Explain assignment of contract and its modes.

by • 05/06/2013 • GeneralComments (0)299

Q. 7     Explain assignment of contract and its modes.

Ans:     ASSIGNMENT OF CONTRACTS

Assignment of a contract means transfer of contractual rights and liabilities to a third party.

 

MODES OF ASSIGNMENT OF CONTRACTS

Assignment of a contract may take place in the following ways, (a) Assignment by act of parties (b) Assignment by operation of law

 

(a)        ASSIGNMENT BY ACT OF PARTIES

Assignment by act of parties takes place when the parties to a contract themselves make the assignment. Such an assignment is subject to the following rules.

1. Assignment of Contractual Liabilities Rule
  (a) In case the contractual obligation involves personal skill or taste or ability (e.g. contract to marry)

Such obligation cannot be assigned

  (b) In other cases

  (i) If the contract expressly or impliedly provides that the contract shall be performed by the promisor only

Such obligation cannot be assigned

  (ii) If the contract does not expressly or impliedly provide that the contract shall be performed by the promisor only

The promisor or his representative may employ a competent person to perform such obligation [Section 40] but even the promisor remains liable to the promisee for proper performance.

  (iii) By novation

The promisor may transfer his liability to a third party with the consent of promisee and the transferee by entering into a tripartite agreement.

II. Assignment of Contract Rights

  (a) In case of contractual rights involving personal skill

Such right cannot be assigned.

  (b) In other cases

Such rights can be assigned subject to all equities between the original parties.

  (c) Actionable claims (i.e. claim to any debt) or to any benefit interest in movable property e.g. book debt, right of action arising out of a contract etc.

An instrument in writing can always assign such claim. Notice of such assignment must also be given to the debtor.

(b)       ASSIGNMENT BY OPERATION OF LAW

Assignment by operation of law takes place when the law intervenes. Such assignment takes place in the following cases.

Case Rule
I.In case of death of any party The rights and obligations (other than those of personal nature) to the deceased party pass on to his legal representatives.
II. In case of insolvency of any party The rights and obligations (other than those of personal nature) of the insolvent party pass on to the Official Receiver or Assignee.

 

EXAMPLE

“X” promises to marry “Y”. Here neither “X” can assign his obligation nor “Y” can assign his right because the contract is of personal nature.

ASSIGNMENT AND SUCCESSION:

Under succession, both benefits and burden attached to the contract devolve upon the legal heir. A son succeeding his father’s estate shall be liable to meet the debts and liabilities of his father to the extent of the property inherited. However, in assignment only the benefit of a contract can be assigned and not the liabilities attached thereto.

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