owed to the assignor, it is an assignment.
- Is Bank entitled to the royalties PublishCo owes under the March sequel contract?
Answer: No, because the sequel contract was not in existence when the assignment was made, so the purported assignment of sequel royalties operated only as a promise to assign.
Whenever a question involves assigning rights that have not yet come into existence, focus on whether the underlying contract or relationship existed at the time of the assignment. The Civil Code draws a sharp line: future rights under an existing contract can be effectively assigned, but rights expected from a future contract are only a promise to assign until the right exists and is later actually assigned.
Here, Maya's January assignment covered royalties under her existing PublishCo contract, and she even included sequels or related works. But the March sequel was a separate new contract, not a right arising under the January contract. Because that sequel contract did not exist when the assignment was made, the purported assignment of sequel royalties operated only as a promise. Since Bank never received an actual assignment after the sequel contract was signed, Bank is not entitled to those royalties.
The first two wrong choices—emphasizing that the assignment was written and expressly included sequels, or that same publisher and sufficient identification make it valid—miss the statutory requirement that the contract exist at assignment time. The third choice is too broad: future royalties can be assigned if they arise under a contract already in existence; the problem is not that they are unearned, but that the source contract did not yet exist.
Study tip: on future-right assignments, first ask when did the contract come into existence, not whether the assignment was detailed or drafted in advance.
- Which issue is most likely central to the dispute?
Answer: Whether the contract's anti-assignment clause prevents enforcement of the assigned right to payment by Riverside
Whenever you see a question about assignment in a contracts dispute, separate rights from duties: an assignment transfers rights, while a delegation transfers duties. Here Northstar assigned only "all rights to receive payments," not its obligation to deliver fasteners. So the central issue is the scope and effect of the clause: does the contract's anti-assignment clause prevent Riverside, as assignee, from enforcing the assigned right to payment? If the clause is enforceable against this assignment, Allied can refuse to pay Riverside even though Northstar remains obligated to perform. If the clause is read narrowly, Riverside may collect. That interpretive question is exactly what the dispute turns on.
The other choices miss the mark. Whether Riverside assumed Northstar's duty to deliver fasteners is not central because no duty was assigned. Similarly, whether the assignment operated as a delegation to Riverside fails for the same reason: Northstar transferred only a payment right, not performance obligations. Whether Allied's refusal to consent was unreasonable is a red herring: absent contract language requiring consent to be reasonable, a party is generally entitled to withhold consent to a prohibited assignment, and the dispute is not about material burden. Finally, don't confuse this narrow assignment of payment rights with an assignment of the whole contract; the clause's wording must be interpreted against that exact scope. On the bar exam, when you see an assignment question, first ask: rights, duties, or both? Then read the anti-assignment clause to see what it actually prohibits. That habit will keep you from picking the tempting delegation answers.
- Which statement is correct regarding Able's liability to Owner?
Answer: Able is not discharged because Owner did not manifest assent to release Able and substitute BuildCo as the obligor; Able remains liable for BuildCo's defective work.
Whenever you see a question about delegation and the delegating party's liability, remember the core rule: delegation never discharges the delegating obligor unless the obligee agrees to a novation. A novation requires the obligee's manifestation of assent to release the original obligor and to accept the delegate as a substitute party. Mere approval of the delegation or acceptance of the delegate's performance does not by itself release the original obligor—the obligee may reserve all rights against the delegator.
Here, Owner said, "I approve of BuildCo doing the work," and then accepted BuildCo's defective performance. Under the rule from Lopez v. Bright, that approval and acceptance are insufficient to create a novation. Owner never manifested an intent to release Able or to substitute BuildCo as the party primarily liable. Therefore, Able remains liable for the $200,000 in damages caused by BuildCo's defective work. The correct statement is that Able is not discharged because Owner did not manifest assent to release Able and substitute BuildCo as the obligor.
