Chapter 14 ThirdParty Rights

The assignor may assign any right unless:

(1) doing so would materially change the obligation of the obligor, materially burden him, increase his risk, or otherwise diminish the value to him of the original contract; (2) statute or public policy forbids the assignment; or (3) the contract itself precludes assignment. The common law of contracts and Articles 2 and 9 of the Uniform Commercial Code (UCC) govern assignments.

Assignment of a right

-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 the right to such performance

Five Exceptions:

1. Material Change in Duties of the Obligor 2. Assignment of Personal Rights 3. Assignment Forbidden by Statute or Public Policy 4. Contracts That Prohibit Assignment

Nondelegable Duties

1.Personal services 2. Public Policy 3. Delegations barred by contract

Contracts That Prohibit Assignment

Assignability of contract rights is useful, and prohibitions against it are not generally favored. Many contracts contain general language that prohibits assignment of rights or of "the contract." Both the Restatement and UCC Section 2-210(3) declare that in the absence of any contrary circumstances, a provision in the agreement that prohibits assigning "the contract" bars "only the delegation to the assignee of the assignor's performance." In other words, unless the contract specifically prohibits assignment of any of its terms, a party is free to assign anything except his or her own duties.

Assignment Forbidden by Statute or Public Policy

Various federal and state laws prohibit or regulate some contract assignment. The assignment of future wages is regulated by state and federal law to protect people from improvidently denying themselves future income because of immediate present financial difficulties.

Material Change in Duties of the Obligor

When an assignment has the effect of materially changing the duties that the obligor must perform, it is ineffective. Changing the party to whom the obligor must make a payment is NOT a material change of duty that will defeat an assignment Nor will a minor change in the duties the obligor must perform defeat the assignment.

Assignment of Personal Rights

When it matters to the obligor who receives the benefit of his duty to perform under the contract, then the receipt of the benefit is a personal right that cannot be assigned

Successive Assignments:

an assignor assigns the same interest twice. The first assignee will take precedence over any subsequent assignee If subsequent assignee gives consideration for the assignment and has no knowledge of the prior assignment, he takes precedence whenever he obtains payment from, performance from or a judgment against the obligor

Under the UCC,

any assignments of rights in excess of $5,000 must be in writing, but otherwise, assignments can be oral and consideration is not required: the assignor could assign the right to the assignee for nothing

Donee beneficiary:

creditor intends for the donee to have the benefit of the promisor's performance

Creditor beneficiary:

one to whom the promisor agrees to pay a debt of the promisee

Intended Beneficiaries:

one who is entitled under the law of contracts to assert a right arising from a contract to which he or she is not a party

General Rule:

persons not a party to a contract cannot enforce its terms; they are said to lack privity, a connection to or relationship with the contracting parties. But if the persons are intended to benefit from the performance of a contract between others, then they can enforce it: they are intended beneficiaries

Delegation:

the transfer of the duty to perform under a contract to a third party

Partial Assignment:

when one assigns part of a contractual right but ONLY IF the obligor can perform that part of his obligation separately from the remainder of his obligation If a lawsuit arises, both parties must be made parties