Lloyd's Maritime and Commercial Law Quarterly
Legal assignment of rights of restricted assignability
P G Turner *
Contract parties often agree on terms which restrict the assignabilility of rights in their contracts, making assignment harder. Can contract terms also be used to make assignment easier? How do specially shaped contract rights interact with the statutory method for legal assignment of choses in action? What are the consequences of a defect in performance of contractual and statutory formalities? These fundamental questions (which apparently have not been considered before) are addressed in this paper. They affect important matters of commerce, doctrine and legal theory.
I. INTRODUCTION
As promises, contractual rights are largely the product of consensual agreement.1 Accordingly, the assignability2 of rights arising under a contract (including debts) is a feature of contractual rights which can be restricted and shaped consensually by the parties to the contract, potentially affecting the status of contractual rights as items of transferable wealth.3 A question of considerable importance is how far the shaping of transferability can go. The question affects the viability of markets in debts and several points of doctrine and legal theory.
Consider, as an illustration, a contract which expresses rights arising under it to be assignable only if one or more formal4 steps are taken, such as a creditor’s obtaining a debtor’s written consent to assign a debt.5 These steps are elements of the new right which the contract creates.6 Construction then determines: what the formal steps are; whether they are required to occur in a particular order; and, if so, what that order is.7 And, to a large extent, the law has upheld such provisions in contracts, which in turn indicates the potential for shaping the transferability of contractual rights by adopting carefully tailored combinations of steps as preconditions to assignment.
* Gonville and Caius College, Cambridge. I am very grateful for the comments and advice on this paper given by Dr Matthew Conaglen, Dr David Fox, Mr Mark Leeming SC and Dr Greg Tolhurst. The normal disclaimers apply.
1. H G Beale (ed), Chitty on Contracts, 29th edn, vol 1 (London, 2004) (hereafter “Chitty”), 10–14.
2. Unless otherwise indicated, all references to assignment in this paper are to dealings with rights which bind the obligor (such as a debtor).
3. On the consensual shaping of property rights, see R C Nolan, “Property in a Fund” (2004) 120 LQR 108, 109–110, 132–135.
4. This term is used in the wider sense referred to in L L Fuller, “Consideration and Form” (1941) 31 Col LR 799, 806.
5. Consent to assignment is different from the consensual moulding or shaping of rights. The distinction is carried through this paper.
6. See Commonwealth v. SCI Operations Pty Ltd [1998] HCA 20; (1998) 192 CLR 285, [64] (statutory debts).
LEGAL ASSIGNMENT OF RIGHTS OF RESTRICTED ASSIGNABILITY
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