- Assignment of Rights – where 1 person under a contract assigns rights/benefits to someone else.
- Two people make a contract; later on, 1 person transfers his rights under the contract to a third party.
- BAR TIP: An assignment of rights transfers only rights, not obligations (frequently tested). By contrast, an assignment of an entire contract transfers both rights and obligations.
- Example: Batman contracts to provide security for
for $200,000. Batman assigns his rights to the $200,000 payment to Robin. Gotham City
- Assignor: the person who later transfers his rights under a contract.
- Assignee: the person to whom the rights are transferred.
- Obligor: the person who owes the assigned performance.
- Compare with TPB – there are different triggering facts.
- TPB: a 3 parties are involved from the beginning
- Assignment: 2 people contract and a third person appears later on.
- Requirements for Making an Effective Assignment
- Gift assignments are valid.
- Consideration is not required to make the assignment valid.
- However, lack of consideration will affect revocability.
- Must have language of present assignment, NOT future assignment.
- Restrictions on Assignment.
- Contract language controls: distinguish a clause that merely prohibits assignment from a clause that completely invalidates assignment.
contract provides, “Rights under this contract are not assignable.” Batman assigns the right to payment to Robin anyway. Can Robin collect from Batman-Gotham City ? Yes. This language merely prohibits assignment. It says don’t do it. Batman will be liable to Gotham City for breach of contract, but the assignment itself is still valid. Gotham City
- Same facts, except that the contract states, “All assignments under this contract are void.” This language completely invalidates the assignment. It means not only, “don’t do it,” it also means, “it won’t be valid if you do.”
- Assignment cannot substantially change the duties of the obligor.
- A requirements contract is assignable as long as the assignee’s requirements are not out of line with the assignor’s requirements..
contracts to buy all the kryptonite it needs in 2008 from a distributor. Gotham City later assigns its rights under the contract to Metropolis. Does this substantially change the duties of the obligor (the distributor)? Requirements contracts are assignable as long as assignee’s requirements are not out of line with the assignors. Gotham City
- Rights of an Assignee
- Asignee can sue the obligor for breach of contract, but is subject to the same defenses the obligor could have raised against the assignor.
- Payment by the obligor to the assignor is effective unless the obligor is aware of the assignment.
- Multiple Assignments.
- Gratuitous (“gift”) assignments: the last gratuitous assignee in time prevails because a later gift assignment revokes an earlier one. [LAST IN TIME].
- Batman assigns the right to payment from
to Robin as a Chanukah gift. Batman later assigns the same right to charity. To whom should Gotham City make payment? The later gift assignment to charity wiped out the earlier assignment to Robin. Gotham City
- Assignments for consideration
- General rule: the first assignee for consideration prevails because assignments for consideration are much more durable in nature. [FIRST IN TIME]
- [Narrow] Exception to the first in time rule: A later assignee for consideration prevails over earlier assignees if (1) he does not know of the prior assignments and (2) is the first to obtain payment from – or a judgment against – the obligor.