3d Party Issues Flashcards
What is entrustment (UCC)?
Under Art. 2/UCC, with entrustmentan owner who entrusts goods to a MERCHANT who deals in goods of the kind (e.g. a dealer) has NO rights against a bona fide puchaser (BFP) if the merchant wrongfully sells the good
When can K duties be delegated AND what are the rights of the obligee?
General rule: K duties MAY be delegated W/O consent of the person to whom performance is owed (the “obligee”) EXCEPTIONS: The K language cntrls (if delegation is prohibited, CANNOT delegate) If K prohibits assignment (this means NO delegation EITHER!) Special skill or reputation prevents delegation Rights of the obligee… Delegating party REMAINS liable to obligee (COMPARE w/ novation) A delegate WHO GETS CONSIDERATION is liable to the obligee (b/c this would make the obligee a 3d party beneficiary)
What is a 3d party beneficiary AND what rights does she have?
3PB arrises when TWO ppl enter into a K intending to benefit a 3d party A 3PB is NOT a party to the K, but has RIGHTS b/c the K intended to benefit her An intended beneficiary has legal rights, BUT an incidental beneficiary DOES NOT Two types of intended beneficiary: (i) creditor beneficiary = is getting benefit b/c a debt is owed to him; OR (ii) donee beneficiary (more likely) = performance is given as a gift Recission and modifictaion of a 3PB K General rule = the promisor and promisee (orig parties to K) CAN recind or modify the K UNTIL the rights of the 3PB have “vested” Vested means the intended beneficiary has (i) MANIFESTED ASSENT to the K; (ii) brought SUIT to enforce K; OR (iii) has RELIED on the K (i.e. you an AFFRIMATIVE act) Once the rights of the 3PB have “vested”, the original parties NEED the consent of the 3PB in order to modify/recind the K NOTE: contrary language in the K cntrls! Liability The intended beneficiary CAN sue the original promisor for breach of K (privity is not necessary) NOTE: if the promisor (of benefit to 3PB) has breached K and can’t enforce performance (against promisee), NEITHER can 3PB The original promisee is liable to a CREDITOR beneficiary (b/c the creditor is owed somethin); DONEE beneficiary has no rights against original promisee (Of course) the original promisor is liable to the original promisee (EVEN IF 3PB is a donee beneficiary)
What is anassignment?
Assignment = after two ppl make a K; LATER one (assignor) transfers his rights to a 3d party (assignee) The party who owes the duty to preform is the obligor The obligor is liable to the assignee, BUT ONLY IF (i) the assignor performs properly under K (no material breach); AND (ii) the obligor is AWARE of the assignment E.g. Batman Ks to provide security for Gotham for $200. Batman (assignor) assigns HIS RIGHT to pmt to Robin (assignee). NOW, Robin has the right to receive pmt from Gotham City (obligor) NOTE: w/ an assignment, two parties K and a 3d person shows up LATER; with a 3d party beneficary, the 3d party is PRESENT at time of K
What’s needed for a validassignment AND what are the restrictions on assignment?
1) Must have language of PRESENT transfer YES: “I assign…” NO: “I promise to assign…” 2) Consideration or a writingis NOT required Gift assignments are valid BUT easily revoked Oral assignments are valid 3) Restrictions on assignment K language cntrls BUT distingush b/t a cl that PROHIBITS assignment from that which INVALIDATES assignments EVEN IF assignments are prohibited (“Rights under this K are not assignable”), a VALID assignment can exist (i.e. the assignee can sue the obligor) If language states that assignments are INVALID (“All assignments under this K are void”), then any assignment is VOID Cannot SUBSTANTIALLY change duties of the obligor NOTE: you can basically always assign pmt b/c it’s easy enough
With multiple assignments, which assignee has rights? NOTE: NY Distinction
1) Gratuitous (“gift”) assignments are EASILY revoked by assignor (UNLESS there is detrimental reliance by the assignee from the obligor’s performance) The LAST gratuitous assignee PREVAILS over earily gratuitous assignees b/c the later gift assignmnet revokes the earlier one NY DISTINCTION: a gift assignment is IRREVOCABLE if embodied in a signed writing by the ASSIGNOR 2) Assignments for consideration are more DURABLE General rule: the FIRST assignee for consideration PREVAILS over all subsequent assignees (as well as gratuitous assignees) EXCEPTION: a later assignee for considertion prevails IF he (i) does not know about the earlier assignments; AND (ii) is the first to get pmt from or a jgmt againt the obligor
