(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.
(2) A contractual right can be assigned unless
(a) 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
(b) the assignment is forbidden by statute or is otherwise inoperative on grounds of public policy, or
(c) assignment is validly precluded by contract.
Rest. 2d § 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.
Rest. 2d § 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.
Rest. 2d § 322. Contractual Prohibition of Assignment
(1) Unless the circumstances indicate the contrary, a contract term prohibiting assignment of "the contract" bars only the delegation to an assignee of the performance by the assignor of a duty or condition.
(2) A contract term prohibiting assignment of rights under the contract, unless a different intention is manifested,
(a) does not forbid assignment of 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;
(b) gives the obligor a right to damages for breach of the terms forbidding assignment but does not render the assignment ineffective;
(c) is for the benefit of the obligor, and does not prevent the assignee from acquiring rights against the assignor or the obligor from discharging his duty as if there were no such prohibition.
Rest. 2d § 326. Partial Assignment
(1) Except as stated in Subsection (2), an assignment of a part of a right, whether the part is specified as a fraction, as an amount, or otherwise, is operative as to that part to the same extent and in the same manner as if the part had been a separate right.
(2) If the obligor has not contracted to perform separately the assigned part of a right, no legal proceeding can be maintained by the assignor or assignee against the obligor over his objection, unless all the persons entitled to the promised performance are joined in the proceeding, or unless joinder is not feasible and it is equitable to proceed without joinder.
Rest. 2d § 328. Interpretation of Words of Assignment; Effect of Acceptance of Assignment
(1) Unless the language or the circumstances indicate the contrary, as in an assignment for security, an assignment of "the contract" or of "all my rights under the contract" or an assignment in similar general terms is an assignment of the assignor's rights and a delegation of his unperformed duties under the contract.
(2) Unless the language or the circumstances indicate the contrary, the acceptance by an assignee of such an assignment operates as a promise to the assignor to perform the assignor's unperformed duties, and the obligor of the assigned rights is an intended beneficiary of the promise. Caveat: The Institute expresses no opinion as to whether the rule stated in Subsection (2) applies to an assignment by a purchaser of his rights under a contract for the sale of land.
Rest. 2d § 336. Defenses Against an Assignee
(1) By an assignment the assignee acquires a right against the obligor only to the extent that the obligor is under a duty to the assignor; and if the right of the assignor would be voidable by the obligor or unenforceable against him if no assignment had been made, the right of the assignee is subject to the infirmity.
(2) The right of an assignee is subject to any defense or claim of the obligor which accrues before the obligor receives notification of the assignment, but not to defenses or claims which accrue thereafter except as stated in this Section or as provided by statute.
(3) Where the right of an assignor is subject to discharge or modification in whole or in part by impracticability, public policy, non-occurrence of a condition, or present or prospective failure of performance by an obligee, the right of the assignee is to that extent subject to discharge or modification even after the obligor receives notification of the assignment.
(4) An assignee's right against the obligor is subject to any defense or claim arising from his conduct or to which he was subject as a party or a prior assignee because he had notice.
Herzog v. Irace
(Assignment of Rights under R § 317 / Binding Upon Obligee)
FACTS
When Jones was unable to pay for medical treatment he signed a letter requesting payment be made directly to P of money received in settlement for his claim
P notified Jones’ lawyers D about the “assignment of benefits” form
P performed surgery and Jones received $20,000 settlement, but Jones told lawyers D to pay the money to him instead of P
Jones never paid P
P sued D for breach of assignment, seeking to enforce the “assignment of benefits”
ISSUE
Is assignment binding upon the obligor where the assignor has intended to relinquish the right and the obligor has been notified?
HELD
An assignment is binding upon the obligor where there is an intent to relinquish the right to the assignee and the obligor is notified
Assignor→ Jones
Asignee-> P
Obligee-> D
The letter directing payment to be made directly to P gives no indication that Jones attempted to retain any control over the funds he assigned to P / letter permanently relinquished Jones’ rights
Ds were duly notified of this assignment, had adequate funds to satisfy all of Jones’s credits, and therefore the settlement money should’ve been paid directly to P
(1) A party performs 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) Except as otherwise provided in Section 9-406, 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
This provision does limit this power to assign to cases in which the seller has earned payment by full performance or the contract has been discharged by breach of the whole contract
(4) 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
(5) 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 delegation of performance of the duties of the assignor and its acceptance by the assignee constitutes a promise by him to perform those duties. The promise is enforceable by either the assignor or the other party to the original contract
Sally Beauty Co. v. Nexxus Products Co.
(Assignment AND Delegation under UCC 2-210)
FACTS
D, a manufacturer of hair products, contract w/ Best to be their exclusive distribution agent in Texas
Later, Best purchased by P, owned by a competitor of D / D subsequently cancelled the contract
P sued for breach of contract
D defended that the contract was not assignable to P
ISSUE
May a distribution agreement be abrogated by the manufacturer if the distributor is purchased by a direct competitor of the manufacturer?
HELD
Under UCC 2-210, delegation can be prohibited because the delegator has a substantial interest in having that delegatee perform under the contract, or assignment will materially affect the delegator
The UCC applies because most of the contract dealt with the distribution of hair care products
The duty of performance under an exclusive distributorship may NOT be delegated to a competitor in the marketplace- or the wholly owned subsidiary of a competitor- without the obligee’s consent
Since the contract is being delegated to competitor P, D has a substantial interest in NOT seeing this contract performed by P, which prohibits the delegation of duties under UCC 2-210
NOTE
In theory, D could sue Best if P failed to perform adequately b/c Best has NOT escaped its original obligations under the contract by delegating its duties to P
Also, contracts for services are usually per se nonassignable w/out consent