Now let's clear up the distractors. The choice saying Able is discharged because Owner expressly approved the delegation and accepted BuildCo's performance misunderstands the distinction between approving a delegation and consenting to a novation—approval keeps Able liable. The choice claiming Able is discharged because Owner's approval was an assent to a substituted contract is similarly flawed: a substituted contract requires a new agreement that replaces the old one, but mere approval of delegation is not such an agreement. Finally, the choice about a delegation needing to be in writing is a trap: the statute of frauds is irrelevant here; the issue is lack of assent, not lack of writing.
Your study tip: when you see a delegation fact pattern, look for explicit words like "release" or "substitute" from the obligee. If you only see "approve" or "accept," the delegating party stays liable.
- Which legal issue is most likely to determine whether First Capital may recover from Landmark?
Answer: Whether First Capital, as a bona fide assignee for value, takes free of defenses arising from Metro Builders' abandonment
Whenever a contract right is assigned, the assignee generally steps into the assignor's shoes and takes the right subject to defenses that the obligor could assert against the assignor. That is the core issue here: Landmark promised to pay Metro, Metro assigned that payment stream to First Capital, but Landmark claims Metro's abandonment gives it a defense against paying the next invoice.
The correct legal inquiry is whether First Capital, as a bona fide assignee for value, takes free of defenses arising from Metro Builders' abandonment. It does not automatically do so. An assignee for value can take free of some defenses, but not defenses that arose directly from the assigned contract and were known or discoverable—here, the abandonment is part of the very contract performance. Moreover, Landmark's contract expressly said any assignment would be subject to all defenses Landmark might have against Metro, so First Capital's rights are limited by that language.
The other choices miss the mark. First Capital's lack of privity with Landmark is not a barrier because assignments are specifically designed to let non-parties enforce rights. The assignment of future progress payments was effective; future receivables can be assigned if they are identifiable, and these payments were tied to an existing contract. Landmark did not waive its defenses merely by permitting assignment—consent to assignment does not waive substantive defenses unless clearly stated. Finally, being a bona fide assignee for value does not automatically immunize the assignee from all defenses; contract defenses arising from the assignor's breach survive assignment, especially where the contract expressly preserves them.
Study tip: always read the contract language in assignment questions—it often controls whether defenses are preserved or waived.
- In FinCorp's action against River Rentals, who should prevail?
Answer: FinCorp, because the anti-assignment clause did not bar assignment of Peak's right to payment and Peak had no remaining duties to delegate.
Whenever a contract contains an anti-assignment clause, UCC § 2-210 requires you to separate rights from duties. A term prohibiting assignment of the contract does not bar assignment of the right to payment; it bars only delegation of the assignor's performance. Here, Peak has already delivered all kayaks and has no remaining duties to delegate. Therefore, the assignment validly transferred Peak's right to collect the $300,000, and River Rentals must pay FinCorp.
Peak's use of the phrase "this contract and all rights and duties under it" does not help River Rentals. The statute treats such language as an assignment of rights plus, unless circumstances indicate otherwise, a delegation of remaining duties—but because Peak had no remaining duties, there was nothing for the anti-assignment clause to bar. Similarly, the argument that a prohibited delegation makes the entire assignment ineffective is wrong: even when a delegation is barred, the assignment of the right to payment survives. Finally, the suggestion that FinCorp must prove consideration is incorrect; assignments generally do not require consideration to be effective, and this assignment was for value anyway.
For the exam, whenever you see UCC 2-210, ask two questions: Has the assignor already performed, and is the assigned right a right to payment? If both answers are yes, an anti-assignment clause usually will not defeat the assignee.
- Which legal issue should determine whether Prestige must accept the sous-chef's performance?
Answer: Whether Chef Ricardo's duty to prepare the meal was of such a personal character that delegation would alter Prestige's expected performance
Whenever you see a question about delegating contractual duties, ask whether the contract or its circumstances suggest the obligee bargained for the specific person's performance. If you see language like "personal" or "material," that signals a duty of personal character.
