Assignment and Delegation

Restatement 2d § 328(1):

"[A]n 'assignment of the contract' . . . is an assignment of the assignor's rights and a delegation of his unperformed duties under the contract."

Assignments are described fairly technically:

"[a]n assignment of a right is a manifestation of the assignor's intention to transfer it by virtue of which the assignor's right to performance by the obligor is extinguished in whole or in part and the assignee acquires a right to such performance."

assignments for value

-when the assignor has received consideration for the assignment. one in which the assignee has given consideration to the assignor for the assignment.

Two types of assignments

1) gratuitous assignments 2) assignments for value

Restatement (Second) of Contracts §317 (2). Assignment of a Right...

A contractual right can be assigned unless a)the substitution of a right of the assignee for the right of the assignor would materially change the duty of the obligor, or materially increase the burden or risk imposed on him by his contract, or materially impair his chance of obtaining return performance, or materially reduce its value to him, or the assignment is forbidden by statute or is otherwise inoperative on grounds of public policy, or assignment is validly precluded by contract.

KEEP IN MIND

An assignment of the contract is both an assignment of a party's rights and a delegation of that party's duties. Because policymakers, judges, scholars, and litigants tend to use the term "assignment" without specifying whether they mean an assignment of rights or an assignment of the contract, it is important to read closely and pay careful attention to what they mean when they use that word.

Amy has a Lotto ticket with five of the six numbers on it in last week's drawing. It is worth $1,500. Amy wants to assign the right to collect the money to her sister, Dianne. Amy gives Dianne the ticket and says, "I know you have a big payment due next week and are struggling, so I'd like you to have these lottery winnings." For purposes of this problem, assume Dianne has not yet said anything in response to Amy's offer. → Has an effective assignment taken place? → Yes, because the purported assignment is accompanied by a writing.

Correct. In this problem, Amy is the assignor, the lottery commission is the obligor, and Dianne is the assignee. While Restatement 2d § 327(1) states the general rule that assignees must manifest acceptance to the assignment before they are effective, this problem illustrates one of the exceptions to the rule. An assignment is irrevocable and effective when there is a delivery of a writing or token to a third party evidencing the assignment. Restatement 2d § 327(1)(b). Here, there is a valid assignment because of the delivery of a writing (the lottery ticket) to a third party, Dianne. Therefore, Dianne need not assent to the assignment to make it effective.

Larry owes David $1,500. Mary contracts with David whereby she will paint David's master bedroom if David will assign his right to receive the $1,500 to Mary's daughter Frieda. David agrees to and assigns his right to Frieda. → When is the assignment effective? → As soon as David manifests his intent to assign the payment to Frieda.

Correct. In this problem, Larry is the obligor because he is the promisor of the payment of money to David, David is the assignor because he originally had the right to the money, and Frieda is the assignee because she is the party that is being assigned the right to collect the money. As stated in Restatement 2d § 327, the general rule is that the assignee must agree to the assignment to make it effective. However, there are two exceptions to this rule. The first is if a third party other than the assignee has given the assignor consideration for the assignment. Restatement 2d § 327(1)(a). That is what occurred here. Mary (a third party other than the assignee), agreed to paint David's bedroom (gave consideration) in exchange for David assigning the right to Frieda. Therefore, (A) is correct because Frieda does not need to accept the assignment in this situation to make it effective.

Gardener has a contract to do the landscaping at Owner's home for $2,500 per year. Gardener delegates the obligation to do the work to Landscaper. Gardener does not possess any special talents making his landscaping services different from any others, and Landscaper is known for doing good work. Assuming a court would find the delegation enforceable, which of the following statements is most accurate?

