Business Law Chapter 19

Rights that cannot be assigned

*1) Rights that are personal in nature.* Meaning the obligor has promised something specific to the person receiving it. Third parties cannot legally become the recipient of such situations unless the only part of a contract left to be fulfilled is the payment, because rights to payment can always be assigned. For Example, A worker received $10,000 to sign an agreement not to compete for one year if he left the comp. The company was sold and the worker refused to sign a noncompete agreement with the new firm and he quit and went to work for a competitor. When the new company sued him to enforce the noncompete agreement he had with the other comp, the court ultimately found that the agreement could not be assigned. 2) *Rights that increase the obligor's risk or duties.* For example, Ben agrees to replace the siding on Erin's two-bedroom ranch. Erin cannot assign her right to Ben's services to Chris, who lives in a three-story, five-bedroom house, because Ben's duties would be greatly increased by the change. 3) *Rights whose assignment is prohibited by contract.* When parties include an antiassignment clause in their contract, the parties are attempting to limit their ability to assign their rights under the contract. If worded improperly or ambiguously, the clause does not effectively limit assignments. But the right to assign monetary payments cannot be denied, also these clauses do not affect assignments made by operation of law, and assignments of the right to receive damages for a breach of contract to sell goods or services are unaffected. 4. *Rights whose assignment is prohibited by law or public policy.*

Duties that Cannot be Delegated

1. *duties that are personal in nature.* Example, if you hire a famous artist, she cannot delegate his duty. Someone who was sought out for his management skills, his contractual duties are considered personal and therefore cannot be delegated. 2. *duties for which the delegatee's performance will vary significantly from the delegator's.* When performance would differ substantially from what the obligee contractually has the right to, courts will rule that the delegation is ineffective. 3. *duties in contracts that forbid delegations.*

Notice of Assignment

Although notice need not be given for a valid assignment, it is usually a good idea for the assignor or the assignee to notify the obligor. Assignments are effective immediately regardless of notice, but by providing notice the assignor can help avoid two serious complications. The first possible complication occurs if the obligor fulfills the contract as written. Because fulfilling the contract discharges the obligor's duties, the act also discharges the assignee's claim on the assignor's right. However, once given notice, the obligor can discharge his contractual obligations only by fulfilling the contract for the assignee. For example, suppose Stefan contracts Latoya to purchase her speedboat. Latoya assigns her right to collect Stefan's money to Meghan. Neither Latoya nor Meghan notifies Stefan of the assignment. Accordingly, Stefan pays Latoya for the boat. His contractual duties have been discharged, and Meghan cannot request performance from him. Had Stephan been notified about the assignment, the only way he could fulfill his contractual obligations would be by paying Meghan the money owed to Latoya. If, after receiving notice, Stefan pays Latoya, Meghan may still legally request that he pay her. Giving the obligor proper notice avoids such problems with performance. The second complication occurs when an assignor assigns two or more parties the same right, and confusion arises as to which party has the right to the contract. Legal Principle- The assignee should always give notice to the obligor as soon as possible after receiving the assignment, because the obligor may satisfy his or her obligations by performing for the assignor until receiving notice of the assignment from the assignee.

Obligees

Contractual parties who agreed to receive something from the other party.

Party gains rights to a contract in two situations.

In the first, one of the contracting parties transfers rights or duties to the third party, in the second, the third party is a direct beneficiary of a contract between two parties.

Example

Sheila assigns her contractual rights to Tony. A week later, she assigns the same rights to Cho. Under the first assignment in time rule, Tony legally has Sheila's rights to the contract. However, if Cho gives notice first and the state in question uses the English rule, although Sheila assigned her rights to Tony first, legally Cho possesses them.

Assignment of the contract

When a court cannot clearly tell what the parties intended, it usually considers the assignment to be of both rights and duties.

delegation

a *delegation* occurs when a party to a contract -a *delegator* transfers her duty to perform to a third party- a *delegatee*- who is not part of the original contract. delegations transfer duties. One important distinction between assignments and delegations is apparent in the rights of the transferring party. After making an assignment, the assignor has no right left to the original contract. After making a delegation, however, the delegator is not relieved of his duty to perform. Legal principle- A party transferring her or his duties under the contract is the delegator, and the one receiving the transfer is the delegatee. After the delegation, although the delegatee is bound to perform, the delegator remains liable if the delegatee fails to perform.

Privity of Contract

a contract is a private agreement between the parties who have entered into it, and traditionally these parties alone have rights and liabilities under the contract.

English rule

a rule that states that the first assignee to give notice of assignment to the obligor is the party with rights to the contract

Obligators

contractual parties who agreed to do something for the other party.

First assignment in time rule

gives the contractual right to the first party granted the assignment.

Assignment

occurs when a party to a contract---an *assignor*--- transfers her rights to receive something under the contract to a third party---and *assignee*. Example, Bina agrees to sell her car to Jose for $8,000. She then assigns her right to receive Jose's payment to Kelly. Kelly, who was not party of the original contract is an assignee and now has the right to receive payment from Jose for Bina's car. When an assignor transfers her rights to an assignee, the assignor legally gives up all rights she had to collect on the contract. Legal Principle- A person who transfers his or her rights under a third party is an assignor, and the person who receives the transfer and is not entitled to enforce the rights is the assignee.

The Restatement (Second) of Contracts

takes a position between the first assignment in time rule and the English rule. It grants legal rights to the first assignee in most situations. However, if the first assignment is legally voidable or revocable by the assignor, subsequent assignments are considered evidence of the voiding ore revocation of the first assignment and the later assignee has legal rights to the contract. Also, the later assignee is considered the legal owner of thr contractual right if she offers something to the assignor as consideration and then obtains (1) performance by the obligor on his duty, (2) judgment requring performance by the obligor, (3) a new contract with the obligor, or (4) evidence frequently used to signify a contractual right (a writing indicating a contractual obligation).