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Contract Law: Gift Giving

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If a person promises to give you a gift, there is usually no consideration. The person can change his mind and decide not to give you the present, and there is nothing you can do about it.But if a person makes a contract with someone else and intends that you will receive a gift under the agreement, you are a donee beneficiary and you do have rights to enforce the deal. Are these rules unacceptably inconsistent? If so, which rule should change?

In your response, focus on:
- Third Party Beneficiary
- Incidental Beneficiaries
- Assignment and Delegation.

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- Third Party Beneficiary

A donee beneficiary is third party that benefits from donation or a gift. It is person who is considered to be a non-party in a contract but still receives a benefit from the completion of the contract. For example, if a donor promises to donate a Ford truck to a charity. The agreement is between the donor and the charity, but since there is only one local retailer of Ford Company, the retailer stands to gain from the transaction. Now if the contact is in private and the retailer does not know about it the donee beneficiary is not affected and so he cannot sue. However, if the retailer comes to know of the promise and he arranges for bringing the truck from the distributor to his premises, he can sue the purchaser if they cancelled the contract.

The rule that is inconsistent is that even though the two parties to the contract have not asked the third party, in this case the retailer to make the purchase, he can still file for damages. The rule that should be changed is that only if the purchaser has promised the third party that he will buy the truck from him should the retailer be ...

Solution Summary

Gift Giving contract law is discussed step-by-step in this solution. The response also has the sources used.

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21. Alan promises to pay Beth $500 to install a pump in his factory. Beth completes
the installation. The act of installing the pump
a. imposes a moral obligation on Alan to pay Beth.
b. imposes no obligation on Alan unless he is satisfied with the job.
c. is not sufficient consideration because it is not goods or money.
d. is the consideration that creates Alan's obligation to pay Beth.

22. Nora promises to give Owen $500 because he does not have as much
money as other people. Nora's promise is
a. enforceable because society wishes to encourage people to keep their
b. enforceable because the redistribution of wealth is a valid social
c. not enforceable because Owen has not given any consideration in
d. not enforceable because Nora could have given more money.

23. Ned Contractors, Inc., begins construction of a mall for Van Development
Corporation and after six months demands an extra $100,000. Ned
offered no reason for the extra $100,000, but said only that it would stop
working if Van did not agree to pay. Van agrees to pay. The agreement is
a. enforceable because the parties executed an accord and satisfaction.
b. enforceable because of the unforeseen difficulties.
c. unenforceable due to the preexisting duty rule.
d. unenforceable as an illusory promise.

24. Paula, a minor, signs a contract to buy a car from Royal Used Cars by misrepresenting
her age to be twenty-one. When Paula fails to make the payments,
Royal sues, and Paula tries to disaffirm the contract. The court orders
Paula to return the car. The court is probably persuaded that
a. Paula should be aware of the reciprocal obligations that arise in all
b. Paula should understand that minority status does not entitle one to
take advantage of adults who willingly contract with minors.
c. the combination of misrepresentation and unjust enrichment should
prevent Paula from asserting her incapacity without returning the
d. none of the above.

25. Nick represents himself as a contractor in Ohio, but he is not licensed in
that state. A contract between Pat and Nick by which Nick agrees to build
a warehouse for Pat in Ohio is
a. enforceable only if Pat does not object after learning of Nick's status.
b. enforceable only if Pat knows that Nick is unlicensed.
c. enforceable only if the outcome is successful.
d. not enforceable.

26. Alpha Cable Company, a subcontractor, understates its bid on a project
for Beta Communications, Inc., the general contractor, due to an addition
error. Alpha can most likely
a. recover damages from Beta for not catching the error.
b. require Beta to pay the difference between the bid and the true cost.
c. rescind the contract.
d. none of the above.

27. Jane, an accountant, convinces her elderly client Howard to sign a
contract to give her his life savings as part of a phony investment scheme.
When Howard learns the truth, he may
a. only enforce the contract.
b. only recover what he gave to Jane.
c. enforce the contract or recover what he gave to Jane.
d. do nothing.

28. Russ buys ranchland from Sam, a rancher, who claims that it would be a
prime site for housing. Russ later learns that the law does not permit the
land to be used for housing. Russ may
a. not rescind the contract.
b. rescind the contract only if Russ did not truly know the law.
c. rescind the contract only if Sam knew about the law.
d. rescind the contract only if the law is not common knowledge.

29. Shade Tree Landscaping Company enters into a contract with Jill to
landscape Jack's yard, using Fertile Nursery to supply trees and bushes.
Maria owns the lot next to Jack's property. The landscaping is a gift from
Jill to Jack. Jill and Jack are friends, but they are not related. Jack is
a. a creditor beneficiary.
b. a donee beneficiary.
c. an assignee.
d. an incidental beneficiary.

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