Cengage Advantage Books: Business Law 9th Edition by Arnold Goldman ,William Sigismond

Exercise 1

Facts
Cook retained Carvel, a licensed dealer/broker in the business of buying and selling automobiles and trucks, to purchase a pickup truck for him. Carvel, in turn, negotiated with Altuna Motors to make the purchase in his name and sell the truck to Cook. All payments associated with the purchase of the truck were to go through Carvel, and the purchase order indicated that the truck was being sold to Carvel as a dealer for resale. Carvel forwarded his personal check to the accounting office at Altuna Motors for the purchase price of the truck. The check was acknowledged. In return, the accounting office delivered to Carvel a packet containing the keys to the truck, the owner's manual, and all other papers necessary to close the deal with Cook. The deal was closed, and Cook took possession of the car. In the meantime, Carvel's check bounced due to insufficient funds. Altuna Motors then attempted to cancel the sale to Cook, but it was too late. Altuna Motors then sued Cook to recover the truck and sued Carvel for the amount of the check.
At Trial
Cook, through his attorney, argued in court that he was entitled to keep the truck as a good faith buyer in the ordinary course of business from a merchant seller who was in the business of selling goods of the kind he had purchased from Carvel. He further claimed that Altuna Motors had entrusted possession of the vehicle to Carvel under the entrustment rule of the Uniform Commercial Code (UCC), which, in effect, cloaked Carvel with the appearance of authority to sell.
Questions
1. What is the entrustment rule of the Uniform Commercial Code (UCC)?
2. Was Cook correct by stating in court that he was entitled to keep the truck? Explain.
3. Does Cook have an obligation to return the truck to Altuna Motors? Explain.