CHAPTER 15 - ASSIGNMENT AND DELEGATION
316 Chapter Scope of This
1. In this Chapter, references to assignment of a right or delegation of a duty or condition, to the obligee or obligor of an assigned right or delegated duty, or to an assignor or assignee, are limited to rights, duties, and conditions arising under a contract or for breach of a contract.
2. The statements in this Chapter are qualified in some respects by statutory and other rules governing negotiable instruments and documents, relating to interests in land, and affecting other classes of contracts.
Topic 1 - What Can Be Assigned or Delegated
317 Assignment of a Right
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
- 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
- the assignment is forbidden by statute or is otherwise inoperative on grounds of public policy, or
- assignment is validly precluded by contract.
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.
319 Delegation of Performance of Condition
1. Where a performance by a person is made a condition of a duty, performance by a person delegated by him satisfies that requirement unless the delegation is contrary to public policy or the terms of the agreement.
2. Unless otherwise agreed, an agreement requires performance of a condition by a particular person only to theextent that the obligor has a substantial interest in having that person perform or control the acts required.
320 Assignment of Conditional Rights
The fact that a right is created by an option contract or is conditional on the performance of a return promise or is otherwise conditional does not prevent its assignment before the condition occurs.
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.
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,
- 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;
- gives the obligor a right to damages for breach of the terms forbidding assignment but does not render the assignment ineffective;
- 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.
323 Obligor's Assent to Assignment or Delegation
1. A term of a contract manifesting an obligor's assent to the future assignment of a right or an obligee's assent to the future delegation of the performance of a duty or condition is effective despite any subsequent objection.
2. A manifestation of such assent after the formation of a contract is similarly effective if made for consideration or in circumstances in which a promise would be binding without consideration, or if a material change of position takes place in reliance on the manifestation.
Topic 2 - Mode of Assignment or Delegation
324 Mode of Assignment in General
It is essential to an assignment of a right that the obligee manifest an intention to transfer the right to another person without further action or manifestation of intention by the obligee. The manifestation may be made to the other or to a third person on his behalf and, except as provided by statute or by contract, may be made either orally or by a writing.
325 Order as Assignment
1. A written order drawn upon an obligor and signed and delivered to another person by the obligee is an assignment if it is conditional on the existence of a duty of the drawee to the drawer to comply with the order and the drawer manifests an intention that a person other than the drawer is to retain the performance.
2. An order which directs the drawee to render a performance without reference to any duty of the drawee is not of itself an assignment, even though the drawee is under a duty to the drawer to comply with the order and even though the order indicates a particular account to be debited or any other fund or source from which reimbursement is expected.
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.
327 Acceptance or Disclaimer by the Assignee
1. A manifestation of assent by an assignee to the assignment is essential to make it effective unless
- a third person gives consideration for the assignment, or
- the assignment is irrevocable by virtue of the delivery of a writing to a third person.
- An assignee who has not manifested assent to an assignment may, within a reasonable time after learning of its existence and terms, render it inoperative from the beginning by disclaimer.
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.
329 Repudiation by Assignor and Novation with Assignee
1. The legal effect of a repudiation by an assignor of his duty to the obligor of the assigned right is not limited by the fact that the assignee is a competent person and has promised to perform the duty.
2. If the obligor, with knowledge of such a repudiation, accepts any performance from the assignee without reserving his rights against the assignor, a novation arises by which the duty of the assignor is discharged and a similar duty of the assignee is substituted.
330 Contracts to Assign in the Future, or to Transfer Proceeds to Be Received
1. A contract to make a future assignment of a right, or to transfer proceeds to be received in the future by the promisor, is not an assignment.
2. Except as provided by statute, the effect of such a contract on the rights and duties of the obligor and third persons is determined by the rules relating to specific performance of contracts.
Topic 3 - Effect Between Assignor and Assignee
331 Partially Effective Assignments
An assignment may be conditional, revocable, or voidable by the assignor, or unenforceable by virtue of a Statute of Frauds.
332 Revocability of Gratuitous Assignments
1. Unless a contrary intention is manifested, a gratuitous assignment is irrevocable if
- the assignment is in a writing either signed or under seal that is delivered by the assignor; or
- the assignment is accompanied by delivery of a writing of a type customarily accepted as a symbol or as evidence of the right assigned.
- payment or satisfaction of the obligation, or
- judgment against the obligor, or
- a new contract of the obligor by novation.
- in exchange for a performance or return promise that would be consideration for a promise; or
- as security for or in total or partial satisfaction of a pre-existing debt or other obligation.
- that he will do nothing to defeat or impair the value of the assignment and has no knowledge of any fact which would do so;
- that the right, as assigned, actually exists and is subject to no limitations or defenses good against the assignor other than those stated or apparent at the time of the assignment;
- that any writing evidencing the right which is delivered to the assignee or exhibited to him to induce him to accept the assignment is genuine and what it purports to be.
