🤔
Contracts • Third Parties
K#183
Legal Definition
A clause that prohibits assignment only eliminates the right, not the power, to assign. Thus, an assignor is liable for breach of contract, but an assignee without notice of the prohibition can still enforce the assignment.
Look for language such as: "rights hereunder not assignable." If ambiguous, contract language is construed as a prohibition.
Look for language such as: "rights hereunder not assignable." If ambiguous, contract language is construed as a prohibition.
Plain English Explanation
Generally speaking, all contract rights can be assigned. However, contracting parties are allowed to include terms in their agreement that eliminate the right to assign. This means that any assignment that is still made is done so against the terms of the agreement and is a breach, however, it doesn't nullify the rights transferred to the assignee as long as they weren't aware of the prohibition when they received the rights.
Hypothetical
Hypo 1: Bob has an apple tree. Bob sells Sam the right to pick 1 basket of apples from his tree each month for $20 per month. In the agreement, it says "rights hereunder not assignable." Sam doesn't like apples, but Amy does. Sam sells Amy his rights for $25 per month. One day, Bob sees Amy on his property picking apples and finds out that Sam had transferred his rights. Result: Sam is in breach of his contract with Bob, and Bob can pursue damages. However, even though Sam wasn't allowed to transfer his rights to Amy, he still did, and Amy wasn't aware she wasn't allowed to have those rights, so she may still exercise her right to pick apples from Bob's tree for the term of the agreement.
Hypo 2: Bob has an apple tree. Bob sells Sam the right to pick 1 basket of apples from his tree each month for $20 per month. In the agreement, it says "all assignment of rights under this contract are void." Sam doesn't like apples, but Amy does. Sam sells Amy his rights for $25 per month. One day, Bob sees Amy on his property picking apples and finds out that Sam had transferred his rights. Result: Sam is in breach of his contract with Bob, and Bob can pursue damages. Further, Amy has no right to pick apples off of Bob's tree because Sam never had the power to assign his rights. Instead, Amy can sue Sam for fraud.
Hypo 2: Bob has an apple tree. Bob sells Sam the right to pick 1 basket of apples from his tree each month for $20 per month. In the agreement, it says "all assignment of rights under this contract are void." Sam doesn't like apples, but Amy does. Sam sells Amy his rights for $25 per month. One day, Bob sees Amy on his property picking apples and finds out that Sam had transferred his rights. Result: Sam is in breach of his contract with Bob, and Bob can pursue damages. Further, Amy has no right to pick apples off of Bob's tree because Sam never had the power to assign his rights. Instead, Amy can sue Sam for fraud.
Visual Aids
Related Concepts
In a third-party beneficiary situation, who is the third-party beneificiary, who is the promisor, and who is the promisee?
What are the implied warranties of an assignor in an assignment for consideration?
What defenses may a promisor assert against a third-party beneficiary?
What duties are not delegable?
What is a delegatee?
What is a delegator, delegatee, and obligee?
What is an assignee?
What is an assignment?
What is an assignor?
What is an obligee?
What is an obligor?
What is a promisee?
What is a promisor?
What is the difference between an assignment and a delegation?
What is the difference between an incidental and intended beneficiary?
What is the effect of a contract containing no language about assignment rights?
What is the effect of consideration on assignment rights?
What is the effect of invalidation language on assignment?
What two types of intended beneficiaries are there?
When are modification agreements between the obligor and assignor effective?
When can an assignee sue an obligor for payments to the assignor?
When do a third party's rights to enforce the contract vest?
When does delegation of duties occur?
Who can sue whom in a suit involving beneficiaries, promisees, and promisors?
Who can sue whom in a suit involving the assignment of rights?
Who can sue whom in a suit involving the delegation of duties?
Who prevails when the same rights have been assigned to multiple parties?
