Assignment of Rights Flashcards
What is a typical assignment situation?
X (obligor) contracts with Y (assignor). Y assigns his right to X’s performance to Z (assignee)
What is the general rule re: assignment?
In General –> All contractual rights may be assigned
Exceptions:
- Assignment that would SUBSTANTIALLY CHANGE obligor’s duty or risk
Example –> personal service K where service is unique - assignment of FUTURE RIGHTS to arise from FUTURE CONTRACTS
- (not future rights in already existing K’s - Assignment prohibited by law
Example –> wage assignment
What is the effect of express contractual provision prohibiting assignment?
Clause prohibiting “assignment of the contract” –> will be construed only as barring delegation of assignor’s duties
Clause prohibiting “assignment of contractual rights” –> does not bar assignment, but gives obligor right to sue for damages
Clause provides that “assignments will be void” –> will bar assignment
What is the effect of assignment?
- establishes privity of K between obligor and assignee
- extinguishes privity between obligor and assignor
What is necessary for an effective assignment?
- Assignor must manifest intent to immediately and completely transfer her rights.
- writing is usually not required
- Right being assigned must be adequately described
- gratuitous assignment is EFFECTIVE, consideration is NOT required
What are the two categories of assignments?
- Assignment for Value
2. Gratuitous Assignment
What is the relevance of “assignment for value” versus “gratuitous assignment”?
Assignment for value –> not revocable
Gratuitous assignment –> generally revocable unless there is an exception
What is an “assignment for value”?
An assignment is for value IF:
- there is consideration; OR
- it’s taken for security for or payment of a PREEXISTING DEBT
What is a “gratuitous assignment”?
An assignment without consideration
What is the general rule re: revocation of gratuitous assignments?
General Rule –> gratuitous assignments are revocable
EXCEPTIONS:
- obligor has already performed;
- a token chose (tangible thing) is delivered (EXAMPLE –> stock certificate)
- assignment of simple chose (intangible claim, such as contract right) is put in writing; OR
- assignee can show DETRIMENTAL RELIANCE (ie..estoppel)
What are the methods of revocation of a gratuitous assignment (4) ?
- death or bankruptcy of assignor;
- notice of revocation by assignor to assignee or obligor;
- assignor taking performance directly from obligor; or
- subsequent assignment of same right by assignor to another
What is the effect of revocation of gratuitous assignment?
Once assignment is revoked, privity between assignor and obligor is restored, and assignor is once again real party in interest
What rights does Assignee have against obligor?
What defenses does obligor have?
Assignee can sue obligor bc assignee is real party in interest
Obligor has any defense inherent in the contract (Example –> failure of consideration and other defenses that came into existence before obligor had knowledge of assignment)
Obligor CANNOT raise any defenses assignor may have against assignee
What rights does assignee have against assignor?
If assignment is FOR VALUE –> assignor warrants that:
- he has not made previous assignment of same right;
- the right exists and is not subject to any undisclosed defenses; AND
- he will do nothing to interfere w the assigned right.
Assignee –> may sue assignor for breach of any of these warranties
HOWEVER –> assignor will NOT be liable to assignee if obligor is incapable of performing
What happens if there are successive assignments of the same right?
If 1st assignment is revocable –> subsequent assignment revokes it
If it’s irrevocable –> First assignment will USUALLY prevail
EXCEPTIONS (if 2nd assignee paid value and took without notice):
- 2nd assignee gets 1st judgment against obligor
- 2nd assignee gets 1st payment of claim against obligor
- 2nd assignee gets delivery of token chose
- 2nd assignee can proceed against 1st assignee on estoppel theory
