Assignment of Rights and Delegation of Duties Flashcards
Who is an obligor?
An obligor, also known as a debtor, is a person or entity who is legally or contractually obliged to provide a benefit or payment to another.
What is “assignment” and “delegation”?
“Assignment” is the transfer of rights under a contract, and “delegation” is the transfer of duties and obligations under a contract.
When is assignment not allowed?
What are the requirements for an assignment of rights?
Do you need consideration?
Not allowed when
-> it materially increases duty or risk of obligor
OR
-> materially reduces obligor’s chance of obtaining performance.
Requirement:
-> No formalities needed
BUT
-> Need present intent to transfer the right immediately
Consideration:
-> no need for consideration for assignment of rights
-> if assignment is for consideration, then assignment becomes is irrevocable
What are the rights of the assignee?
Assignee takes all of the rights of assignor as the K stands at time of the assignment, BUT she takes subject to any defenses that could be raised against the assignor (aka assignee becomes subject/target of any defenses that could be raised against assignor).
Can the assignor enforce the K after assignment?
When there is assignment of a party’s rights under a contract, and the assignment is not revoked, the assignor cannot enforce the contract.
What does a prohibition, within a K, with regards to assignment do?
A prohibition on assignment does not affect the assignment of rights, BUT bars delegation of duties (unless circumstances indicate otherwise).
Is the promise of a future payment from one party to a third party an assignment of rights to the third-party?
What would make such a similar transaction an assignment of rights?
A promise by a party to a contract to pay money received, pursuant to the contract, to third party is NOT an assignment of the party’s contractual rights, BUT a promise of a future payment.
-> As a consequence, the third party is not an assignee of the contract.
Party to the contract (obligee) tells obligor (person making the payment) to pay the third-party. This is an assignment because the money isn’t passing through the obligee.
Under what circumstances are delegation of duties not allowed?
Is the delegator still liable if delegatee fails to perform duties?
What is the effect on the delegatee’s duties does the acceptance of a delegation by the delegatee?
Generally allowed, EXCEPT when other party to K has substantial interest in a specific individual’s performance (for example, personal services K involving special skill)
When obligations are delegated, delegator is not released from liability, so he is still liable if delegatee doesn’t perform (unless there is a novation)
Delegatee’s acceptance of a delegation constitutes a promise to perform the delegated duties
-> promise is enforceable if there is consideration
OR
-> a consideration substitute that makes the promise enforceable
How can the other party to the K treat the delegation of duties by the delegator to the delegatee?
What CAN the other party do, but what MUST they also do?
Delegation in Ks for the sale of goods
-> may be treated by the other party as creating reasonable grounds for insecurity
THUS
-> the other party MAY demand assurances from delegatee
BUT
-> the other party MUST accept conforming performance by delegatee or else the other party is in breach of K.
What is a novation?
A novation is an agreement made between two contracting parties to allow for the substitution of a new party for an existing one.
What effect does a novation have on the duties and rights of the party being replaced?
It releases the prior party from any rights and duties to the contract (not liable anymore).
What does it mean when the assignment of a K uses the words “this K is assigned to”?
Assignments not limited to contractual rights (e.g. “this contract is assigned to”) are generally treated as both an assignment of rights and a delegation of duties.
