Assignments in the United States

Introduction to Assignments

Assignment and Discharge of Contracts

1. Definition of assignment.—Persons other than a creditor may become entitled by representation or assignment to stand in the creditor’s place, to exercise his rights under the contract; in other words, the creditor may transfer his rights against his debtor to some third person. An assignment, says another authority, is a transfer by one party to another of some right, title or interest in personal or real property. The instrument by which the transfer is made is also frequently called an assignment. The assignment must not increase the debtor’s burden or diminish his remedies.

2. Competent parties to an who have capacity to contract may make an assignment. Where a partnership has a claim against some debtor, ordinarily one partner can assign this claim to some other person. A may assign his claim against B thru the ministry of his agent C. A tenant, where he is not forbidden by his contract or by law, may assign his interest in a lease. The person to whom the rights are assigned, under a contract may bring action in his own name; generally, notice in writing must be given to the debtor of the assignment, as he is entitled to know to whom he can pay his debt. Thus if a debtor, before receiving notice of the assignment, were to pay his original creditor, he would be discharged. If the assignee sues him, he will be able to raise against the assignee any defence he might have raised against the original creditor. On the other hand, the debtor may consent to the assignment, in which case no notice will be necessary.

When there are several competing assignees, their claims will rank as between themselves, not according to the order in date of the assignment, but according to the dates at which they have respectively given notice to the debtor.’ The debtor, on paying the first who gives notice to him, is discharged. In the case of negotiable instruments, these difficulties are overcome in that the absolute benefit of the contract is attached to the ownership of the document, which according to ordinary rules would be the only evidence of the con tract. The instrument itself when it is transferable by endorsement is an authentic record of the successive transfers, and the bona fide possessor of the instrument is presumed to be the true owner thereof.

3. Assignment of the assigning of liabilities the converse of the rule we have been considering is followed. Ordinarily speaking, a debtor may not assign his liability to be performed by some third person. It is a matter of public policy that the creditor should know to whom he may look for satisfaction after considering the character, credit and substance of the person with whom he contracted. Of course, if the creditor consents to accept another debtor a new contract is formed, and the old debtor will be released to the extent of the new contract.

Where a person has undertaken an obligation which is not purely personal and does not require the exercise of his own peculiar skill, he may have the contract performed by some other person, but he will remain liable for its due performance according to his contract. Again, there may be certain servitudes attaching to a piece of land, as, for example, the servitude by which low lying land must receive surplus water from higher land; if the owner of the lower land assigns or sells it, the person to whom he assigns or sells must respect the servitude. If a party to a contract dies, his rights and liabilities pass to his heirs or representatives, and while they may take advantage of the rights, they must also carry the liabilities under the contract made by the deceased.

4. Other examples of and mortgages are generally assignable, as also the benefits under judgments, insurance policies and contracts of suretyship. Chattel mortgages may also be as signed, in which case the transfer may cover the legal title to the property mortgaged and all the rights of the mortgagor under the mortgage, or only the equity or equitable interest of the assignor. But if a person has a right of action for breach of promise to marry, it is contrary to public policy that this right of action should be assigned to a third person. If A con tracts with a famous artist to paint his portrait, and the artist assigns the contract to another artist equally famous and able, A is not bound to accept the picture by the second artist, or to recognize him in any way.

5. Modes of discharging a are several modes of discharging a contract, all of which we cannot discuss here. Among them, however, are the following: discharge by agreement, by payment or performance, by novation, by breach, by performance becoming impossible, by operation of law, by confusion, by compensation.

6. Discharge by the parties who make a contract may in turn agree to cancel it. The contract itself may contain a stipulation for its cancellation under certain conditions. Thus, in an in surance policy it may be provided that if the risk insured is increased or changed, the policy shall be immediately void. The release of an obligation may be made either expressly or tacitly. The release would be considered to be tacit when the creditor voluntarily surrenders to the debtor the original title of the obligation, unless there is proof of a contrary intention.

7. Discharge by payment or payment is meant not only the delivery of a sum of money in satisfaction of an obligation, but the performance of anything to which the parties are respectively obliged. If a contract is bilateral, that is, involves the doing of something by both parties, then the performance of obligation by one party discharges that person, but the contract is not wholly discharged, because he is entitled to enforce performance by the other party thereto.

Whether the payment or performance is sufficient will depend upon the construction of the contract. Generally speaking, if the debtor has substantially performed his part of the contract, he may recover payment, but will be subject to a deduction for such damages as his omission or deviation from the con tract may have caused the other party, tho this omission or deviation must be slight and not such as to deprive the other party of his rights. If the omission or deviation cannot be adequately compensated for in damages, the performance may be held incomplete.

A contract may provide that it must be performed to the satisfaction of the creditor, and the debtor will be strictly held to his obligation to meet the personal taste or judgment of the creditor, where this is in tended. It has been held in some cases that under such circumstances performance will be sufficient if it satisfies the mind of a reasonable man. The obligation may be to deliver a thing determined in kind only; in this case, the debtor need not give a thing of the best quality, nor can he offer one of the worst : he must offer a thing of merchantable quality.