- against the owner or an assignor having a power of avoidance, unless given by him or by a person in possession of the writing with his consent and any necessary indorsement or assignment;
- against a subsequent assignee who takes possession of the writing and gives value in good faith and without knowledge or reason to know of the discharge or modification.
- the first assignment is ineffective or revocable or is voidable by the assignor or by the subsequent assignee; or
- the subsequent assignee in good faith and without knowledge or reason to know of the prior assignment gives value and obtains
- payment or satisfaction of the obligation,
- judgment against the obligor,
- a new contract with the obligor by novation, or
- possession of a writing of a type customarily accepted as a symbol or as evidence of the right assigned.
2. Except as stated in this Section, a gratuitous assignment is revocable and the right of the assignee is terminated by the assignor's death or incapacity, by a subsequent assignment by the assignor, or by notification from the assignor received by the assignee or by the obligor.
A gratuitous assignment ceases to be revocable to the extent that before the assignee's right is terminated he obtains
4. A gratuitous assignment is irrevocable to the extent necessary to avoid injustice where the assignor should reasonably expect the assignment to induce action or forbearance by the assignee or a subassignee and the assignment does induce such action or forbearance.
5. An assignment is gratuitous unless it is given or taken
333 Warranties of an Assignor
1. Unless a contrary intention is manifested, one who assigns or purports to assign a right by assignment under seal or for value warrants to the assignee
2. An assignment does not of itself operate as a warranty that the obligor is solvent or that he will perform his obligation.
3. An assignor is bound by affirmations and promises to the assignee with reference to the right assigned in the same way and to the same extent that one who transfers goods is bound in like circumstances.
4. An assignment of a right to a sub-assignee does not operate as an assignment of the assignee's rights under his assignor's warranties unless an intention is manifested to assign the rights under the warranties.
Topic 4 - Effect on the Obligor's Duty
334 Variation of Obligor's Duty by Assignment
1. If the obligor's duty is conditional on the personal cooperation of the original obligee or another person, an assignee's right is subject to the same condition.
2. If the obligor's duty is conditional on cooperation which the obligee could properly delegate to an agent, the condition may occur if there is similar cooperation by an assignee.
335 Assignment by a Joint Obligee
A joint obligee may effectively assign his right, but the assignee can enforce it only in the same manner and to the same extent as the assignor could have enforced it.
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.
337 Elimination of Defenses by Subsequent Events
Where the right of an assignor is limited or voidable or unenforceable or subject to discharge or modification, subsequent events which would eliminate the limitation or defense have the same effect on the right of the assignee.
338 Discharge of an Obligor After Assignment
1. Except as stated in this Section, notwithstanding an assignment, the assignor retains his power to discharge or modify the duty of the obligor to the extent that the obligor performs or otherwise gives value until but not after the obligor receives notification that the right has been assigned and that performance is to be rendered to the assignee.
2. So far as an assigned right is conditional on the performance of a return promise, and notwithstanding notification of the assignment, any modification of or substitution for the contract made by the assignor and obligor in good faith and in accordance with reasonable commercial standards is effective against the assignee. The assignee acquires corresponding rights under the modified or substituted contract.
3. Notwithstanding a defect in the right of an assignee, he has the same power his assignor had to discharge or modify the duty of the obligor to the extent that the obligor gives value or otherwise changes his position in good faith and without knowledge or reason to know of the defect.
4. Where there is a writing of a type customarily accepted as a symbol or as evidence of the right assigned, a discharge or modification is not effective
339 Protection of Obligor in Cases of Adverse Claims
Where a claim adverse to that of an assignee subjects the obligor to a substantial risk beyond that imposed on him by his contract, the obligor will be granted such relief as is equitable in the circumstances.
Topic 5 - Priorities Between Assignee and Adverse Claimants
340 Effect of Assignment on Priority and Security
1. An assignee is entitled to priority of payment from the obligor's insolvent estate to the extent that the assignor would have been so entitled in the absence of assignment.
2. Where an assignor holds collateral as security for the assigned right and does not effectively transfer the collateral to the assignee, the assignor is a constructive trustee of the collateral for the assignee in accordance with the rules stated for pledges in Â§Â§ 29-34 of the Restatement of Security.
341 Creditors of an Assignor
1. Except as provided by statute, the right of an assignee is superior to a judicial lien subsequently obtained against the property of the assignor, unless the assignment is ineffective or revocable or is voidable by the assignor or by the person obtaining the lien or is in fraud of creditors.
2. Notwithstanding the superiority of the right of an assignee, an obligor who does not receive notification of the assignment until after he has lost his opportunity to assert the assignment as a defense in the proceeding in which the judicial lien was obtained is discharged from his duty to the assignee to the extent of his satisfaction of the lien.
342 Successive Assignees From the Same Assignor
Except as otherwise provided by statute, the right of an assignee is superior to that of a subsequent assignee of the same right from the same assignor, unless
343 Latent Equities
If an assignor's right against the obligor is held in trust or constructive trust for or subject to a right of avoidance or equitable lien of another than the obligor, an assignee does not so hold it if he gives value and becomes an assignee in good faith and without notice of the right of the other.