Repossession and privity (1 Viewer)

[47.46.45]

So. Imagine the following scenario. Dave loans $20 000 from Musafa. Dave has a Nissan Pulsar, worth $20 000 (it's a really nice Pulsar or something). Dave sells the Pulsar to Kate, who buys it without realising that it's encumbered. Dave flees the country and Musafa reposesses the Pulsar.
How does that work with respect to privity? It seems weird that Musafa can enforce the contract to Kate's detriment when she wasn't a party to their contract? Or is the idea that the contract between her and Dave was invalid?
This isn't a thinly veiled assignment question, just something that I'm curious about after using the REVS service so many times. And I don't really understand privity (missed the lesson due to epic car crash) and I figured maybe for once BOS will be helpful instead of going for the "go and read your textbook" approach.

 

[Frigid]

i thought a bona fide purchaser for value without notice would be protected by equity?

 

[amaccas]

double post

 

[amaccas]

i agree

but what if she was deemed to have 'constructive knowledge' would this change anything?

 

[hfis]

Your example mentions that the car was encumbered, but doesn't state that the car was security for the loan, which is a big issue (however nitpicky). At the most, all this problem provides for is that Musafa can fall back on the claim of right defence if prosecuted for theft, but he would still have to return the car or give just compensation when discharged.

If the car was in fact security for the loan, then Kate's interest is merely an equitable one, with the legal interest now being vested in Musafa. However, as she was a bona fide purchaser without notice, her equitable interest will operate to procure specific performance of the contract of sale, and vest in her the legal interest also. If Dave was insolvent instead of missing, then it might be possible to relation-back the purchase to the insolvency, which would defeat the transaction. However, the fact that Kate was an innocent party without notice is a massive strike against any case Musafa can bring.

If she had notice that the goods were encumbered, then the situation would be different, and fall under the umbrella of conversion/detinue.

 

[hfis]

but what if she was deemed to have 'constructive knowledge' would this change anything?

I think it might. I'd check, but I seem to have misplaced my torts textbook... look under 'conversion' and it should tell you.

I don't think this is really a privity problem. A and B have a contract between themselves exclusively, and A and C have a similar contract. Fulfilling one contract prevents the operation the other (ie. an interference with rights) - as opposed to there being only one contract with two parties giving consideration + one nominal party. The answer is an amalgamation of the tort of conversion and property law generally.