Assignment of Rights
What are the requirements for an assignment?
1) Language must indicate a present assignment i.e. "I assign" NOT "I promise to assign" 2) Consideration is generally NOT required 3) Writing requirement is flexible - absent a statute to the contrary, a writing is NOT required. However, the following assignments must be in writing: a) Wage assignments, b) Assignments for an interest in land c) assignment of choses in action more than $5,000, and d) assignments intended as security interests under Art. 9
What is the relevant vocabulary?
1. Assignor - party that assigns a right to receive a benefit to the assignee 2. Assignee - party that receives the assignment 3. Obligor - party that is liable for giving the right to the assignee
What is the exception for the revocability of gratuitous assignments?
A gratuitous assignment ceases to be revocable to the extent that before the assignee's right is terminated: 1) the obligor has already performed i.e. there has been payment or satisfaction of the obligation, or 2) the assignee has obtained a judgment against the obligor, or 3) the assignee has entered into a new contract with the obligor by novation, or 4) the assignee has relied on the assignment in a way that is reasonable, foreseeable, and detrimental *Note - if the assignment is not revocable, then it generally will not be revoked by a later assignment and will take priority over a later assignment
What is the exception to the consideration for assignment rules?
A subsequent assignee for value can take priority over earlier assignees if it is without notice of prior assignments and: 1) it is the first to obtain a judgment against the obligor, or 2) it is the first to obtain payment from the obligor, or 3) it enters into a new contract with the obligor by novation that supersedes the obligation running to the assignor in favor of the new one running to him, or 4) it gets the first delivery of a tangible token or writing, the surrender of which is required by the obligor's contract, or 5) it can set up an estoppel against the first assignee e.g. the first assignee permits the assignor to retain a document that would indicate to a reasonable person that the assignor was the sole owner of the right
What is the common law rule on the limitation of assignments?
An assignment cannot substantially change the duties of the obligor
What is the limitation rule for output/requirement contracts?
An assignment is allowed as long as: 1) Must be a good faith requirement and 2) Cannot be unreasonably disproportionate
What are direct ways a gratuitous assignment can be directly revoked?
By notice of revocation communicated by the assigner to either the assignee or the obligor
What are direct ways a gratuitous assignment can be indirectly revoked?
By: 1) The death or bankruptcy of the assigner, or 2) The assigner taking performance directly from the obligor, or 3) The making of a subsequent assignment of the same right by the assigner to the another
What are the ways a gratuitous assignment can be revoked?
Can be revoked either directly or indirectly
What are the obligor's defenses against assignee?
General rule - any defenses that the assigner has can be raised against the assignee
What is the rule for gratuitous assignments?
It is possible to make a gratuitous assignment but a gratuitous assignment can be revoked
Can the obligor continue paying the assigner after the assignment?
Once there is a notification of the assignment, obligor must pay the assignee to discharge the debt
How does consideration affect assignments?
Rule - the first assignee for consideration has priority over all subsequent assignees and over all creditors of assignor
What is the rule for modification by obligor and assigner?
The contract can be modified until the obligor has received notice of the assignment
How are claims among assignees who did not provide consideration resolved?
The last in time rule - a later gift assignment revokes any earlier ones
What is the rule for entrusting goods to a party?
When someone entrusts goods to a merchant, that merchant has the power to transfer all rights of the purchaser to a buyer in the ordinary course
What are the warranties that come with an assignment for value?
When there is assignment for value, the assignor makes certain implied warranties to the assignee i.e.: 1) the rights assigned actually exist 2) assignor will do nothing to impair the value of the assignment *Note - assignor will not be liable to the assignee simply because the obligor is incapable of performing; assignor does not warrant what the obligor will do
Can an assignee sue the obligor?
Yes, assuming there is a valid assignment