Assignment And Delegation — Apply assignment and delegation rules

Historical Context & Motivation

The common law historically treated contractual rights and obligations as deeply personal, binding only the original parties. Under early English law, the doctrine of privity of contract prevented any transfer of contractual interests to strangers, reflecting feudal anxieties about maintenance, champerty, and the unauthorized stirring up of litigation. Over centuries, commercial necessity gradually eroded this rigid posture. Merchants needed mechanisms to monetize accounts receivable, delegate performance obligations, and structure multi-party transactions. The law responded by developing the doctrines of assignment and delegation, which today occupy a central place in contract law and appear frequently on the Uniform Bar Examination.

Against this backdrop, the central question becomes: under what circumstances may a party to a contract transfer its rights to receive performance (assignment) or shift its duty to perform (delegation) to a third party — and what limitations does the law impose on such transfers?

Core Principles & Definitions

Assignment and delegation are conceptually distinct operations, though they often occur simultaneously. When a party transfers its entire interest in a contract — often through language such as "I assign this contract" — courts presume both an assignment of rights and a delegation of duties under the Restatement (Second) § 328(2). Understanding the foundational principles requires careful attention to the vocabulary of the doctrine: the assignor transfers rights, the assignee receives them, and the obligor is the party who owes the performance. In delegation, the delegator transfers duties, and the delegatee assumes them.

Visual Explanation — Assignment vs. Delegation Flow

The diagram above illustrates the fundamental structural difference between assignment and delegation. In an assignment, the assignee steps into the shoes of the assignor and acquires the right to demand performance directly from the obligor. Once the obligor receives proper notice of the assignment, the obligor must render performance to the assignee; payment to the assignor after notice does not discharge the obligor's obligation. By contrast, in a delegation, the delegatee undertakes the duty to perform, but the delegator remains on the hook unless the obligee consents to a novation — a substituted contract that releases the delegator and creates a new direct obligation between the obligee and the delegatee.

How Assignment and Delegation Work in Practice

Requirements for a Valid Assignment

An effective assignment requires only a present manifestation of intent to transfer an existing right. No particular form or magic words are required; consideration is not necessary (though a gratuitous assignment is generally revocable unless certain exceptions apply). The assignor must identify the right being transferred with reasonable certainty. A promise to assign in the future does not constitute a present assignment — it creates at most an equitable obligation that courts may enforce under specific circumstances. Once effectuated, the assignment is immediately operative, and the assignee holds an enforceable right against the obligor.

Limitations on Assignment

• Material change in obligor's duty or risk: Assignment is prohibited when it would materially change the obligor's duty, increase the burden or risk imposed on the obligor, or impair the obligor's chance of obtaining return performance (Restatement § 317(2)(a)).
• Contractual anti-assignment clause: The parties may validly prohibit assignment, but such clauses are narrowly construed. Under UCC § 2-210(2), a clause prohibiting assignment of "the contract" bars only delegation of duties, not assignment of rights to damages for breach or rights to payment.
• Statutory prohibition: Certain assignments are barred by statute, such as the assignment of future wages in some jurisdictions or assignments of certain government contracts.
• Public policy: Rights that are personal in nature — such as the right to receive personal services from a specific individual — may not be assignable because the obligor's performance would differ in kind, not just identity of the recipient.

Rules Governing Delegation

Delegation of duties follows a parallel but distinct framework. Most duties are delegable unless the obligee has a substantial interest in having the delegator perform personally. The classic example is a contract for personal services involving special skill, judgment, or trust — such as engaging a renowned portrait artist. The obligee bargained for that particular individual's performance, and substitution would deprive the obligee of the expected benefit. However, duties that are routine and fungible — such as delivering goods of a specified type — are freely delegable. Critically, even when delegation is permissible, the delegator is not released from liability. The delegator remains liable to the obligee for any deficiency in the delegatee's performance. Only a novation — an agreement among all three parties substituting the delegatee for the delegator — will release the delegator.

Exceptions, Effects on Third Parties, and Priority Rules

Effect of Assignment on the Obligor

Once an obligor receives notice of an assignment, the obligor must perform for the assignee. If the obligor, after receiving notice, nevertheless performs for the assignor, the obligor has not discharged the obligation and may be required to perform again for the assignee. This makes the notice requirement practically critical. Before notice, the obligor is protected: performance rendered to the assignor in good faith discharges the obligation. The obligor also retains all defenses against the assignee that the obligor could have raised against the assignor. This includes defenses arising from the original contract (e.g., failure of consideration, fraud, breach) as well as setoff rights that matured before notice.

Successive Assignments and Priority

When an assignor wrongfully assigns the same right to multiple assignees, a priority dispute arises. Two competing rules exist. Under the English Rule (followed by the Restatement), the first assignee generally prevails because the assignor's right was extinguished upon the first assignment, leaving nothing to transfer to subsequent assignees. Under the American Rule (used in some U.S. jurisdictions), the first assignee to notify the obligor, to obtain payment, to obtain a judgment, or to obtain a novation prevails. For bar exam purposes, the Restatement's approach (first-in-time prevails, subject to exceptions for bona fide purchasers) is the dominant rule.

Revocability of Gratuitous Assignments

A gratuitous assignment — one given without consideration — is generally revocable by the assignor. Revocation may occur by the assignor's death, bankruptcy, or subsequent assignment of the same right to another party. However, a gratuitous assignment becomes irrevocable under several recognized exceptions: (1) delivery of a writing embodying the right (a "token chose"); (2) delivery of a writing signed by the assignor manifesting the assignment; (3) the assignee's reasonable and foreseeable detrimental reliance; or (4) the assignee's collection of the assigned right from the obligor. These exceptions are significant on the bar exam because they convert what would otherwise be a revocable transfer into a binding one.

Worked Example — Analyzing an Assignment and Delegation Scenario

Consider the following fact pattern, typical of a Contracts MBE question: Alpha Corp. contracts with Beta Builder to construct a warehouse for $500,000. Beta then purports to "assign the contract" to Gamma Construction, a general contractor of comparable reputation. Alpha objects and demands that Beta perform personally. Gamma completes the warehouse to specification, but Alpha refuses to pay Gamma.

Assignment vs. Delegation vs. Novation — Key Comparisons

Connection to Third-Party Beneficiaries and UCC Article 9

The doctrine of assignment and delegation intersects with several advanced contract law concepts that frequently appear on the UBE. Most importantly, when a delegatee accepts a delegation and promises to perform the delegator's duties, the obligee becomes an intended third-party beneficiary of the delegation agreement between the delegator and delegatee. This gives the obligee standing to sue the delegatee directly for non-performance, even though the obligee was not a party to the delegation agreement. This conceptual link between delegation and third-party beneficiary law is essential to a complete understanding of both doctrines.

Understanding the interplay between the Restatement and the UCC is critical for the Contracts portion of the UBE. Where the subject matter of the contract involves a sale of goods, UCC Article 2 governs assignment and delegation questions. For assignments of payment rights functioning as secured transactions, UCC Article 9 provides an even more permissive regime — rendering many anti-assignment clauses entirely unenforceable. Future study should integrate these doctrines with the broader frameworks of third-party beneficiary contracts and conditions and discharge, as these topics frequently overlap in MBE and MEE questions.

Practice Problems

Summary — Assignment and Delegation Rules