Third Party Rights in Contract Law: Quiz and Study Guide

Question 1

What is the principle of 'privity of contract' and why is it important in contract law?

Accepted Answer

Privity of contract means only parties to a contract have legal rights and obligations under that contract.

Answer

Privity of contract allows third parties to enforce a contract even if they're not a party to it.

Answer

Privity of contract only applies to written contracts, not verbal or implied contracts.

Answer

Privity of contract prevents the assignment of contractual rights and obligations to third parties.

Question 2

Identify a fundamental principle embedded within the concept of contract law.

Accepted Answer

Privity of Contract

Answer

Delegation

Answer

Estoppel

Answer

Negligence

Question 3

Who possesses the legal right to transfer their contractual privileges to an external party?

Accepted Answer

Assignor

Answer

Assignee

Answer

Promisor

Answer

Promisee

Question 4

Who holds the legal authority to enforce a third party right?

Accepted Answer

The third party

Answer

The assignor

Answer

The assignee

Answer

The promisor

Question 5

How does the doctrine of privity of contract affect the enforceability of contracts?

Accepted Answer

Prevents third parties from enforcing contracts

Answer

Allows third parties to enforce contracts if intended beneficiaries

Answer

Has no bearing on the enforceability of contracts

Answer

Renders all contracts null and void

Question 6

Which of the following situations illustrates the concept of 'novation' in contract law?

Accepted Answer

Party X and Party Y terminate their contract and create a new one with different terms.

Answer

Company A assigns a contract to Company C.

Answer

Person Z is added as a beneficiary to an existing contract.

Answer

Organization P and Organization Q amend their contract by mutual agreement.

Question 7

Which of the following is a fundamental principle that limits third party rights in contract law?

Accepted Answer

Privity of contract

Answer

Assignment

Answer

Novation

Answer

Promissory estoppel

Question 8

The process of transferring all rights and obligations under a contract to another party is known as:

Accepted Answer

Assignment

Answer

Delegation

Answer

Subrogation

Answer

Novation

Question 9

Which of the following is NOT a requirement for a valid transfer of rights under a contract?

Accepted Answer

Registration with a government agency

Answer

Consent of both parties to the original contract

Answer

Absolute transfer of all rights and obligations

Answer

Notice to the other party

Question 10

In the context of novation, what happens to the original contract?

Accepted Answer

It is discharged and replaced by the new contract

Answer

It is varied and remains in force

Answer

It is enforced alongside the new contract

Answer

It is transferred to the new party

Question 11

A person who is not a party to a contract but benefits from its performance is known as a:

Accepted Answer

Third party beneficiary

Answer

Creditor

Answer

Agent

Answer

Assignor

Question 12

The doctrine of ________ creates third party rights by preventing a promisor from withdrawing an offer when a third party relies on it.

Accepted Answer

Promissory estoppel

Answer

Privity

Answer

Assignment

Answer

Novation

Question 13

The process of replacing an existing contract with a new contract that has different terms is known as:

Accepted Answer

Novation

Answer

Variation

Answer

Rescission

Answer

Assignment

Question 14

Upon contract assignment, which party assumes the rights and obligations, and which is released from liability?

Accepted Answer

Assignee assumes all rights and obligations, releasing the assignor from liability.

Answer

Assignor retains all rights and obligations.

Answer

Rights and obligations are shared equally between assignor and assignee.

Question 15

What is the primary legal requirement for a third party to be recognized as an intended beneficiary of a contract?

Accepted Answer

The contract must clearly show an intention to benefit the third party.

Answer

The third party must be explicitly named in the contract.

Answer

The third party must provide valuable consideration for the contract.

Answer

The third party must have knowledge of and consent to the contract.

Question 16

In an assignment of rights, what is the role of the assignor?

Accepted Answer

Transfers their rights to the assignee under the existing contract.

Answer

Retains their rights until the assignee fulfills their obligations under the contract.

Answer

Becomes jointly liable with the assignee for future breaches of the contract.

Answer

Has no further involvement in the contract.

Question 17

For a valid novation to occur, which requirement must be met?

Accepted Answer

Agreement of all parties to the original contract.

Answer

Written evidence of the new contract.

Answer

Consideration for the new contract.

Answer

Registration with a government body.

Question 18

In a tripartite contract, who is the third party?

Accepted Answer

A person not initially involved in the contract who later acquires rights under it.

Answer

The person who provides payment for the contract.

Answer

The person who arranges the contract.

Question 19

In the context of novation, what is the effect of the creation of a new contract?

Accepted Answer

Extinguishes the original contract.

Answer

Supplements the original contract.

Answer

Modifies the original contract.

Question 20

Under what condition can a third party enforce a contract?

Accepted Answer

When they have acquired a direct right under the contract.

Answer

Third parties never have the right to enforce a contract.

Answer

When they have incurred a loss due to the contract.

Answer

When they have provided consideration for the contract.

Question 21

In the context of third party rights, what is the legal principle known as jus quaesitum tertio?

Accepted Answer

Rights obtained by a third party under a contract cannot be taken away without their consent.

Answer

Third parties do not have rights under a contract unless they have provided consideration.

Answer

Third parties can only acquire rights under a contract if they are specifically named in the contract.

Question 22

Which of the following is a legal principle that prevents a third party from enforcing a contract they are not a party to?

Accepted Answer

Privity of contract

Answer

Novation

Answer

Assignment

Question 23

What is the legal process by which the rights and obligations of a contract are transferred to a new party?

Accepted Answer

Assignment

Answer

Subrogation

Answer

Delegation

Answer

Discharge

Question 24

Which of the following statements about novation is true?

Accepted Answer

It creates a new contract that replaces the original contract.

Answer

It cannot be used to modify the terms of an existing contract.

Answer

It only requires the consent of the parties to the original contract.

Question 25

A third party may have rights under a contract if:

Accepted Answer

They are a beneficiary under a trust.

Answer

They are a witness to the contract.

Answer

They provide consideration for the contract.

Answer

They are related to one of the parties to the contract.

Question 26

Which of the following is NOT a benefit of assignment?

Accepted Answer

It can be used to transfer liabilities.

Answer

It can provide flexibility in contract management.

Answer

It can reduce the risk of contractual disputes.

Question 27

What is the legal principle that allows a third party to benefit from a contract without being a party to it?

Accepted Answer

Collateral contract

Answer

Subrogation

Answer

Agency

Question 28

Which of the following statements about estoppel is true?

Accepted Answer

It prevents a party from denying a fact that they have previously represented.

Answer

It requires proof of actual reliance by the third party.

Answer

It is only available in written contracts.

Question 29

What is the main difference between assignment and delegation?

Accepted Answer

Assignment transfers rights and obligations, while delegation only transfers obligations.

Answer

Assignment can only be done with the consent of the other party, while delegation does not require consent.

Answer

Assignment creates a new contract, while delegation does not.

Question 30

Which of the following is a limitation on the enforceability of third party rights?

Accepted Answer

The third party must have a legal interest in the contract.

Answer

The third party must be a beneficiary under a trust.

Answer

The contract must be in writing.

Question 31

What is the legal remedy available to a third party who has been deprived of their rights under a contract?

Accepted Answer

Breach of contract

Answer

Misrepresentation

Answer

Negligence

Answer

Fraud