Assignment of Rights and Delegation of Duties

Rights of Assignee

1. assignee takes all of the rights of the assignor as the contract stands at the time of the assignment, but she takes subject to any defenses that could be raised against the assignor. 2. assignee's rights are subject to setoff if the transaction giving rise to the setoff occurred prior to the time the obligor was given notice of the assignment 3. assignee's rights are subject to a setoff that arises out of the same transaction 4. assignee is subject to any contract modification made before obligor received notice of the assignment 5. payment by the obligor to the assignor can be raised as a defense, provided the payment was made before the obligor had notice of the assignment

Assignment Revocability - When Gratuitous Assignments are Irrevocable

1. obligor has already performed or promiser estoppel applies 2. if contract right that's being assigned is evidence by a document that symbolizes the right (bankbook, insurance policy, stock certificate), then delivery of the document makes assignment irrevocable 3. delivery of written assignment signed by the assignor to the assignee makes assignment irrevocable

Subsequent Assignment

1. subsequent assignment of the same right revokes any prior revocable assignment 2. if the first assignment was irrevocable, then the first assignee has priority over the second, unless the second assignee is a bona fide purchaser for value without notice of the first assignment, in which case the assignee who obtains payment from the obligor or judgment first will have priority. 3. if the second assignee knows about a prior assignment, then he is estopped from asserting a claim over the first assignee even if he would have otherwise prevailed

Novation

A novation is the substitution of a new contract for an old one when the original obligor is released from his promises under the original agreement. A novation may be express or implied after delegation if: i) the original obligor repudiates liability to the original promisee and ii) the obligee subsequently accepts performance of the original agreement from the delagatee without reserving rights against the obligor

Effect on Delegatee

Acceptance by the delegatee of a delegation of contract duties constitutes a promise to perform those duties. That promise is enforceable against the delegatee if the delegatee has received consideration or there is a consideration substitute that makes the promise enforceable.

Assignment of Rights

Almost all contract rights can be assigned. Partial assignments are permissible, as is the assignment of future or unearned rights

Effect of Assignment of Contract

An assignment of a contract that is not limited to contractual rights (e.g., "this contract is assigned to") is typically treated as both an assignment of rights and a delegation of duties.

Effect on Other Party to the Contract

Any delegation of performance under a contract for the sale of goods may be treated by the other party as creating reasonable grounds for insecurity. The other party may, without prejudice to his rights against the delegator, demand assurances from the delegatee. However, as long as the delegation was permitted, the other party must accept the conforming performance of a delegatee or be in breach of the contract. If the promise is enforceable by the delegator, such as when the promise is supported by consideration, the other party to the contract is treated as a third-party beneficiary of the delegation and may be able to enforce the delegatee's promise.

Delegation of Duties - Exceptions

Delegation is not permitted when 1) a party to the contract has a substantial interest in having the delegating party perform (for example, in a personal services contract involving taste or a special skill), or 2) the delegation is prohibited by the contract. Unless circumstances indicate the contrary, the prohibition on the assignment of a contract (e.g., "this contract may not be assigned"), bars the delegation of duties, even though it does not affect the assignment of rights.

Assignment Requirements

No formalities are needed for an assignment, but there must be a present intent to transfer the right immediately. No consideration is needed, but the lack of consideration would affect revocability of the assignment. Distinguish promise of a future payment: A promise by a party to a contract to pay to monies received pursuant to the contract to third party is not an assignment of the party's contractual rights, but a promise of a future payment. As a consequence, the third party is not an assignee of the contract.

Effect on Delegator

When obligations are delegated, the delegator is not released from liability, and recovery can be had against the delegator if the delegatee does not perform, unless the other party to the contract agrees to release that party and substitute a new one (a novation). Merely consenting to a delegation does not create a novation.

Rights of Assignor

When there is assignment of a party's rights under a contract, and the assignment is not revoked, the assignor cannot enforce the contract.

Assignment Revocability

assignment for consideration: irrevocable gratuitous assignment: if no consideration, assignment is generally revocable

Limitations on Assignments

assignment not allowed if it materially increases the duty or risk of the obligor or materially reduces the obligor's chance of obtaining performance a contract provision can render an otherwise allowable assignment void (e.g., "any assignment of rights under this contract is void") and unenforceable by the assignee against the obligor a contract provision that merely prohibits an assignment (e.g., "An assignment of rights under this contract is prohibited"), while giving rise to an action for breach against the assignor, does not operate to prevent the assignor from assigning those rights (the assignor retains the power to make an assignment) nor the assignee from suing the obligo Unless circumstances indicate the contrary, the prohibition on the assignment of a contract (e.g., "this contract may not be assigned"), does not affect the assignment of contract rights, but only bars the delegation of duties. NOTE: Courts often narrowly interpret a prohibition provision, such as by finding that such a provision only applies to a specific contractual right, and that the assignment in question thus did not violate the provision.

Delegation of Duties - General Rule

generally, obligations under a contract can be delegated

A revocable gratuitous assignment is automatically revoked upon

the assignor's death, incapacity, or bankruptcy

Delegation

transfer of duties and obligations under a contract

Assignment

transfer of rights under a contract