Gardener only has the duty to landscape Owner's home, but both Gardener and Landscaper have the right to landscape Owner's home. Correct. This answer choice accurately sets forth the legal effects of a delegation—it gives the delegate the right, but not the obligation, to render performance to the obligee. Restatement 2d § 318(3). As Gardener delegated the duty to Landscaper, Landscaper gained the right to perform to Owner, but does not have the obligation to perform. This means that if neither Landscaper nor Gardner perform the required landscaping, Owner's only remedy is to sue Gardner, because only Gardner has the obligation to perform under the contract. Note that if Gardner wanted to be off the hook under the contract and have Owner only be able to recover from Landscaper for performance, the parties would need to enter into a transaction known as a "novation" under Restatement 2d §§ 279(2), 280, not a delegation under Restatement 2d § 318.

ASSIGNMENT AND DELEGATION

In an assignment, there are two contracts: the original agreement, followed by a second contract in which contractual rights obtained under the first agreement are assigned to a third party.

Restatement § 324 Mode of Assignment in General

It is essential to an assignment of a right that the obligee manifest an intention to transfer the right to another person without further action or manifestation of intention by the obligee. The manifestation may be made to the other or to a third person on his behalf and, except as provided by statute or by contract, may be made either orally or by a writing

IDENTIFYING AN ASSIGNMENT

One of the key things to look for in an assignment is a transfer of an existing contractual right, with no other action necessary, for only existing contractual rights with no other action needed can be assigned. Id. Even then there are restrictions stating that some rights cannot be assigned. Restatement 2d § 317(2).

Example

The delegate, which is the party who was not a party to the original contract, but who owes the obligation of performance to the obligee after the delegation. Here, that is Super Vacation because it was not a party to the original contract but who, after the delegation, now has the duty to book Brett's vacation.

Example

The delegating party, which is the party who transfers a duty of performance under the contract to another. Here that is Tom's, since Tom's had a duty to book Brett's vacation that it transferred to Super Vacation. (Note that some older cases called the "delegating party" either the "obligor" or the "delegator.")

Example

The obligee, which is the party who was in the contract originally with the delegating party and was initially owed the duty by the delegating party but which, after the delegation, is owed that duty by another. Here, that is Brett because Brett originally was owed a duty to have a vacation arranged by Tom's and who, after the delegation, is owed that duty by Super Vacation.

Gratuitous assignments

a)consideration is not required b)The only relationship to examine is the one between Amy (the assignor) and Brenda (the assignee)

Absent evidence to the contrary, when a party "assigns the contract" or "all their rights under the contract" to another party, it acts as both

an assignment of rights and a delegation of duties under the existing contract. Restatement 2d § 328; UCC § 2-210(4).

Contract right are

assigned

APPLIED: One of the requirements for an effective assignment is that there be an

assignment of an existing contractual right "without further action or manifestation of intention by the obligee." Restatement 2d § 324. Here, because Sasha promised to transfer the right in the future and upon a certain condition, there is not a present intention to transfer the right. Therefore, no assignment has taken place. This is only a promise to assign a "future right," as provided for under Restatement 2d § 321(2).

In an assignment of rights, the person making the assignment (who will be one of the original contracting parties) is called the

assignor

contract duties are

delegated

The original contracting party whose obligation is assigned is the

obligor

If you don't want a party to be able to delegate their duties

put it in the contract

An unenforceable assignment simply leaves the contracting parties in the

status quo: Each must perform as originally agreed.

Delegations are permissible except when barred by the contract or public policy, or when the obligee's interests will be

substantially harmed by having the delegatee—rather than the delegator—performing. A failed delegation is very different than a failed assignment of rights: It is an anticipatory breach of contract. Finally, even when a delegator has effectively transferred its obligations to the delegatee, the delegator can still face liability if the delegatee breaches the contract.

The person to whom the assignment of rights is made (who will be a stranger to the original contract) is called

the assignee.

courts may refuse to enforce a purported assignment for several reasons, including when it places an

undue burden on the obligor.

Assignments of rights are generally

valid. As soon as the obligor has notice of the assignment, the obligor must honor it and perform for the assignee, rather than the assignor.

