Assignment

From The Jolly Contrarian
Jump to navigation Jump to search

The act of unilaterally passing your rights, but not your obligations, to some other fellow.

Rights: As a matter of contract law, one can assign one’s rights without one’s counterparty’s consent (broadly speaking, why should she care?), unless your contract states that you cannot, in which case you cannot.

Obligations: You cannot assign your obligations to anyone without the counterparty’s consent. This stands to reason, since another chap might not be as skillful, creditworthy or personally attractive as you. Therefore your counterparty must consent, and if he does, it is called a novation.

Does a right of assignment compromise a netting contract? If I have a contract predicated on my being able to net or set off transaction amounts I owe you against amounts you owe me, couldn’t your right to assign your rights against me to a third person prejudice the rights under my contract?

What about subrogation rights under a guarantee? A debtor cannot set off a subrogated claim against liabilities the guarantor has to that debtor[1]. Would the converse situation apply? Could a debtor set off a subrogated claim by the guarantor against another liability owed to the debtor by the beneficiary of the guarantee? On one hand the set-off should have been applied before the guarantee has been called upon. On the other hand, what if the guarantee is expressed to be payable regardless of any set-off (as usually it would be).

See also