THIRD PARTY PROBLEMS

Question 1

ENTRUSTMENT (ARTICLE 2)

Answer 1

An owner who entrusts goods to a merchant who deals in goods of the kind has NO rights against a bona fide purchaser

(specialized definition of merchant)

Question 2

THIRD PARTY BENEFICARY

Answer 2

A person who is not a party to a K, but has rights because the K was intended to benefit her

Question 3

PROMISOR

Answer 3

Party to the K who promises to perform for the third party beneficiary

Question 4

PROMISEE

Answer 4

Party to the K who secures the promise (of performance by the promisor)

Question 5

INTENDED BENFICIARY

Answer 5

Person to whom performance is to be given under the K

Question 6

DONEE BENEFICIARY

Answer 6

A person who is getting the performance as a gift

Question 7

CREDITOR BENEFICIARY

Answer 7

Getting performance to repay a debt

Question 8

RESCISSION AND MODIFICATION IN THIRD PARTY BENEFICIARY CASES

Answer 8

RULE: Promisor and promisee can rescind or modify the K until the rights of the TPB have vested

Question 9

WHEN DO RIGHTS “VEST” WITH THIRD PARTY BENEFICIARIES?

Answer 9

(1) When the TPB learns about it AND
(2) When the TPB relies on it

Question 10

RULES OF LIABILITY IN THIRD-PARTY BENEFICIARY CASES

Answer 10

(1) Promisor is liable to TPB/intended benficiary (only has rights that promisee would have had)
(2) Promisee is liable to a creditor beneficiary
(3) Promisor is liable to promisee

Question 11

DELEGATION OF DUTIES

Answer 11

RULE: Contractual duties may be delegated WITHOUT consent (distinguish novation) of the person to whom performance is owed (the “obligee”)

EXCEPTIONS:

If K prohibits delegation or assignment

If special skill or reputation is involved

Question 12

ASSIGNMENT OF RIGHTS

Answer 12

Where 2 people make a K, and one (assignor) transfers his rights to a third party (assignee)

• MUST have language of present transfer
• Consideration not required
  
  • Gift assignments are valid, but VERY easily revoked

Question 13

“RIGHTS UNDER THIS K ARE NOT ASSIGNABLE”

Answer 13

Means an assignment itself is still valid, but the assignor will be liable to the obligor for BREACH

Question 14

“ALL ASSIGNMENTS UNDER THIS K ARE VOID”

Answer 14

Completely invalidates assignment

Question 15

OBLIGOR LIABILITY TO THE ASSIGNEE

Answer 15

Assignee “steps into the shoes” of the assignor

Will only have teh rights that the assignor would have had

Assignee only has rights against the obligor when obligor is NOTIFIED of the assignment

Question 16

GRATUITOUS “GIFT” ASSIGNMENTS

Answer 16

Last in time rule –> the LAST gratuitous assignee prevails over earlier gratuitous assignees because a later gift assignment revokes an earlier one

IN NY: A gift assignment is IRREVOCABLE if it is embodied in a signed writing

Question 17

ASSIGNMENTS FOR CONSIDERATION

Answer 17

First in time rule –> the FIRST assignee for consideration prevails over all subsequent assignees (as well as prior gratuitous assignees)

EXCEPTION: A later assignee for consideration prevails if he does not KNOW of the earlier assignments AND is the first to get payment from or a judgment against the obligor