Rights/Duties of Third Parties Flashcards
When may a merchant have the power to transfer rights re property not owned to another buyer?
When someone entrusts goods to a merchant who deals in goods of that kind – i.e. delivers goods or leaving goods for later pickup – then the merchant has the power to transfer rights of the entruster to a buyer in the ordinary course of business.
They can only pass rights of entruster - so if entruster isn’t owner then that title won’t pass.
What happens when good is entrusted to third party and third party wrongfully sells good?
Original owner cannot reclaim goods from a good faith purchaser. BUT if the person passing title is thief then they cannot pass title to someone else, so can reclaim.
What types of third party beneficiaries have contractual rights?
(e.g. Party A contracts with B and B will render performance for C - C is third party).
Only intended beneficiaries have K rights, not incidental ones. In assessing whether beneficiary is intended or incidental, assess whether beneficiary (a) is identified in the K (b) receives some performance directly from promisor, or (c) has some relationship to promisee to indicate intent to benefit.
What is the difference between a creditor vs donee beneficiary?
Both are types of intended beneficiaries. A creditor beneficiary is a person to whom debt is owed by promisee. A donee beneficiary is a person whom the promisee wants benefit gratuitously.
In a situation where Party A contracts with Party B so that Party B promises performance for Party C. If B breaches, then Who may sue on behalf of whom? What defenses may be raised?
Party C may sue Party B on the K. B may raise any defenses they would have against A. If the promise is absolute then they cannot assert any of A’s defenses but if it is not then they can assert A’s defenses as well.
If Party C is a creditor beneficiary, then they can sue Party A. If party C is donee beneficiary then they can only sue Party A if there is detrimental reliance.
Party A may sue Party B.
When can a third party sue to enforce K rights?
Only once their rights have vested, i.e. either when they:
(a) manifest assent to a promise in the manner requested
(b) bring a suit to enforce the promise, OR
(c) materially change position in justifiable reliance on the promise
Note: Parties to K can modify K up until rights vest
What does it mean when a party assigns their rights in a K?
E.g., Party X contracts with party Y and Y assigns his right to X’s performance to Z. So, e.g. Batman K’s with Gotham City and assigns right of payment to Robinhood.
What rights may be assigned?
All rights except:
(1) an assignment that would substantially change the obligor’s (person to shift performance) duty or risk
(2) assignment of future rights to arise from future contracts
(3) an assignment prohibited by law
Note: Assignment does NOT need consideration
What is the difference between an assignment for value and a gratuitous assignment? Which can be revoked?
- Assignment for value = (a) done for consideration or (b) taken as payment for preexisting debt, Can NOT be revoked
- gratuitous assignment = not for value, can be revoked
When is a gratuitous assignment irrevocable?
when
- obligor already performed
- tangible claim delivered
- intangible claim is put in writing
- assignee can show detrimental reliance
How may a revocable gratuitous assignment be revoked?
- death or bankruptcy of the assignor
- notice of revocation to assignee or obligor
- assignor taking performance directly from obligor
- subsequent assignment of the same right by the assignor to another
What’s the legal effect of a clause prohibiting assignment of “the contract” vs “contractual rights”?
Prohibiting assignment of the contract = bars delegation of only assignors duties (e.g. Batman)
Prohibiting assignment of “contractual rights” = doesnt bar assignment, gives obligor (gotham city) right to sue for damages.
When X contracts with Y and assigned Y performance to Z, and Y breaches, may Z sue Y? What defenses does Y have?
Z may sue Y, and Y may not assert any defenses that X would have against Z.
When there have been multiple assignments who gets to be the assignee?
- If the first assignment was revocable, then second revokes it so second assignee.
- If the first assignment was irrevocable, then first prevails UNLESS second person has paid value and has no notice of first person AND
- 2nd gets first judgment against obliger
- 2nd gets first payment
- 2nd gets delivery of token
- 2nd is party to novation releasing first
- 2nd has estoppel claim against first
What is delegation of duties? Which duties may be delegated?
Delegation occurs when Party A promises performance for B and then delegates performance to C.
All duties may be delegated, except:
- duties involving personal judgment/skill
- delegation would change person receiving performance’s expectancy
- special trust was put into delegator
- contract says no delegation
