Tuesday, September 27, 2011

Contracts Question

The following question was asked on my facebook page @
http://www.facebook.com/pages/Asked-Answered-The-Multi-State-Bar-Exam/122156504533565

Question

Will a section of a contract be enforceable if it states that the contract cannot be assigned to a third party and that no third party can benefit from the terms of the contract?

Response:

Generally speaking a clause in a contract prohibiting assignments of "the contract" will be construed as barring only delegations of the assignor's duties, and will have no effect on one's ability to assign contractual rights. The results are slightly different if there is a clause in the contract prohibiting assignment of "contractual rights." In such a case, assignment is, again, not barred, but the obligor will have the right to sue for damages. The major distinction is if the contract states that attempts to assign will be void. In such a situation, the parties can bar assignment. In addition, if the assignee has notice of this nonassignment clause, the assignment will be ineffective. This is an area of the MBE in which a few words make all the difference, so it's important to focus carefully on the words in the contract attempting to prevent assignments.


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