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lecture notes ch. 16

lecture notes ch. 16 - Chapter16 Title:BusLawSeal.eps...

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Chapter 16 Title: BusLawSeal.ep picture was not saved with a preview (TIFF  Comment: This EPS  Third Party Rights C HAPTER O UTLINE I. Assignment and Delegations A. A SSIGNMENTS The transfer of contract rights to a third person is an assignment. No special form is  required.   Assignments   are   involved   in   much   business   financing.   Assignments   may  involve accounts receivable, proceeds from executory contracts, or general intangibles  (property that is a right rather than a physical object—stocks, bonds, and the goodwill of  a business, for example). 1.The Effect of an Assignment
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When contract rights are assigned unconditionally, the rights of the assignor are  extinguished,   and   the   assignee has  a  right   to   demand  performance   from   the  obligor.  The assignee takes only those rights that the assignor originally had. A DDITIONAL B ACKGROUND Restatement (Second) of Contracts, Section 317 The  Restatement (Second) of Contracts  is an authoritative source for some of the principles  discussed in this chapter.  Specific sections of the  Restatement  are noted in the text. The following is  the   section   that   relates   to   and   is   cited   in   this   part   of   the   text— Restatement (Second) of Contracts, Section 317. § 317. Assignment of a Right (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 ma- terially 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.
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2.Rights Assigned Are Subject to the Same Defenses The assignee’s rights are subject to the defenses that the obligor has against the  assignor. (If a creditor fraudulently procures the right to a debtor’s payment, the  debtor may raise the fraud as a defense against payment to the creditor’s assignee.) 3.Form of the Assignment An  assignment   can   take   any  form—oral  or   written—subject   tot   he   Statute   of  Frauds.
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