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skebart skebart
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6 years ago
Assignment. Rogers agreed with Newton to do the plumbing work as a subcontractor on a construction project. Their contract stipulated that Rogers was to receive 22,100 in three installments. Rogers secured a loan from the Merchants & Farmers Bank of Dumas for 15,500 to pay for the necessary expenses he would incur when he began work and before he had received his first installment from Newton. In return for the borrowed money, Rogers assigned to the bank his rights in the contract he had formed with Newton. On February 11, the bank sent Newton notice of the assignment and asked Newton to make his payment checks payable to Rogers and the bank jointly. Newton agreed in a letter to the bank to do this. On March 12, however, Newton wrote a check for 7,085 payable to Rogers only. Rogers completed the work for Newton and had paid all his expenses except for that owed to one of his suppliers, Southern Pipe and Supply Co Rogers eventually defaulted on his payments to the bank, and the bank sued Newton for the balance on the note. Newton could not avoid his obligation to the assignee of the note (the bank), but he claimed that he should not be responsible for the bill to Southern Pipe and Supply. He claimed that Rogers's assignment of his contract with Newton to the bank obligated the bank to assume Rogers's duties under the contract (including payments to all suppliers) and that the bank should therefore pay the bill owed to Southern Pipe and Supply. Did Rogers's assignment of his rights in the contract with Newton include a delegation of his duties under the contract as well? Discuss.
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wrote...
6 years ago
Assignment
No. The judgment for the bank was affirmed. The court quoted the rule of the Restatement (Second) of Contracts, Section 328(1), which states: Unless the language or the circumstances indicate to the contrary, as in an assignment for security, an assignment of the contract' or of all my rights under the contract' or an assignment in similar general terms is an assignment of the assignor's rights and a delegation of his unperformed duties under the contract. In the case at bar, the court concluded that the language of the consumer note and security agreement Rogers signed to get the loan from the Bank describes the assignment as a security interest' to secure the . . . loan. In the bank's letter to Newton, in which the bank notified Newton of the assignment, the bank had explicitly stated that the assignment of the contract was to secure the loan, and there is no evidence showing the Bank intended to perform Rogers's duties under the contract. The court concluded that Rogers had assigned his right to payments on his contract only, and not his duty to pay Southern Pipe.
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