Chapter 17

Question 1

Assignment

Answer 1

The act of transferring to another all or part of one’s rights arising under a contract.

Question 2

Effects of Assignment

Answer 2

• the party assigning the rights to a third party is known as the assignor
• the party receiving the rights is the assignee.
• the parties in assignment relationships are obligee (the person to whom a duty, or obligation, is owed)
• obligor (the person who is obligated to perform the duty)

Question 3

Extinguishes of Assignor Rights

Answer 3

• When rights under a contract are assigned unconditionally, the rights of the assignor are extinguished.
• The third party (the assignee) has a right to demand performance from the other original party to the contract.
  The assignee takes only those rights that the assignor originally had

Question 4

Assignee’s Rights are Subject to Same Defense

Answer 4

The assignee’s rights are subject to the defenses that the obligor has against the assignor. In other words, the assignee obtains only those rights that the assignor originally had

Question 5

Form of the Assignment

Answer 5

An assignment can take any form, oral or written. Naturally, it is more difficult to prove that an oral assignment occurred, so it is advisable to put all assignments in writing

Question 6

Rights That Cannot Be Assigned

Answer 6

• The assignment is prohibited by statute.
• The contract is personal.
• The assignment significantly changes the risk or duties of the obligor.
• The contract prohibits assignment.

Question 7

When a Statute Prohibits Assignment

Answer 7

When a statute expressly prohibits assignment of a particular right, that right cannot be assigned.

Question 8

When a Contract Is Personal In Nature

Answer 8

If a contract is for personal services, the rights under the contract normally cannot be assigned unless all that remains is a monetary payment

Question 9

When an Assignment Will Significantly Change the Risk or Duties of the Obligor

Answer 9

A right cannot be assigned if the assignment will significantly increase or alter the risks to or the duties of the obligor

Question 10

Notice of Assignment

Answer 10

• Once a valid assignment of rights has been made, the assignee should notify the obligor of the assignment.
• Giving notice is not legally necessary to establish the validity of the assignment: an assignment is effective immediately, whether or not notice is given.

Question 11

Two Major Problems for Notice of Assignment

Answer 11

1. Priority Issues
2. Potential for Discharge by Performance by Wrong Party

Question 12

Delegations

Answer 12

 The transfer of a contractual duty to a third party. The party delegating the duty (the delegator) to the third party (the delegatee) is still obliged to perform on the contract should the delegatee fail to perform.
 Just as a party can transfer rights through an assignment, a party can also transfer duties. Duties are not assigned, however—they are delegated.

Question 12

Priority Issues

Answer 12

If the assignor assigns the same right to two different persons, the question arises as to which one has priority—that is, which one has the right to the performance by the obligor.

Question 12

Potential for Discharge by Performance to the Wrong Party

Answer 12

Until the obligor has notice of an assignment, the obligor can discharge his or her obligation by performance to the assignor (the obligee). Performance by the obligor to the assignor constitutes a discharge to the assignee. Once the obligor receives proper notice, however, only performance to the assignee can discharge the obligor’s obligations.

Question 13

Duties That Cannot Be Delegated

Answer 13

• When special trust has been placed in the obligor or when performance depends on the personal skill or talents of the obligor.
  o Personal in nature
• When performance by a third party will vary materially from that expected by the obligee.
• When the contract expressly prohibits delegation.

Question 14

Assignment of ALL RIGHTS

Answer 14

 When a contract provides for an “assignment of all rights,” this wording may create both an assignment of rights and a delegation of duties.
 This occurs when general words are used, such as “I assign the contract” or “I assign all my rights under the contract.”

Question 15

Intended Beneficiaries

Answer 15

A third party for whose benefit a contract is formed; an intended beneficiary can sue the promisor if such a contract is breached

Question 16

Types of Intended Beneficiaries

Answer 16

1. Creditor Beneficiary
2. Donee Beneficiary

Question 17

Creditor Beneficiary

Answer 17

benefits from a contract in which one party (the promisor) promises another party (the promisee) to fulfill a duty that the promisee owes to a third party (the creditor beneficiary).

Question 18

Donee Beneficiary

Answer 18

when a contract is made for the express purpose of giving a gift to a third party, the third party (the donee beneficiary) can sue the promisor directly to enforce the promise.

Most common donee beneficiary is a life insurance contract

Question 19

Incidental Beneficiaries

Answer 19

 Sometimes, a third person receives a benefit from a contract even though that person’s benefit is not the reason the contract was made.
 Because the benefit is unintentional, an incidental beneficiary cannot sue to enforce the contract.