Assignment, Delegation

Assignments limited by contract

> An express term prohibiting assignment altogether will be enforced -But law favors assignment, thus, a term prohibiting assignment must be clear and will be narrowly construed. > An express term requiring the obligor's consent for assignment will be enforced

Delegation limited by Contract

> As with assignment, a contract provision expressly prohibiting delegation is enforceable.

Assignments limited by law

> Assignment is not permitted where it would impose (cause hardship) on the obligor - Rights may not be assigned if this would materially change the obligor's duty; - Increase the burden or risk imposed by the contract; - Impair the obligor's prospects of getting return performance; - Or otherwise substantially reduce the contract's value to the obligor.

Effect of Delegation Where the Delegate Has Assumed the Obligor's Duties Effect on Delegate:

> Effect on the Delegate: If the delegate expressly promises the obligor to perform the obligor's duties, the delegate is said to have assumed the duties of the obligor. + Then delegate is under a duty to the obligor, and it usually follows that the delegate is under a duty to the obligee (the obligee is an intended third-party beneficiary of the delegate's promise to the obligor). > In this case, the delegate is liable to both the obligor and the obligee for failure to perform the duties

Effect of Delegation Where the Delegate Has Not Assumed the Obligor's Duties

> Effect on the Delegate: w/o an assumption, the delegate is not liable to anyone > Effect on the Original Obligor: An effective delegation (w/o both an assumption and a novation) does not relieve the obligor of its duty to perform or of liability for breach. Obligor remains liable to the obligee in the event of the delegate's nonperformance. Delegation does not discharge duty but subsequent performance of that duty by the delegate will discharge the duty

Effect of Delegation Where the Delegate Has Assumed the Obligor's Duties Effect on the Original Obligor:

> Effect on the Original Obligor: The assumption of the obligor's duties does not relieve the obligor from its duties to the obligee. Though the delegatee's assumption makes the delegate liable to the obligee, it does not discharge the duty to the obligee of the original obligor. As a result of the assumption, the delegatee and the delegating party are both under a duty to render the same performance.

Effect of the Assignment

> Once there's an assignment (obligor receives notice of it), the obligor is required to provide the performance to the assignee rather than the obligee. > In the event that the obligor fails to perform, the assignee can sue the obligor for breach of contract. + The obligor may raise any applicable contract defenses, including defenses based on formation of the original contract between the obligor and the obligee/assignor.

The Right to Delegatee (harder to delegate than assign) Delegation of contractual duties is generally permissible provided that

> it does not impair the reasonable expectations of the party to whom the performance is due. > An obligor is entitled to delegate his contractual duties unless this violates the contract or violates public policy.

Present assignments vs. Promise to collect and pay or promise to assign:

A promise to collect and pay or a promise to assign is not a valid assignment of rights.

In assignment situations, who can sue whom: Assignee vs. Assignor:

An assignee can sue the assignor for wrongfully revoking an irrevocable assignment.

In assignment situations, who can sue whom: o Assignee vs. obligor:

An assignee may sue the obligor. The obligor may raise against assignee any defense it might have had with the assignor.

In assignment situations, who can sue whom: Assignor [for consideration] vs. obligor:

An assignor FOR consideration may not sue obligor. This is a revocation of an irrevocable assignment.

Delegation limited by Law

Not every performance is delegable. If an obligor attempts to delegate a non-delegable performance, the purported delegation is not effective and the oblige is entitled to insist upon performance by the original obligor. + A duty is non-delegable when obligee has a substantial interest in having the obligor herself perform or control the duty. + Even when duty non-delegable, obligee can waive right, by express provision in original contract or by consenting to delegation later.

Obligor

Other party to the contract

Payment by obligor who didn't know about the assignment:

Payment by obligor to assignor is effective until obligor knows of the assignment. Similarly, modification agreements between obligor and assignor are effective if the obligor did not know of the assignment.

Assignee

Person to whom a contractual right is assigned.

Obligee/Assignor

Person who assigns a contractual right

Obligee

The other party to the contract

When third-party does not perform:

When delegate does not perform, the delegate is only liable if she received consideration from delegator. The delegator is always liable whether the delegate received or didn't receive consideration.

If you don't have an existing right

You can't give away what you don't have, so if you don't have an existing right, ownership of a contractual right, you can't assign it.

Assignment

a voluntary manifestation of intention by the holder of an existing right to make an immediate transfer of that right to another person.

Delegatee

person who assumes the duty

Delegation

the act by which one owing a duty manifests an intention to confer another person the power to perform that duty.

Obligor/Delegator

the person who delegates her contractual duty

UCC § 2-210. Delegation of Performance; Assignment of Rights. *5 (1) (2)

(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.

§ 317. Assignment of a Right. *2 (1)

(1) An 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.

§ 318. Delegation of Performance of Duty.

(1) An obligor can properly delegate the performance of his duty to another unless the delegation is contrary to public policy or the terms of his promise. (2) Unless otherwise agreed, a promise requires performance by a particular person only to the extent that the obligee has a substantial interest in having that person perform or control the acts promised. (3) Unless the obligee agrees otherwise, neither delegation of performance nor a contract to assume the duty made with the obligor by the person delegated discharges any duty or liability of the delegating obligor.

§ 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.

An assignment requires:

(1) a voluntary manifestation of assent to assign and (2) the immediate transfer of an existing right

Generally contractual duties are delegable unless

(1) the contract prohibits delegations or prohibit assignments; (2) the contract calls for very special skills; or (3) the person to perform the contract has a very special reputation.

§ 317. Assignment of a Right. *2 (2)

(2) A contractual right can be assigned unless: + 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.

UCC § 2-210. Delegation of Performance; Assignment of Rights. *5 (3) (4) (5)

(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.

Contract Rights (the right to receive a performance from someone else)

+ are property rights and are therefore freely "assignable," (transferrable to another person). + Obligee can assign her rights to an assignee without the consent of the obligor.

Situations where Assignments are Limited

-By Contract -By Law

A gratuitous assignment or an assignment lacking consideration can be revoked if:

1. Assignor dies 2. Assignor assigns to a different person 3. Assignor notifies the assignee or obligor that the assignment has been revoked

Multiple Assignments: o Gratuitous assignments: Generally in gratuitous assignments, the last assignee wins. However, if a gratuitous assignment is not revocable because:

1. It is the subject matter of a writing delivered to the assignee 2. The assignee has received some sort of indicia of ownership, or 3. The assignee has relied detrimentally, then it will prevail over a later assignment.