⚡ 10-Second Rule
You can hand your contract rights to someone new right now, for free, unless it makes the other side's job harder.
🧒 ELI-10 Scene
Zoe is next in line for the last cupcake at the school bake sale. She has to leave for soccer practice. So she tells her friend Priya, "Take my spot — the cupcake is yours." The baker doesn't mind. He still hands over exactly one cupcake to exactly one kid. Same job, new receiver. But Zoe couldn't hand Priya a spot in a different, longer line across town. That would make the baker's job harder. And notice: Zoe gave the spot away as a gift, right then. No trade needed.
⚖️ Actual Rule
An assignment is a present transfer of a contractual right from the assignor to the assignee, extinguishing the assignor's right and putting the assignee in the assignor's shoes. No consideration is required, but a gratuitous assignment is generally revocable — by the assignor's death, a later assignment of the same right, or notice of revocation — unless it is made in a signed writing delivered to the assignee, is accompanied by delivery of a token embodying the right, or the assignee foreseeably and detrimentally relies on it (Restatement (Second) of Contracts §§ 317, 332, paraphrased). Under UCC § 2-210(2), rights are assignable "except where the assignment would materially change the duty of the other party, or increase materially the burden or risk imposed on him by his contract, or impair materially his chance of obtaining return performance." A contractual anti-assignment clause ordinarily takes away only the right to assign, not the power: the assignment is still effective, and the obligor's remedy is damages for breach, unless the clause expressly makes assignments void (Restatement (Second) of Contracts § 322, paraphrased). The obligor may assert against the assignee any defense arising from the contract that it could assert against the assignor, and payment to the assignor discharges the obligor only until the obligor receives notice of the assignment (Restatement (Second) of Contracts §§ 336, 338, paraphrased). Among successive assignees of the same right, the first assignee generally prevails, but a later assignee who pays value in good faith without notice wins if it first obtains payment, a judgment, a novation, or delivery of a token embodying the right (Restatement (Second) of Contracts § 342, paraphrased).
ELI-10 translation: you can give away what someone owes you, but you can't make their job harder.
🔍 Ask These Questions
- Did the assignor make a present transfer of an existing right? (Did Zoe say "it's yours now," not "I'll give it later"?)
- Was it gratuitous, and if so, is it still revocable? (A gift transfer can be taken back unless written, tokened, or relied on.)
- Would the assignment materially change the obligor's duty or risk? (Does the baker's job get harder or riskier? If yes, no transfer.)
- Is there an anti-assignment clause, and does it void assignments or just forbid them? (A "don't do it" clause still lets the transfer work; a "void" clause kills it.)
- Has the obligor received notice? (Before notice, paying the old owner counts; after notice, only paying the new owner counts.)
- Can the obligor raise defenses it had against the assignor? (The new owner takes the deal warts and all.)
- Are there competing assignees? (First in line usually wins, unless a later honest buyer grabs the money, a judgment, a new deal, or the token first.)
⚠️ Bar Trap
Exam language: Examiners plant a clause stating that "rights under this contract may not be assigned," then have the assignor assign anyway. The bait is concluding the assignment is ineffective and the assignee takes nothing. Under the majority rule, such a clause removes only the right to assign, not the power — the assignment is valid, and the obligor's sole remedy is damages against the assignor for breach, unless the clause declares assignments void.
ELI-10: A "no handing off" promise doesn't stop the handoff from working. It just lets the other side complain about a broken promise. Only a clause saying handoffs are "void" actually stops them.
🧪 Question
A plumbing contractor agreed in writing to install fixtures in a developer's office building for $80,000, payable on completion. The contract provided: "The contractor shall not assign any rights under this agreement." After completing the work, the contractor assigned its right to the $80,000 payment to a bank as part of a loan workout, and the bank promptly notified the developer in writing of the assignment. The developer nevertheless paid the $80,000 to the contractor, which is now insolvent. The bank has sued the developer for $80,000.
Is the bank likely to prevail?
(A) No, because the contract prohibited assignment of the contractor's rights. (B) No, because the developer discharged its obligation by paying the contractor in full. (C) Yes, because the anti-assignment clause did not invalidate the assignment, and the developer paid the contractor after receiving notice of the assignment. (D) Yes, because anti-assignment clauses are unenforceable as against public policy.
Answer: (C). The clause barred assignment but did not declare assignments void, so it stripped only the right to assign, not the power; the assignment of a completed-performance payment right was effective. Once the developer received notice, only payment to the bank could discharge the debt, so paying the contractor left the $80,000 obligation to the bank outstanding.
💡 Why the Wrong Answers Are Wrong
- (A) treats a bare prohibition as destroying the power to assign; without language voiding assignments, the transfer remains effective and the clause supports only a damages claim against the assignor.
- (B) ignores the notice rule: payment to the assignor discharges the obligor only if made before the obligor receives notice of the assignment.
- (D) overshoots — anti-assignment clauses are generally enforceable; they simply give a breach remedy rather than nullifying the assignment.
- ELI-10: The misconception is thinking a "no handoffs" clause erases the handoff. It doesn't — and once you know about the new owner, paying the old owner counts for nothing.
