Assignability Of Contracts

Assignability Of Contracts-63
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. The Restatement (Second) of Contracts defines an assignment of a right as “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 the right to such performance.” The one who makes the assignment is both an obligee and a transferor.

Assignments are an important part of business financing, such as factoring.

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The assignor’s intention must be that the assignment is effective without need of any further action or any further manifestation of intention to make the assignment.

In other words, the assignor must intend and understand himself to be making the assignment then and there; he is not promising to make the assignment sometime in the future.

Now, if Dealer assigns the contract to Assignee, Assignee stands in Dealer’s shoes, and Buyer could likewise deduct the $250 from payment to Assignee.

The “shoe rule” does not apply to two types of assignments.

Federal Trade Commission regulations also affect the ability of many sellers to pass on rights to assignees free of defenses that buyers could raise against them.

Because of these various limitations on the holder in due course and on waivers, the “shoe rule” will not govern in consumer transactions and, if there are real defenses or the assignee does not act in good faith, in business transactions as well.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.Also, the waiver clause in the contract must have been presented in good faith, and if the assignee has actual notice of a defense that the buyer or lessee could raise, then the waiver is ineffective.Moreover, in consumer transactions, the UCC’s rule is subject to state laws that protect consumers (people buying things used primarily for personal, family, or household purposes), and many states, by statute or court decision, have made waivers of defenses ineffective in such .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.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.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.


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