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Unformatted text preview: t if Harry had attempted
to assign the contract to Melissa, the assignment would be invalid. Harry’s benefit on
the contract is to have his house painted, and painting Melissa’s house, which is in a different location, is materially different than painting Harry’s house. Note that in this last
example, Peter is now the obligor. If he refuses to paint Melissa’s house, he will not be
liable for breach.
Of course, even if an assignment is valid, the obligor must have notice of it before he
knows to perform for the assignee. For example, if Peter assigns to Ann but no one
tells Harry, and when Harry’s house is painted he sends the check to Peter, Harry is
not liable to Ann. Ann’s only recourse might be against Peter. This is because when an
assignor makes an assignment, the assignor is also automatically making certain warranties to the assignee.
Example 6.5. Preston’s Plumbing Co. had a contract with Industrial Manufacturing Inc. to install new employee restrooms in Industrial’s factory.
Industrial has not made the final $10,000 payment due on the contract.
Preston doesn’t have either the time or the inclination for a lawsuit, so he
assigns the debt to Community Credit, a collection agency, for consideration of $5,000.
Preston, as an assignor, is guaranteeing to Community that the debt is genuine, that it is
not subject to any undisclosed restrictions, and that he, Preston, will not do anything to
impair its value. If, for example, Preston forgot to tell Community that he had committed
a partial breach by using the wrong plumbing fixtures, and that as a result Industrial has
a valid claim that the full $10,000 is not what they owe, Community might be able to sue
Preston for breach of warranty.
Note that even if the contract states it cannot be assigned, it often can be, as long as the
obligor’s burden has not materially changed.
Example 6.6. Patrick’s Insurance Agency has a five-year lease with Lateesha Landlord. The lease states it cannot be assigned without the landlord’s
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This test prep was uploaded on 04/09/2014 for the course BUS 311 taught by Professor Parker during the Spring '10 term at Ashford University.
- Spring '10
- Business Law