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What is the rule on ENTRUSTMENT?
(i.e., when does an owner have rights against a third-party?)
An owner who entrusts goods to a MERCHANT
who deals in goods of the kind
has NO RIGHTS against a bona fide purchaser
Facts to watch for
- 1) Merchant who
- 2) Deals in goods
- 3) of the kind
Thus, if any of those three are missing, the owner has rights against the third-party
When can a TPB enforce a contract?
an INTENDED beneficiary can enforce the contract once his/her RIGHTS HAVE VESTED
- 1) rights become vested when the TPB knows about the K or when he/she benefits from it
- 2) only the INTENDED TPB has rights
- 3) once vested, the intended TPB must consent to any modifications or recessions of the K
- 4) promisor is liable to intended TPB for breach
- 5) promisee is liable to intended TPB for promisor's breach if TPB was also a CREDITOR beneficiary (i.e., promisee's purpose was to satisfy debt to TPB) [rare]
DELEGATION OF DUTIES
1) What is the general rule?
2) What are the exceptions?
Can delegate without consent
of obligee (person to whom performance is owed)
EXCEPTIONS (delegation w/o consent will be a breach of K)
- 1) contrary language in K, or
- 2) special skills or reputation
ASSIGNMENT OF RIGHTS
- Need language of a PRESENT ASSIGNMENT (mere promise to assign in the future is not effective)
- Can't SUBSTANTIALLY increase obligor's duties
- Last-in-time GRATUITOUS assignment prevails
- FIRST-in-time PAID-FOR assignment prevails against all others (EXCEPT where subsequent assignee for consideration (i) does not know of prior assignment, and (ii) is first to get payment or a judgment against obligor)