Assignable Contract

Assignable Contract-18
Assignments are an important part of business financing, such as factoring.A To effect an assignment, the assignor must make known his intention to transfer the rights to the third person.An obligor who could avoid the assignor’s attempt to enforce the rights could avoid a similar attempt by the assignee.

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After all, anybody could waltz up to the obligor and say, “I’m the assignee of your contract with the bank.

From now on, pay me the $500 a month, not the bank.” The obligor is entitled to verification of the assignment. He gains all the rights against the obligor that the assignor had, but no more.

For that reason, there are various rules that limit both the holder in due course and the waiver rule.

Certain defenses, the so-called real defenses (infancy, duress, and fraud in the execution, among others), may always be asserted.

But if notice is given to the obligor and she performs to the assignor anyway, the assignee can recover from either the obligor or the assignee, so the obligor could have to perform twice, as in Exercise 2 at the chapter’s end, .

Of course, an obligor who receives notice of the assignment from the assignee will want to be sure the assignment has really occurred.Suppose Dealer sells a car to Buyer on a contract where Buyer is to pay 0 per month and the car is warranted for 50,000 miles.If the car goes on the fritz before then and Dealer won’t fix it, Buyer could fix it for, say, 0 and deduct that 0 from the amount owed Dealer on the next installment (called a setoff).First, it is inapplicable to the sale of a negotiable instrument to a holder in due course.Second, the rule may be waived: under the UCC and at common law, the obligor may agree in the original contract not to raise defenses against the assignee that could have been raised against the assignor.When an assignment has the effect of materially changing the duties that the obligor must perform, it is ineffective.Changing the party to whom the obligor must make a payment is not a material change of duty that will defeat an assignment, since that, of course, is the purpose behind most assignments.Nor will a minor change in the duties the obligor must perform defeat the assignment.Several residents in the town of Centerville sign up on an annual basis with the Centerville to receive their morning paper.For the assignment to become effective, the assignee must manifest his acceptance under most circumstances.This is done automatically when, as is usually the case, the assignee has given consideration for the assignment (i.e., there is a contract between the assignor and the assignee in which the assignment is the assignor’s consideration), and then the assignment is not revocable without the assignee’s consent.


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