Assignment and Delegation

Visualization of a Delegation

Obligee <- Delegator (Obligor) <- Delegate

Visualization of an Assignment

Obligor -> Assignor (Obligee) -> Assignee

What is a Material Change

A major change relative to the contract the parties have, not the personal preference of the parties Ex: Changing where payments are sent is not a material change. Requirement to extend credit to different party generally increases risk.

Prohibition by K

Balance the right to alienate property w/ freedom of contract General Rule: A prohibition of assignment of the K is construed as meaning duties may not be delegated UNLESS language or circumstances indicate otherwise. Note: Courts MAY treat "prohibited" assignment as breach of K, but NOT void the assignment.

Rule for Delegation of Duties

Duties may be delegated UNLESS: 1) Otherwise agreed upon 2) There is substantial interest in the performance of the ORIGINAL promisor

UCC Prohibition by K

The right to sue for breach of the whole K, OR a right that has been FULLY EARNED by performance, CAN be assigneddespite agreement otherwise

Examples of Statutory Prohibition / Public Policy

-Claims Against the Gov. (Statutes often also include exceptions) -Wage Assignments (Statutes generally applyto specific types) (May be construed as revocable order to pay)

Rule of Right to Assign

A K is a property right, hence assignable UNLESS the assignment: 1) Materially changes duties OR 2) Increases the burdens or risks OR 3) Impairs the chance of receiving return performance 4) Is prohibited by the K 5) Is prohibited by statute 6) Is prohibited by public policy Note: The Obligor DOES NOT have to consent to assignment.

Vesting of Rights Rule

An assignee's rights vest when notice is given to the obligor, and it is NOT optional for the Obligor - Obligor MUST "pay" assignee once he is given notice by assignee. Note: If Obligor pays assignor, he still owes assignee Rule: Once rights vest, obligor and assignor CANNOT change the K (mostly), or set off later claims

Difference between Assignments and Delegations

Assignments occur when rights are given Delegations occur when duties are given Rule: Every time there is a right, there is a corresponding duty

Defenses of Assignees

BIG RULE: Assignees "stand in the shoes" of the assignor, hence defense on the assigned contract are valid against the assignee.

Effects of Delegations

General Rule: Duties are transferred w/ rights UNLESS the language or circumstances dictate otherwise. Note: Acceptance of a delegation generally implies a promise to perform

Rule of Assignments

Rights are IMMEDIATELY transferred and may only be partial. Caveat: There may be a future event within the contract that triggers an assignment

Rule of Assignor / Obligator in Delegations

Rule: Assignor / Delegator has "stand-by liability" after the assignment / delegation. Hence the obligation does not go away w/o novation and one is STILL responsible if delegate does not perform/pay. Note: When a delegate promises to perform, the original obligee is a 3PB of the promise.