3d Party Issues (mine)

Question 1

What is entrustment (UCC)?

Effect?

Answer 1

Under Art. 2/UCC, an 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 if the merchant wrongfully sells the good

(can only sue the merchant for breach of K)

Question 2

What is a 3d party beneficiary AND what rights does she have?

Answer 2

3PB arrises when two parties (promisor & promisee) enter into a K intending to benefit a 3d party

• 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;
    • (ii) donee beneficiary (more likely) = performance is given as a gift

3PB’s rights:

• Arise upon “vest”
  
  • vesting =
    
    • 1. 3PB learns of the K + detrimentally relies upon it
    • 2. Manifests assent to K
    • OR 3. Brought suit to enforce K
• 3PB’s Rights:
  
  • (default only; can be altered by K)
  • 1. Approve modification/rescission
       * (before rights vest, promisor & promisee can alter w/o permission)
  • 2. Sue for performance
       * Agnst promisor
       * Agnst promisee? ONLY IF creditor beneficiary

Question 3

When can K duties be delegated AND what are the rights of the obligee?

Answer 3

General rule: K duties may be delegated W/O consent of the “obligee” (person to whom obligation is owed)

EXCEPTIONS:

1. The K language cntrls
   
   • If delegation/assignment prohibited
   • Particular effect:
     
     • “no assignments under this K” –> assignment valid, but breach of K
     • “assignment void” –>assignment agreement void + breach of K
2. Delegating party has special skill or reputation

Rights of the obligee:

• General Rule:
  
  • Delegating party REMAINS liable to obligee (privity of K)
  • Delegate not liable to obligee
    
    • UNLESS delegate receives consideration from obligee

(contra novation- here, no agreement by obligee –> no privity of K)

Question 4

What is an assignment?

How create?

What obligations?

Answer 4

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

To create assignment of rights:

1. Present transfer of rights
   
   • (not intent/promise to transfer in future)
2. to a non-party

Restrictions on right to assignment:

• CanNOT “substantially alter” the obligation of the obligor
• Contract language controls
  
  • “no assignment of rights” –> assignemnt valid, K breached
  • “assignment are void” –> assignment void & K breached

Effect:

• 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). –> 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

Question 5

With multiple assignments, which assignee has rights? NOTE: NY Distinction

Answer 5

General Rules:

• Priority:
  
  • First assignee for consideration prevails over all other assignees
• Exception:
  
  • Later assignee for consideration is:
    
    • Bona fide purchaser (unaware of previous)
    • • first to judgment/collect payment
• Gratuitous assignments:
  
  • last gratuitous transfer takes priority over earlier
  • MS: always presume revocation of earlier gift
  • NY DISTINCTION: a gift assignment is IRREVOCABLE if embodied in a signed writing by assignor