Assignment In Contracts

Assignment In Contracts-86
For the assignment to become effective, the assignee must manifest his acceptance under most circumstances.

For the assignment to become effective, the assignee must manifest his acceptance under most circumstances.

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Suppose Dealer sells a car to Buyer on a contract where Buyer is to pay $300 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, $250 and deduct that $250 from the amount owed Dealer on the next installment (called a setoff).

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.

An obligor who could avoid the assignor’s attempt to enforce the rights could avoid a similar attempt by the assignee.

Likewise, under UCC Section 9-318(1), the assignee of an account is subject to all terms of the contract between the debtor and the creditor-assignor. 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.The assignee acquires the right to receive the contractual obligations of the promisor, who is referred to as the obligor (see Figure 14.1 "Assignment of Rights").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.The assignor may assign any right unless (1) doing so would materially change the obligation of the obligor, materially burden him, increase his risk, or otherwise diminish the value to him of the original contract; (2) statute or public policy forbids the assignment; or (3) the contract itself precludes assignment.The common law of contracts and Articles 2 and 9 of the Uniform Commercial Code (UCC) govern assignments.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 .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.

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