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Contracts • Third Parties
K#189
Legal Definition
Modification agreements between the obligor and assignor are effective if the obligor did not know of the assignment.
Plain English Explanation
A modification agreement between an obligor (the person who owes something) and an assignor (the person originally entitled to receive the obligation) can still be effective even if the assignor has already transferred their rights to an assignee. What's important is that the obligor must be unaware of the assignment at the time they enter into the modification agreement.
This means that if the obligor and assignor agree to change the terms of their original deal—whether it's a change in payment amount, due date, or any other term—the agreement is valid and binding as long as the obligor hasn’t been informed that the assignor’s rights were given to someone else (the assignee). In other words, the modification is legitimate because the obligor is acting in good faith, believing that the assignor still has the authority to modify the agreement.
However, if the obligor knew about the assignment before making the modification agreement, that agreement is not effective against the assignee. The assignee can hold the obligor to the original terms of the agreement, and the obligor could be in breach of the contract if they follow the modified terms instead of the original ones.
This means that if the obligor and assignor agree to change the terms of their original deal—whether it's a change in payment amount, due date, or any other term—the agreement is valid and binding as long as the obligor hasn’t been informed that the assignor’s rights were given to someone else (the assignee). In other words, the modification is legitimate because the obligor is acting in good faith, believing that the assignor still has the authority to modify the agreement.
However, if the obligor knew about the assignment before making the modification agreement, that agreement is not effective against the assignee. The assignee can hold the obligor to the original terms of the agreement, and the obligor could be in breach of the contract if they follow the modified terms instead of the original ones.
Visual Aids
Related Concepts
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