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Rumbin v. Utica Mutual Insurance Co.8/15/2000
Although we previously have addressed the issue of the validity of contractual provisions prohibiting the assignment of contractual rights; see Lewin & Sons, Inc. v. Herman, 143 Conn. 146, 149, 120 A.2d 423 (1956) (upholding validity of contractual provision that prohibited assignment without consent); the law of contracts has changed considerably since our earlier decision. Accordingly, we now re-examine the basic legal principles regarding contractual antiassignment provisions.
Our analysis of the effect of the antiassignment provision begins by emphasizing that the modern approach to contracts rejects traditional common-law restrictions on the alienability of contract rights in favor of free assignability of contracts. See 3 Restatement (Second), Contracts § 317, p. 15 (1981) (" contractual right can be assigned"); J. Murray, Jr., Contracts (3d Ed. 1990) ("the modern view is that contract rights should be freely assignable"); 3 E. Farnsworth, Contracts (2d Ed. 1998) § 11.2, p. 61 (" oday most contract rights are freely transferable"). Common-law restrictions on assignment were abandoned when courts recognized the necessity of permitting the transfer of contract rights. "The force of human convenience and business practice [were] too strong for the common-law doctrine that [intangible contract rights] are not assignable." (Internal quotation marks omitted.) J. Murray, Jr., supra, § 135, p. 791. "If the law were otherwise, our modern credit economy could not exist." 3 E. Farnsworth, supra, § 11.2, p. 61. As a result, an assignor typically can transfer his contractual right to receive future payments to an assignee. See Western United Life Assurance Co. v. Hayden, 64 F.3d 833, 841 (3d Cir. 1995); 3 E. Farnsworth, supra, § 11.2, pp. 61, 66.
The parties to a contract can include express language to limit assignment and courts generally uphold these contractual antiassignment clauses. See 3 Restatement (Second), supra, § 317, p. 15 (" contractual right can be assigned unless . . . assignment is validly precluded by contract"); 3 E. Farnsworth, supra, § 11.4, pp. 82 ("most courts have upheld [terms prohibiting assignment] as precluding effective assignment"). Given the importance of free assignability, however, antiassignment clauses are construed narrowly whenever possible. See 3 E. Farnsworth, supra, § 11.4, pp. 82-83.
In interpreting antiassignment clauses, the majority of jurisdictions now distinguish between the assignor's "right" to assign and the "power" to assign (modern approach). For example, in Bel-Ray Co. v. Chemrite (Pty.) Ltd., 181 F.3d 435, 442 (3d Cir. 1999), the United States Court of Appeals for the Third Circuit recognized that numerous jurisdictions followed the general rule "that contractual provisions limiting or prohibiting assignments operate only to limit parties' right to assign the contract, but not their power to do so, unless the parties manifest an intent to the contrary with specificity." (Emphasis added.) The court concluded, however, that the "assignment clauses not contain the requisite clear language to limit `power' to assign" and, therefore, held the assignment valid and enforceable. Id., 443. The court acknowledged that contracting parties could limit the power to assign by including an "assignment provision [that] generally state that nonconforming assignments (i) shall be `void' or `invalid,' or (ii) that the assignee shall acquire no rights or the nonassigning party shall not recognize any such assignment." Id., 442. Without such express contractual language, however, "the provision limiting or prohibiting assignments will be interpreted merely as a covenant not to assign . . . . Breach of such a covenant may render the assigning par
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