Third-Party Problems Flashcards
When does an entrustment issue arise under Article 2?
An owner who entrusts goods to a merchant who deals in goods of the kind has no rights against a bona fide purchaser
What are an owner’s remedies for violation of entrustment?
The owner may sue the dealer for conversion
When is a third-party beneficiary relationship created?
When two people enter into a contract intending to benefit a third party
Who is the third-party beneficiary in the contractual relationship?
A person who is not a party to the contract, but has rights because the contract was intended for their benefit
Who is the promisor in the TPB contractual relationship?
The party who promises to perform for the TBP
Who is the promisee in the TPB contractual relationship?
The party who secures the promise
Who is an intended beneficiary?
The person to whom performance is to eb give under the contract. Only intended beneficiaries have legal rights.
Who is a donee beneficiary?
A person who is getting the performance as a gift
Can a TPB contract be rescinded or modified?
Either the promisee or the promisor can rescind or modify until the rights of the TPB have vested.
When does a TPB’s rights vest?
When the TPB learns of the contract and relies on it. There is an exception, however, when the contractual language holds to the contrary.
Who is a promisor liable to in a TPB contract?
- The promisee
2. The TPB (has the same rights as the promisee)
Who is the promisee liable to in a TPB contract?
A creditor beneficiary, not a donee beneficiary.
What is the general rule regarding delegation of contractual duties?
Contractual duties may be delegated without the consent of the person to whom performance is owed (“the obligee”).
Who is the obligee under a contract?
The person to whom performance is owed.
Can delegation be prohibited?
Yes, delegation and assignment may be prohibited by the terms of the contract.
Absent express prohibition in the contract, when is delegation otherwise not allowed?
When the contract is based on the obligor’s special skill or reputation
Who is the obligor under a contract?
The person who owes the duty
Who is liable to the obligee when a delegation occurs?
- The delegating party remains liable
2. The delegate is liable if he received consideration
What is an assignment of rights?
Two people make a contract. Later, one (the “assignor”) transfers his rights to a third party (the “assignee”). The party who owes the duty to the assignee is the obligor.
How is an assignment different from a TPB contract?
In an assignment, the third party appears later.
How is an assignment created?
Must have clear language of a present transfer. A promise to assign is insufficient.
Is consideration required for an assignment?
No, but it may be given. If no consideration is given, it is a gift assignment and easily revocable.
Are there any restrictions on the assignability of contractual rights?
Yes. The contractual language controls and may prohibit assignment. Otherwise, the duties of the obligor may not be substantially changed when assigned.
In an assignment, to whom is the obligor liable?
The assignee. The assignee steps into the shoes of the assignor. The obligor, however, must know of the assignment to be liable.
Who prevails when there are multiple gratuitous assignments?
The last gratuitous assignee prevails over earlier gratuitous assignees.
NY Distinction - A gratuitous assignment in writing is irrevocable.
Who does the first assignee for consideration prevail over?
All subsequent assignees, whether gratuitous or for consideration.
When can a later assignee for consideration prevail over the first assignee for consideration?
- If the later assignee does not know about the earlier assignee; and
- Is the first to get payment from or a judgment against the obligor
