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What is the rule on ENTRUSTMENT?
Art. 2: An owner who entrusts goods to a MERCHANT who deals in goods of the kind has NO RIGHTS against a bona fide purchaser. Only remedy is for owner to sue merchant for conversion.
Facts to watch for - 1) Merchant who
- 2) Deals in goods
- 3) of the kind
- Thus, if any of those three are missing, the owner has rights against the third-party
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THIRD-PARTY BENEFICIARIES
When can a TPB enforce a contract?
an INTENDED beneficiary can enforce the contract once his/her RIGHTS HAVE VESTED
Notes—
- 1) rights become vested when TPB knows about the K and relies on it OR when he/she benefits from it
- 2) only the INTENDED TPB has rights
- 3) once vested, the intended TPB must consent to any modifications or recessions of the K
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THIRD PARTY BENEFICIARY: Liability: Who can sue whom?
- (1) Promisor is liable to intended TPB for breach, even though there is no privity of K.
- (2) Promisee (person who secures the promise) is liable to intended TPB for promisor's breach ONLY IF TPB was also a CREDITOR beneficiary (i.e., promisee's purpose was to satisfy debt to TPB) [rare]
- (3) Promisor is liable to promisee, just as in any other K.
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DELEGATION OF DUTIES
1) What is the general rule?
2) What are the exceptions?
Can delegate without consent of obligee (person to whom performance is owed)
- EXCEPTIONS (delegation w/o consent will be a breach of K)
- 1) contrary language in K, or
- 2) special skills or reputation
EXAM TIP: If K prohibits assignment, then there is no delegation either!
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ASSIGNMENT OF RIGHTS
- Need language of a PRESENT ASSIGNMENT (mere promise to assign in the future is not effective)
- Can't SUBSTANTIALLY increase obligor's duties
- Last-in-time GRATUITOUS assignment prevails**
- FIRST-in-time PAID-FOR assignment prevails against all others EXCEPT where subsequent assignee for consideration (i) does not know of prior assignment, and (ii) is first to get payment or a judgment against obligor.
**NY: A gift assignment is irrevocable if it is in a signed writing.
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