Unless the contract so stipulates, a debtor must per form or pay his obligation as a whole, and not in parts; and if a creditor has a right under his contract to receive a specific thing, he is not bound to accept another, tho it be of greater value than the thing due.

If the obligation is to do a certain thing, the parties to the contract may agree that money shall be paid in lieu of such performance, and the new contract dis charges the old.

Generally speaking, where a negotiable instrument is given in payment of a debt which is due, under the English law the original obligation is only condition ally discharged, in which case if the instrument is not paid, the creditor may sue on the original contract, or on the instrument.

8. Time and place of payment or performance.— If the contract does not fix a date for performance, it is implied that the contract is to be performed within a reasonable time; but performance on a certain date may be of the essence of the contract. If so, the con tract will be strictly construed. Performance later will not be binding on the other party, unless he waives the delay, as, for example, by agreeing to performance at a later date, or by accepting performance when it is made. In mercantile contracts the assumption is that time, when specified, is an essential condition, and when a person promises to do a thing “as soon as possible,” he is bound to do it within a reasonable time.

Payment must be made in the place expressly or impliedly indicated by the contract. As a general rule, if no place is indicated and the thing to be paid or delivered is a certain specific thing, payment must be made at the place where the thing was at the time the contract was made. In all other cases, as, for example, where money is to be paid, the general rule is that payment must be made at the domicile of the debtor. Thus, in a Manitoba case it was held that when a contract is silent as to the place of payment, and the debtor is a contractor who has done work in another province, the money will be payable at his residence.’ In a Quebec case 2 it was held that the domicile which determines the place of payment is the debtor’s actual domicile at the place of payment, and not some different domicile which he had at the time of the contract. The fact that the debtor may have paid certain instalments at the domicile of the creditor is not in itself of such a nature as to modify the law, or the rights of the parties in this respect. The court refused to hold that the defendant had, by virtue of any such payment at the domicile of the creditor, waived his right to pay the subsequent instalments at his own domicile.

9. Composition kith we have al ready seen, a debtor may come to an arrangement with his creditors by which they accept less than the full amount of their claims on a compromise settlement. If such an agreement is made, the creditors have no claim for any balance. In the case of each creditor, the consideration for accepting less than is due to him is the fact that the other creditors also forbear to exact performance in full. If each for bears for part of his claim, each receives a benefit, because if one or more exacted full payment, some would be sure to lose thereby. In making such a composition with his creditors, however, a debtor can not benefit one creditor over another, and an agreement to do so would be an agreement in fraud of his creditors and would be void.

10. Application or imputation of debtor of several debts may, when paying, declare what debt he means to discharge, and his wishes in this respect must be observed. His intention may be discovered from his conduct, or from the circumstances under which he pays. If the debtor does not indicate what debt he means to discharge, the creditor may apply the payment toward any debt due to him by the person paying, provided the debt is not illegal. Having made his choice, he will be held to it, unless the debtor consents to another application of the payment. If the debtor has accepted a receipt by which the creditor has imputed the payment in dis-, charge of a special debt, the debtor cannot afterward require the imputation to be made upon another debt, except upon the ordinary grounds for the avoidance of contracts.

If neither party makes a choice as to which of several debts shall be discharged by the payment, the payment will be imputed in discharge of the debt actually payable which the debtor has at the time the greatest interest in paying. This is the rule under the English law, as also in the Province of Quebec. Following this rule, it was held in a New York case 1 that the amount paid will be applied to a debt secured by a mortgage in preference to a debt which is not secured.

The Supreme Court of the United States has made decision, in a sense contrary to this rule, namely, that: “If the application is made by neither party, it be comes the duty of the court, and in its exercise a sound discretion is to be exercised. It cannot be conceded that this application is to be made in a manner most advantageous to the debtor. It would seem reason able that an equitable application should be made; and, it being equitable that the whole debt should be paid, it cannot be inequitable to extinguish first those debts for which the security is most precarious.”

In Quebec, also, it is laid down that, if only one of several debts is actually payable, the payment must be imputed in discharge of such debt, altho it be less burdensome than those which are not actually payable; if the debts are of like nature and equally burdensome, the imputation is made upon the oldest; all things being equal, it is made proportionately on each.

11. Tender.

When a creditor refuses to receive payment, the debtor may make an actual tender of the money or other thing due. By making a tender, the debtor offers to carry out his bargain. ‘When the tender is a sum of money and it is refused, it becomes equivalent to a payment on the date of the first tender, provided the tender was unconditional and was made at a reasonable time and place, and that since making it the debtor has remained ready and willing to pay the money. If the debtor is sued, after making his tender, he should plead his former tender, renew it and deposit the money in court. The tender must be in money—a check or note would not be sufficient. The tender must be made by a person legally capable of paying to a, creditor legally capable of receiving payment, or to some one having authority to receive payment for him. If the obligation of the debtor is to deliver goods, or to perform an obligation other than the payment of money, and the creditor refuses the tender made to him, the debtor is discharged. Moreover, if the creditor sues him for breach of his contract, he may plead his tender as a good defence.

