Assignment vs. delegation
Remedies & Third Parties · Apr 26
Floor. ~40 min: R2d §§ 317, 318 + McCloskey / Birdsall. The doctrine the next class assumes you have covered.
Target. ~75 min: Floor + R2d § 280 (novation) + synthesis.
(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 (a) 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 (b) the assignment is forbidden by statute or is otherwise inoperative on grounds of public policy, or (c) assignment is validly precluded by contract.
(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.
A novation is a substituted contract that includes as a party one who was neither the obligor nor the obligee of the original duty.
R2d § 317: a contractual right is freely assignable — and the assignment extinguishes the assignor's right, putting the assignee in her shoes — unless:
Paradigm of a non-assignable right: one whose assignment changes what the obligor must do — e.g., a personal-service obligation, or a requirements contract whose volume would balloon under a new assignee.
220 F.2d 101 (3d Cir. 1955)
United States Court of Appeals for the Third Circuit
Rule. To constitute anticipatory repudiation, a party's statement or conduct must amount to an absolute and unequivocal refusal to perform, or a distinct and positive statement of inability to do so. Expressions of difficulty or requests for assistance do not rise to the level of repudiation.
1992 WL 37731 (Conn. Super. Ct. 1992)
Connecticut Superior Court
Rule. When a creditor accepts a debtor''s assignment of a third-party promissory note in substitution for a liquidated debt, and the note is received in satisfaction of the debt, accord and satisfaction discharges the original obligation even if the note later proves uncollectible. A creditor who accepts substitute consideration cannot later reclaim the original debt.
A bridge back to Class 50. When a contract creates rights in someone other than the two signers — whether a third-party beneficiary or, after transfer, an assignee — the original parties' freedom to change the deal shrinks once that outside right vests.
Under R2d § 311, an intended beneficiary's right vests on reliance, suit, or assent. After an effective assignment, the assignee likewise takes a right the obligor and assignor can no longer alter to her detriment.
The unifying idea: once an outsider has a locked-in stake, the contract is no longer just the original parties' to rewrite.
Facts. Builder contracts with Owner: Builder will construct a deck for $20,000, payable on completion. Halfway through, Builder runs into cash-flow trouble. Builder (i) transfers to Bank the right to receive Owner's $20,000 payment, in exchange for a $15,000 loan; and (ii) hires Sub to finish the deck.
Question. Two transactions. Classify each. Whose consent matters?
Analysis.
Transfer to Bank = assignment of a right under R2d § 317. Owner's consent NOT required (default rule). Owner's only objection is if the assignment materially changes Owner's duty — paying $20,000 to Bank instead of Builder does not.
Transfer to Sub = delegation of duty under R2d § 318. Owner's consent NOT required UNLESS the building service was personal (§ 318(2)). For a typical deck build, no personal-services objection. BUT Builder remains liable; if Sub builds defectively, Owner sues Builder, not (only) Sub.
Drafting move that changes the result. "This contract may not be assigned or delegated without the other party's written consent." That clause makes both transactions ineffective absent Owner's signature.
Variation on Builder. Suppose Builder, Sub, and Owner all sign a three-party agreement: Sub will finish the deck, Sub assumes the duty, and Owner releases Builder from further liability.
Now the transaction is a novation under R2d § 280. Owner's express consent to discharge is the pivotal fact. Builder is out. Sub is in.
Why does it matter? If Sub builds defectively, Owner cannot sue Builder. The release operated as a contractual bar. The drafting move that creates a novation is the express discharge — without it, the same facts produce only a delegation, and Builder remains liable.
Problem. Owner contracts with Builder. Contract: "This contract may not be assigned." Builder assigns its right to payment to Bank anyway. Owner refuses to pay Bank.
Question. Is the assignment effective?
Answer. Modern majority (UCC § 9-406; R2d § 322): anti-assignment clauses generally do NOT void assignments of the right to payment. Such clauses are construed as imposing a contractual duty not to assign — breach of that duty gives Owner a damages claim against Builder but does not extinguish Bank's right to collect.
Policy: free assignability of payment rights is essential to commercial finance (factoring, securitization). Courts will not let an anti-assignment clause cut off the receivables market.
Contrast: anti-DELEGATION clauses (refusing to accept a substitute performer) are enforced more readily — the obligee has a stronger interest in who performs.
Rules. R2d § 317 (assignment of rights); § 318 (delegation of duties); § 280 (novation); UCC §§ 2-210, 9-406.
Cases. McCloskey v. Minweld (anticipatory repudiation requires unequivocal refusal); Birdsall v. Saucier (accord and satisfaction via substitute performance).
Punchline. Rights flow downstream — assignment is the default permissive. Duties stick to the original obligor — delegation does not discharge absent novation. Anti-assignment clauses constrain delegation more than they constrain assignment of payment.
Open question. Module VII closes today. Tomorrow: capstone, year synthesis, exam orientation.
Next class: Module VII Capstone & Year Synthesis
_Remedies & Third Parties_ · Apr 27
Module quiz, debrief, Damages Calculation skills assessment, and exam-prep orientation. Bring the whole year — the offer life-cycle, the consideration map, the voidability matrix, the parol-evidence funnel, the conditions taxonomy, and the three measures of recovery. One question across the year: what is the legal value of a broken promise? Come ready to answer. You may be called.