6. Can a person take advantage of another person's mistake? 7. Do fraudulent representations always make a contract void? 8. How are prospectuses worded to avoid open fraud? What are the three vital points in any proposed investment? 9. What does "duress" mean? What is its effect on a contract? What is meant by "undue influence"? What is its legal effect on a contract? 10. II. What is the law as to altering a contract? What is the best way to alter a contract? Why? 12. Disputes often arise over the interpretation of contracts. Why? 13. What is the object of the rules for interpreting contracts? 14. A bought a cash register on the statement that it would save the expense of a bookkeeper and one-half of the clerks' time. After a short time he alleges that the statement was false and seeks to rescind the sale on the ground of fraud. Was this fraud, or statement of opinion, and what is the result? CHAPTER IX ASSIGNMENT AND NOVATION § 64. Assignment of Contracts A contract which calls for personal services cannot be assigned by either of the parties to it. No one can be compelled to work for a person unless he agrees to it; and no one can be compelled to have another working for him whom he did not choose, and these conditions would result if such contracts could be assigned. A contract which depends on the skill, ability, or trustworthiness of one of the parties to it cannot be assigned by that party, but may be assigned by the other party. For example, a contract to write a poem cannot be assigned by the poet, but may be assigned by the publisher. The rights in any other contract may be assigned by either of the parties to it unless there is something said in the contract to forbid it. A party may assign a contract by simply handing the written contract over to the party to whom he assigns it, or by informing the other party to the contract by word of mouth that he has given up all his rights under it to the person to whom he wishes to assign it. Where the party desiring to assign a contract is under obligations under the contract, he cannot assign these without the assent of the other party to the contract (see § 65, “Novation"); otherwise he would still remain liable for whatever he had bound himself to do or to pay in the contract. Form of Assignment. The proper way to assign a contract is in writing, usually on the back of the contract, if it is in writing, or if it is an oral contract, by a written assignment. In the case of contracts under the Statute of Frauds, the law requires the assignment to be in writing. No particular form of words is necessary if the intention to transfer all the rights in the contract is plain. (See Chapter C, Forms 18 and 19.) Liabilities of the Assignee. A person to whom a contract is assigned by one of the parties becomes liable to perform all the duties of the party who assigns the contract. He receives only such rights as the original party enjoyed under the contract. If the contract was obtained by fraud, duress, or undue influence, or the other party to it was not competent to make a contract, such other party may refuse to perform it just as much as though the assignee were one of the original parties. If the party who assigned the contract owed the other party anything which could have been offset against the contract, the other party may offset that amount against the person to whom the contract has been assigned. Rights of Assignee. If a party should assign all his rights under a contract to one person and afterwards assign them to another, the second person would get no rights under the contract. If the party assigned only part of his rights to the first person, the second person might enforce such rights as remained. The second person would be entitled to sue for damages the party who claimed to assign the contract to him. Subject to the rights of the other party, the person to whom a contract has been assigned may bring a suit to enforce it in all cases where the party who assigned it to him would be entitled to do so. In some states, if he sues in a court of law, he must bring his suit in the name of the person who assigned the contract to him. He may sue in a court of equity in his own name. In a case where there have been several assignments, the suit must be brought in the name of the party who gave the first assignment. A person to whom a contract has been assigned should notify the other party to the contract at once that the rights under the contract have been assigned to him. If there has been an assignment to any other parties, the one who is the first to give this notice will be entitled to have his rights enforced first. Then, too, it prevents the other party from paying out anything to the person who has assigned the contract. If such payment has been made in ignorance of assignment, the party to whom the contract has been assigned could not compel payment again to himself. Notes: I. All contracts which do not involve the personal element may be assigned unless prohibited by the law or by public policy. 2. Any form of assignment which cuts off all control of the assignor over the contract will be sufficient. 3. The assignee takes all the rights which the original party had in the contract, and the contract is subject to all the defenses which have arisen prior to its assignment. 4. The assignee should always give the other party prompt notice that the contract has been assigned to him. § 65. Novation Novation is the substitution of other parties, or another party, for one of the original parties to the contract. Where John Smith has an agreement with Henry Jones to buy a horse for a certain sum, and instead of doing so he assigns the contract to Samuel Brown, and Henry Jones agrees to take Samuel Brown as party to the agreement, this is a novation. Samuel Brown has been substituted for John Smith in the contract, which can now be enforced against him, Samuel Brown. Agreement of Parties. In order to constitute a good novation, all the parties must agree to the arrangement. Henry Jones must discharge John Smith from his agreement to pay for the horse, and take Samuel Brown's agreement in place of it; John Smith must have assigned all his interest in the contract to Samuel Brown, whose agreement to pay for the horse is the consideration for Henry Jones's acceptance of him as a substitute for John Smith. If any of these considerations are lacking, the novation will not be enforceable. In Ford v. Adams,1 Jacob Schyer owed Ford some money. He gave a written order to Adams, who owed him, Schyer, to deliver 40 cords of wood to Ford. Ford accepted the substitution. Adams did not deliver the wood, and Ford sued him for it. The court said that there was not a good novation, because it was not shown that Schyer had released Adams's debt to him, and without that there would be no consideration to Adams for his promise. Notes: I. To constitute a good novation, the other party to the contract must accept the substitution and must release the party making it from his obligation to him. 2. The party making the novation must assign to the new party all his interest in the contract. 3. All of the parties must accept the new arrangement. REVIEW QUESTIONS 1. Why cannot a contract for personal services be assigned? 2. Can a written contract be assigned orally? 3. Write an assignment of a written contract. 4. What does the assignee of a contract have to do? 1 2 Barb. (N. Y.) 349. |