The Civil Code of Quebec lays down certain rules for the tender of specific things.’ Thus if a certain specific thing is deliverable on the spot where it is, the debtor must, by his tender, require the creditor to come and take it there. If the thing is not so deliverable and from its nature it is difficult of transportation, the debtor must indicate by his tender the place where it is, the day and hour when he is ready to deliver it, and the place where payment ought to be made. If the creditor fails, in the former case, to take the thing away, or in the latter, to signify his willingness to accept, the debtor may, if he thinks fit, remove the thing to any other place for safe keeping at the risk of the creditor. These rules are of general application also under the English law.

12. Novation is meant that a debtor contracts toward his creditor a new debt which is sub stituted for the old one, the latter being extinguished; or a new debtor is substituted for a former one, who has been discharged toward the creditor; or by the effect of a new contract, a new creditor is substituted for a former one, toward whom the debtor is dis charged. In each case,, the consideration is the creation of new rights and liabilities, and the extinction of old ones.

Novation can be effected only between persons capable of contracting. It will not be presumed. The intention to effect it must be evident. As Pol lock puts it,’ whether there has been novation in any particular case is a question of fact, but assent to a novation is not to be inferred from conduct, unless • there has been a distinct and unambiguous request. Thus, it has been held that the mere acceptance of a renewal note by a bank is only a conditional payment, and is not a novation of the original note, especially when the bank retains the original note. The bank may, at its option, proceed on the original note and tender the renewal note with its action, or it may proceed on the renewal note itself.’ It has also been held that when an agent, acting on behalf of a company, guarantees a contract made on behalf of the company, and gives his own promissory notes to accommodate a third person with whom the contract is made, such giving of notes does not constitute novation; a new debt and a new debtor would be substituted for the previous debt and the previous It has also been held that a settlement of indebtedness* between a debtor and a creditor, by part payment and by notes of the latter, does not make “the intention to effect a novation evi dent,” particularly when the creditor retains accepted drafts which he holds for the original debt. He has, therefore, the right to sue and recover on the It has been held, however, that an agreement be tween an employer and an employee, in settlement of a claim for damages caused by an explosion, operates, as a novation, whereby the delictual obligation is extinguished and a contractual obligation arises instead.

If the latter be conditional, it only becomes executory upon the fulfilment of the An unpaid vendor of movables, which are delivered to the purchaser on condition that the property shall not pass until the price, payable by instalments, is fully paid up, has the right to revendicate the movables, notwithstanding the acceptance by him of the notes of the purchaser, as no novation has thereby taken place.’ It has also been held that the acceptance of a draft, for the amount of an overdue note, drawn upon the makers by the holder, and the fact that the latter afterward files a claim on the draft against the estate of one of the acceptors who had made an assignment, and receives dividends, does not effect a novation of the note. The indorsee could, therefore, recover from the maker the amount due on the note, less the sum received as a dividend.’ There is no substitution of agreements under the following circumstances. A purchases from B a case of shoes to be delivered in one week; at the end of the week A requests B to postpone the delivery of the shoes for a week longer, and B consents ; at the end of the second week A refuses to accept the shoes, owing to the fact that the price has very materially decreased since he gave the order. A must accept the shoes and pay the price agreed upon.

A distinction must be drawn between a voluntary forbearance to deliver at the request of another, and a substitution of one agreement for another. If A re quests postponement of performance, he must take the risk that in the meantime the price of the goods may change. [1]

Assignments & Transfers (Distributorships)

This section introduces, discusses and describes the basics of assignments & transfers. Then, cross references and a brief overview about Distributorships is provided. Finally, the subject of Business, Corporate Law in relation with assignments & transfers is examined. Note that a list of cross references, bibliography and other resources appears at the end of this entry.

Assignments (Letters of Credit)

This section introduces, discusses and describes the basics of assignments. Then, cross references and a brief overview about Letters of Credit is provided. Finally, the subject of Commercial Law in relation with assignments is examined. Note that a list of cross references, bibliography and other resources appears at the end of this entry.

Assignments (Ownership of Rights)

This section introduces, discusses and describes the basics of assignments. Then, cross references and a brief overview about Ownership of Rights is provided. Finally, the subject of Intellectual Property in relation with assignments is examined. Note that a list of cross references, bibliography and other resources appears at the end of this entry.

Assignments (Third Party Rights)

This section introduces, discusses and describes the basics of assignments. Then, cross references and a brief overview about Third Party Rights is provided. Finally, the subject of Secured Transactions in relation with assignments is examined. Note that a list of cross references, bibliography and other resources appears at the end of this entry.

Assignments (Transfer of Rights)

This section introduces, discusses and describes the basics of assignments. Then, cross references and a brief overview about Transfer of Rights is provided. Finally, the subject of Intellectual Property in relation with assignments is examined. Note that a list of cross references, bibliography and other resources appears at the end of this entry.

Resources

Notes

Walter Johnson, “Commercial Law” (New York, 1917)

Assignments