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Contracts • Third Parties
K#185
Legal Definition
Under common law, assignments that substantially change the duties of the obligor are not allowed. An assignment of the right to payment is a valid assignment, as it does not alter the obligor's duties. However, an assignment of the right to a contract performance other than the right of payment is usually a substantial change and, thus, an invalid assignment.
Plain English Explanation
If a contract fails to limit the ability to assign rights, then the law will allow such assignments so long as it doesn't create some substantial burden on the obligor.
Hypothetical
Hypo 1: Bob hires Sam to mow his lawn every Sunday for 1 year. Bob will pay Sam $100 per month. Sam transfers his right to receive payment to Amy. Bob transfers his right to have his lawn mowed to Jill. Result: When it comes to Sam's right to be paid $100 per month, it is not a substantial change to assign that right to Amy. Here, Bob still has an obligation to pay $100 per month, but instead of paying it to Sam he will pay it to Amy. However, when it comes to Bob's right to have his lawn mowed every Sunday for 1 year, his attempt to transfer this right to Jill will be seen as a substantial change. Why? Well, that's for you to argue on an exam. You'd likely want to point out that lawns are generally very different, and they are also located in different areas. The $100 per month bargain was based on Bob's specific lawn, not Jill's. Thus, a court would likely find Bob's assignment to be invalid.
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 clause prohibiting assignment?
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?
