Does a 'this contract may not be assigned' clause stop the counterparty from assigning its rights under Connecticut law?
Usually not. In Rumbin the Connecticut Supreme Court adopted the modern approach of Restatement (Second) of Contracts § 322: a clause that says payments may not be assigned limits the party's RIGHT to assign but not its POWER to do so, so where the provision does not contain express language limiting the power to assign or voiding the assignment itself, the assignment is valid and enforceable despite the breach. The obligor's remedy is an action for damages for breach of contract against the assignor.
The trap
A plain prohibition limits the right to assign, not the power to assign. The annuity contract in Rumbin provided that '[n]o payment under this annuity contract may be . . . assigned' by the plaintiff, and that was not enough: the transfer still happened, the judgment approving it was affirmed, and the non-assigning party was left to prove damages. Rumbin turned on the absence of express language that limits the power to assign or voids the assignment, so a drafter who wants the transfer itself to fail has to say that in terms. Connecticut's UCC § 42a-9-406 rule for accounts and payment intangibles was not verified here, so nothing in this rule speaks to receivables financing.
3 authorities
The words that state the rule
In the present case, the annuity contract provided that “[n]o payment under this annuity contract may be . . . assigned” by the plaintiff. This antiassignment provision limited the plaintiffs right to assign, but not his power to do so. The provision did not contain any express language to limit the power to assign or to void the assignment itself. Therefore, in accordance with the modem approach, we conclude that the plaintiffs assignment to Wentworth is valid and enforceable despite the plaintiffs breach of the contract’s antiassignment provision.
The words that state the rule
We further conclude, however, that Safeco is free to sue for any damages that it might sustain as a result of the assignment by bringing an action for breach of contract against the plaintiff as assignor. See, e.g., Bel-Ray Co. v. Chemrite (Pty.) Ltd., supra, 181 F.3d 442 ; Pro Cardiaco Pronto Socorro Cardiologica, S.A. v. Trussell, supra, 863 F. Sup. 137-38; Macklowe v. 42nd Street Development Corp., supra, 170 App. Div. 2d 389; Sullivan v. International Fidelity Ins. Co., supra, 96 App. Div. 2d 556. Alternatively, Safeco may pursue damages from Wentworth, who, as the assignee, “ ‘stands in the shoes of the assignor.’ ” 3 E. Farnsworth, supra, § 11.8, p. 105; see id., 105-107; 3 S. Williston, Contracts (3d Ed. I960) § 404, p. 5, and § 432, pp. 181-83. Safeco, therefore, is fully protected against any actual damages that it might sustain as a result of the plaintiffs breach of the antiassignment provision. 11 *278 The modem approach thus serves the dual objectives of free assignability of contracts together with full compensation for any actual damages that might result from an assignment made in breach of an antiassignment provision. The judgment is affirmed.
The words that state the rule
We conclude, in accordance with case law and § 322 of the Restatement (Second) of Contracts, that the antiassignment provision at issue here does not render the assignment of the annuity ineffective, but, instead, gives the annuity issuer, Safeco, the right to recover damages for breach of the antiassignment provision.
“Defective” means that reading found something to correct. What you are reading is the rule as it stands after that reading.