Assignment and Delegation

• Author: Franklin G. Snyder, Mark Edwin Burge
• Pages: 589-606

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UNIT 28:ASSIGNMENT AND DELEGATION589

Unit 28

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CONTRACT NONPARTIES

Part Two

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Assignment and Delegation

FOCUS OF THIS UNIT

The nonparties we considered in the previous unit—third-party beneficiaries—

can gain rights under contract law based largely on the original intent of the parties

to the contract. They are parties in their own right from the day the contract is

formed. This unit deals with a very different situation: where nonparties take over

the rights and duties of contracting parties after the inception of the contract. An

example may help explain what we mean here.

A Simple Contract. Suppose that builder Burge has contracted with Snyder to

build a department store, Snyder’s Shop-a-Rama, in exchange for $1 million. Under

this contract, Snyder has the right to performance from Burge—construction of the

store. Likewise, Burge has the rightto Snyder’s performance—payment of the $1

million. Each party’s contract rights to the other’s performance under these facts also

create corresponding duties.

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Thus, we can equally say that Burge has a legal duty to

build the department store for Snyder, while Snyder has a legal duty to pay Burge $1

million. In a bilateral contract like this example, both sides have rights the

performance of another (which are legal benefits) and duties to perform (which are

legal detriments).

Passing Along Rights and Duties. With these rights and duties in mind,

consider the possibility that the parties may want to move them around. In your

Property course, you have likely heard of the “bundle of sticks” approach to property

rights, in which various sticks from the bundle can be removed and transferred.

Contract rights are a form of property. What if Snyder decides that he, in fact, does

not want to own or run a department store, but he has heard that Williston would be

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[One or more of your first-year professors may have introduced you to the idea that all legal

duties have reciprocal rights, and vice versa. Thus, my right to build a fence on my property implies

your duty not to tear down that fence; your duty to pay me money implies my right to get it, and so on.

These were dubbed “jural correlatives” by Professor Hohfeld and have had a great deal of influence,

particularly in property and tort law.See, e.g., Wesley Newcomb Hohfeld, Fundamental Legal

Conceptions as Applied in Judicial Reasoning, 26 YALE L.J. 710 (1917).—Eds.]

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590CHAPTER IX:CONTRACT NONPARTIES

interested in jumping into such a business venture? Can Snyder and Willison agree

to substitute Williston into Snyder’s place in the original contract? Or suppose Burge

has decided to exit the construction business, so he arranges for Corbin to build

Snyder’s department store for him. Neither Snyder or Burge may have a particular

objection—Williston may have better credit and Corbin may be a better construction

company—but what if one of the original parties objects? Does that party still have

the right to transfer its rights and duties?

Getting the Vocabulary Right. The law of assignment and delegation is where

we find the answers to these questions, but exploring that law requires

understanding some terminology. Contract rights (the benefits) are assigned, while

contract duties (the obligations) are delegated. Attorneys sometimes lump

assignment and delegation together and refer to both concepts as assignment, but

doing so is incorrect. Indeed, this kind of imprecision that can get a transactional

lawyer in trouble. Suppose the Snyder-Burge contract says that “Burge may the

assign the contract to another builder”—that provision arguably means that Burge

can transfer his benefit(“assign”), but cannot transferhis obligation(“delegate”).

Snyder may be indifferent about who gets the money he pays Burge, but may have a

strong objection to having someone else do the work, especially if he selected Burge

because of the latter’s special skill and expertise.

The original contracting party who makes an assignment is known as an

assignor, while the nonparty who receives the assignor’s rights is called the assignee.

Where duties are delegated, the original contracting party is called the delegator

while the nonparty who takes on the delegator’s duties under the contract is called

the delegatee.

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The Basic Rules. The general rules are pretty simple. (1) Contractual benefits

may be assigned, and contract obligations may be delegated, except sometimes when

they cannot. (2) Both assignment and delegation may be limited or prohibited by the

parties’ agreement, exceptwhen such limits or prohibitions are not effective. Fleshing

out the exceptions to these general rules is the main challenge. The basic rules on

assignments are found in section 317 of the Restatement (Second) of Contracts, while

those on delegation are in section 318. Article 2 of the UCC has its own rules for sale-

of-goods contracts in section 2-210. Some of the UCC’s approach to interpretation of

assignment and delegation provisions is also reflected in section 322 of the

Restatement. You should look at those sections as you read the cases in this unit.

Interestingly, the CISGhas no rules of its own on the topic, which means if you are

working in international sales transactions you may find yourself using the domestic

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[We’re not terribly fond of all these “-or” and “-ee” terms, as they can be a recipe for confusion

and errors in contract drafting. (Practice tip: When drafting contracts, use the parties’ names, or some

functional terms like “buyer” and “seller” instead whenever possible.) Nonetheless, you need to

recognize these sort of terms as they frequently appear in both transactional documents and court

opinions. –Eds.]