Here, the contract expressly described Chef Ricardo's "personal menu design and preparation" as material. Because the event was a private dinner for 200 guests at a high price, Prestige expected Chef Ricardo's own taste, judgment, and skill — not just a qualified substitute. The controlling legal issue is therefore whether the duty to prepare the meal was so personal that delegation would alter Prestige's expected performance. That is the correct reasoning.
Now the wrong answers. The choice about the sous-chef being "equally qualified" misses the point: even a perfect substitute cannot replace a personal-service performer when the obligee bargained for that specific individual. The "surety" option is a trap — a surety is someone who separately promises to answer for another's debt or performance; merely saying the sous-chef is skilled does not create such a promise. The choice about Prestige's "refusal" breaching good faith is also wrong: if the duty is personal, Prestige has every right to reject a substitute, and insisting on contracted terms is not bad faith. Finally, the good-faith framing distracts from the real inquiry: not whether Prestige was nice, but whether the delegated performance would deprive Prestige of the benefit it bargained for.
Remember this pattern: personal-service contracts with "material" language usually block delegation. When you see that, focus on the character of the duty, not the delegate's skill.
- Which legal issue should govern the dispute?
Answer: Whether Voss's duty to conduct the gala was so personal that it could not be delegated without the Philharmonic's consent
Whenever you see a contract dispute involving performance by a substitute, separate two concepts: assignment of rights and delegation of duties. The right to be paid can usually be assigned, but the duty to perform can be delegated only if the obligee has no substantial interest in the original obligor's performance. Here, the contract expressly required Voss to conduct personally and forbade delegation without written consent. Conducting a gala is a personal-services performance, so Voss's duty was nondelegable. The Philharmonic's refusal was therefore justified regardless of Maestro Chen's talent.
That explains why the reasonableness of the refusal is not the governing issue: in a personal-services contract, the specific person's performance is the very thing bargained for, so Chen's equal qualifications do not compel acceptance. Likewise, Voss's assignment of her right to the performance fee would transfer only her right to payment, not her duty to conduct; a novation requires all parties, including the Philharmonic, to agree to substitute Chen for Voss, and the Philharmonic did not. Finally, Chen was not an intended third-party beneficiary: the contract was made for the Philharmonic's benefit, not to confer on Chen any right to perform or demand acceptance.
Study tip: when you see a "delegation" issue, ask first whether the contract calls for personal skill, taste, or special trust. If it does, delegation is barred—quality of the substitute is irrelevant.
- Under these rules, which statement is correct?
Answer: City may refuse ArtWorks' performance because the contract's personal-service nature and anti-delegation clause show the parties did not intend to permit delegation; Aria remains liable to City.
This question tests the distinction between assigning rights and delegating duties, and effect of an anti-delegation clause in a personal-service contract. Under Mendoza, an assignment of "all rights under this contract" presumptively delegates duties too. But that presumption yields to "language or circumstances indicate the contrary." Here both the personal-services clause—Aria "personally to conceive and paint"—and the explicit "may not be delegated" language show City had a substantial interest in Aria's own performance. Therefore ArtWorks' assignment did not give it the right to paint, and City could refuse its crew. The delegation is ineffective unless City consents, but Aria is not discharged: she remains liable to City. So the statement that City may refuse because the personal-service nature and anti-delegation clause show no intent to permit delegation, while Aria remains liable, is correct.
The answer claiming ArtWorks may enforce because assignment includes delegation and City must accept unless it can show financial insecurity is wrong: it ignores the contrary-indication exception. Financial insecurity is not the test—the test is whether City had a substantial interest in Aria's original performance. The answer saying City may refuse only after giving Aria an opportunity to cure, and ArtWorks may then sue for payment once ready, willing, and able is also wrong: no cure precondition exists when delegation is prohibited, and ArtWorks never acquired the right to demand payment. Finally, the answer that City must accept because the anti-delegation clause is an unlawful restraint on alienation is wrong: anti-delegation clauses are enforceable, especially for personal services, and the restraint-on-alienation doctrine concerns assignment of rights, not delegation of duties. Remember: explicit anti-delegation language and personal-service terms rebut the default presumption—and leave the original obligor on the hook.
