Bona Fide Purchase-Accession Flashcards
General Rule regarding BFP
A purchaser of goods acquires all title that his transferor had or had power to transfer.
[Caveat Emptor - “let the buyer beware”]
A person can only sell what title he has (theif has no title = sells no title).
Defenses to General Rule
- Bona Fide Purchase
- Accession
- Adverse Possession
Bona Fide Purchase Exception (definition)
- Involuntary transfer of title by law
- Possibility of transferring more complete title than what is owned.
- between fraudulent party and BFP/BOC
Ex.: O -> X -> BFP [O = Original owner; X = fraudulent wrongdoer]
Bona Fide Purchaser
Person purchases:
1. In Good Faith
2. Without Knowledge of the Wrongdoing/Fraud
- without notice that someone else actually owns the chattel
3. For value
- price should be “reasonable” under the circumstances (gifts do not apply)
- buyer should know very low purchase price may indicate seller does not have title (e.g., $20 Rolex)
Assessing Bona Fide Purchase
Disputes typically arise between the original owner and the current possessor of the good. When assessing who will prevail, focus on the transactions between the owner and the first party and from the current possessor with the next-to-last party.
Purpose of Law of BFP
- Protect innocent purchasers
- Give greater confidence in the marketplace
Exceptions to the General Rule
General Rule - Caveat Emptor
Common Law exceptions (Equitable Estoppel):
1. Apparent Authority
2. Voidable Title
Statutory (UCC) exceptions (Statutory Estoppel) [Each state adopts its own version]:
1. Entrustment
2. Voidable Title
Apparent Authority (Common Law)
When an owner with good title “clothes” another to make him appear to be the true owner or have authority to sell the item, selling to a BFP may allow an exception to title and the wrongdoer may convey good title when he has none.
O -> X -> BFP
O clothes X with appearance of ownership or authority to sell goods and X sells good to BFP
Voidable Title (Common Law)
- Misrepresentation
- Reasonable reliance
- Change of position
O _ X _ BFP
O sells to X but sale is induced by fraud and O is never paid for item, O can get item back if X still has the item, but if X sells to BFP prior to O getting item back, then BFP gets item.
Buyer in the Ordinary Course
Person who:
1. Deals in good faith
2. Without knowledge of fraud, wrongdoing, or true owner
3. Buys during the ordinary course of business of a merchant of good of that kind
Entrustment Rule (UCC)
Giving item to merchant who sells goods of like kind, selling to a BOC will allow good title to pass when the merchant has none.
- Entrusting a good in a merchant in goods of that kind
- BOC does not get title, but rights of the Entruster (DeGroff study session)
O -> X -> BFP
O gives possession to X (merchant who deals with goods of that kind) and sells to BOC
Voidable Title (UCC)
Similar to Common Law Equitable Estoppel.
UCC 2-403; Identity is not a disqualifier for voidable title.
O _ X _ BFP
O sells to X but sale is induced by fraud and O is never paid for item, O can get item back if X still has the item, but if X sells to BOC prior to O getting item back, then BOC gets item.
What is Voidable Title?
A title is “voidable” because the original owner can void title (don’t get confused on language) by demanding return of goods from the person who deceived him. It’s not really title per se but is a power to transfer good title.
When does Voidable Title occur?
- Original owner was deceived as to the identity of the purchaser (Phelps).
- Delivery was in exchange for a check which was later dishonored.
- Original owner and purchaser agreed it was to be a cash sale but original owner never got money.
- Delivery was procured through fraud punishable by larcenous act (e.g., fraud through use of stolen credit card).
What is the Rationale behind Voidable Title?
Original owner intended to sell and is willing to part with title. Original owner should not automatically recover. He was not completely innocent.