What is novation

when one party allows the substitution of another party to an agreement. -plain words

UCC §2-210. Delegation of Performance; Assignment of Rights

1)A party may perform his duty through a delegate unless otherwise agreed or unless the other party has a substantial interest in having his original promisor perform or control the acts required by the contract. No delegation of performance relieves the party delegating of any duty to perform or any liability for breach. 2)Unless...otherwise agreed, all rights of either seller or buyer can be assigned except where the assignment would materially change the duty of the other party, or increase materially the burden or risk imposed on him by his contract, or impair materially his chance of obtaining return performance. A right to damages for breach of the whole contract or a right arising out of the assignor's due performance of his entire obligation can be assigned despite agreement otherwise... 3)Unless the circumstances indicate the contrary a prohibition of assignment of "the contract" is to be construed as barring only the delegation to the assignee of the assignor's performance. 4)An assignment of "the contract" or of "all my rights under the contract" or an assignment in similar general terms is an assignment of rights and unless the language or the circumstances (as in an assignment for security) indicate the contrary, it is a delegation of performance of the duties of the assignor and its acceptance by the assignee constitutes a promise by him to perform those duties. This promise is enforceable by either the assignor or the other party to the original contract. 5)The other party may treat any assignment which delegates performance as creating reasonable grounds for insecurity and may without prejudice to his rights against the assignor demand assurances from the assignee (Section 2-609).

Restatement Second of Contracts § 321. Assignment of Future Rights

1)Except as otherwise provided by statute, an assignment of a right to payment expected to arise out of an existing employment or other continuing business relationship is effective in the same way as an assignment of an existing right. 2)Except as otherwise provided by statute and as stated in Subsection (1), a purported assignment of a right expected to arise under a contract not in existence operates only as a promise to assign the right when it arises and as a power to enforce it.

For an assignment to be valid and enforceable (against the assigner's creditor):

1)The assignor must express the intent to relinquish the right in question to the assignee 2)The assignor can't retain any control over the assignment 3)The assignor cant keep a power of revocation 4)The obligor must later pay the funds to the assignee.

Restatement (Second) of Contracts §332. Revocability of Gratuitous Assignments

1)Unless a contrary intention is manifested, a gratuitous assignment is irrevocable if a)the assignment is in a writing either signed or under seal that is delivered by the assignor; or b)the assignment is accompanied by delivery of a writing of a type customarily accepted as a symbol or as evidence of the right assigned. 2)Except as stated in this Section, a gratuitous assignment is revocable and the right of the assignee is terminated by the assignor's death or incapacity, by a subsequent assignment by the assignor, or by notification from the assignor received by the assignee or by the obligor. 3)A gratuitous assignment ceases to be revocable to the extent that before the assignee's right is terminated he obtains a)a payment or satisfaction of the obligation, or b)judgment against the obligor, or c)a new contract of the obligor by novation. 4)A gratuitous assignment is irrevocable to the extent necessary to avoid injustice where the assignor should reasonably expect the assignment to induce action or forbearance by the assignee or a sub-assignee and the assignment does induce such action or forbearance. 5)An assignment is gratuitous unless it is given or taken a)in exchange for a performance or return promise that would be consideration for a promise; or b)as security for or in total or partial satisfaction of a preexisting debt or other obligation.

Restatement Second of Contracts § 322. Contractual Prohibition of Assignment

1)Unless the circumstances indicate the contrary, a contract term prohibiting assignment of "the contract" bars only the delegation to an assignee of the performance by the assignor of a duty or condition. 2)A contract term prohibiting assignment of rights under the contract, unless a different intention is manifested, a)does not forbid assignment of a right to damages for breach of the whole contract or a right arising out of the assignor's due performance of his entire obligation; b)gives the obligor a right to damages for breach of the terms forbidding assignment but does not render the assignment ineffective; c)is for the benefit of the obligor, and does not prevent the assignee from acquiring rights against the assignor or the obligor from discharging his duty as if there were no such prohibition.