Will a Montana court give effect to this clause barring assignment or requiring our consent?
For most ordinary contracts the clause is good. The Montana Supreme Court says so in terms: “Montana law enforces contract clauses requiring consent prior to assignment of a party's rights”, citing Rother-Gallagher v. Montana Power Co., where “an attempted assignment of a party's rights to a roadbuilding and timber removal contract was void.” Applying that, Hedges v. Woodhouse held “that the contractual restrictions on assignment of the Melaleuca contract must be met in order to accomplish a valid assignment of the contract during Johnson's lifetime”, and affirmed judgment against the purported assignee. The reported Montana law on the subject is thin, and the general rule within it is clear enough to plan around. What the statutes DO establish: for a nonnegotiable written contract for the payment of money or delivery of personal property, Montana allows transfer “by endorsement the same as a negotiable instrument,” which “transfers all the rights of the assignor under the contract to the assignee, subject to all equities and defenses existing in favor of the maker at the time of the endorsement or arising before notice of the assignment is received by the maker” (§ 28-2-206, MCA): a mechanical transfer rule, not itself a statement about whether a NO-ASSIGNMENT clause can block that transfer. The same chapter supplies the notice mechanic that decides who an obligor may safely pay: under § 30-9A-406(1) the account debtor “may discharge its obligation by paying the assignor until, but not after, the account debtor receives a notification, signed by the assignor or the assignee, that the amount due or to become due has been assigned and that payment is to be made to the assignee”, and after that notification paying the assignor no longer discharges the debt. Separately, Montana has adopted UCC Article 9's anti-assignment override for commercial receivables: a contract term that “prohibits, restricts, or requires the consent” of the account debtor to an assignment of an account, chattel paper, or payment intangible, or to a security interest in one, “is ineffective”, with named exceptions including individual consumer transactions and ownership interests in a general partnership, limited partnership, or LLC (§ 30-9A-406(4), (8), (10), MCA). Two more exceptions sit at the section level rather than inside the override: “[t]his section does not apply to an assignment of a health-care-insurance receivable” (§ 30-9A-406(9)), and subsections (1), (2), (3) and (7) do not reach a controllable account or controllable payment intangible (§ 30-9A-406(11)). The parallel override for promissory notes, health-care-insurance receivables, and general intangibles including permits, licenses, and franchises is at § 30-9A-408, and for letter-of-credit rights at § 30-9A-409.
The trap
The STATUTES, by contrast, are untested. Across all 64,117 published Montana opinions, not one mentions § 28-2-206, § 30-9A-406, § 30-9A-408 or § 30-9A-409, so no Montana appellate decision has construed the endorsement mechanics or the Article 9 override, and the general rule stated above rests on Hedges and Rother-Gallagher rather than on any of them. What remains genuinely open is the reach of such a clause against a third party. Hedges v. Woodhouse recounts an argument that “anti-assignment clauses in franchise agreements are enforceable only against the contracting party, not against an assignee”, and the Montana Supreme Court never reached that particular argument, because it was raised for the first time on appeal and refused on that procedural ground; the holding above rests on the assignor's own failure to meet the clause. In re the Marriage of Szafryk framed an issue around whether a party “forfeited his right to use…dealership property by violating anti-assignment clauses,” but the Court's actual holding rested on a DIFFERENT, independent forfeiture ground (ceasing to personally operate the business) and expressly declined to resolve the assignment question, so it is not authority for how Montana treats an anti-assignment clause's violation either. Do not rely on either case for a holding neither one actually delivers. One sale type sits outside the override: “Subsection (4) does not apply to the sale of a payment intangible or promissory note, other than a sale pursuant to a disposition under 30-9A-610 or an acceptance of collateral under 30-9A-620 .” A restriction on selling a payment intangible or promissory note therefore survives unless the sale is a disposition or an acceptance of collateral under the sections named. § 30-9A-408 is drawn the other way round on the same point: its override “applies to a security interest in a payment intangible or promissory note only if the security interest arises out of a sale” of it, other than under those same two sections. Maine and New Jersey carry the identical carve-out.
17 authorities
- statuteMont. Code Ann. § 28-2-206enactment date not established
The words that state the rule
A nonnegotiable written contract for the payment of money or the delivery of personal property may be transferred by endorsement the same as a negotiable instrument. The endorsement transfers all the rights of the assignor under the contract to the assignee, subject to all equities and defenses existing in favor of the maker at the time of the endorsement or arising before notice of the assignment is received by the maker.
- statuteMont. Code Ann. § 30-9A-406enactment date not established
The words that state the rule
a term in an agreement between an account debtor and an assignor or in a promissory note is ineffective to the extent that it: (a) prohibits, restricts, or requires the consent of the account debtor or person obligated on the promissory note to the assignment or transfer of, or the creation, attachment, perfection, or enforcement of a security interest in, the account, chattel paper, payment intangible, or promissory note;
- statuteMont. Code Ann. § 30-9A-406enactment date not established
The words that state the rule
This section is subject to law other than this chapter that establishes a different rule for an account debtor who is an individual and who incurred the obligation primarily for personal, family, or household purposes.
The words that state the rule
Hedges argues that anti-assignment clauses in franchise agreements are enforceable only against the contracting party, not against an assignee, which status she claims to hold.
The words that state the rule
Whether the District Court erred in concluding that John forfeited his right to use the dealership property by violating anti-assignment clauses contained in the parties’ settlement agreements.
The words that state the rule
Because we conclude that John forfeited his right to use the dealership property by ceasing to personally operate Country Ford, we need not address this argument.
The words that state the rule
Hedges did not raise these arguments in her brief to the District Court. This Court has frequently refused to consider new issues on appeal.
- statuteMont. Code Ann. § 30-9A-406enactment date not established
The words that state the rule
Subsection (4) does not apply to the sale of a payment intangible or promissory note, other than a sale pursuant to a disposition under 30-9A-610 or an acceptance of collateral under 30-9A-620 .
- statuteMont. Code Ann. § 30-9A-406enactment date not established
The words that state the rule
In this subsection (4), "promissory note" includes a negotiable instrument that evidences chattel paper. Except as otherwise provided in 30-2A-303 , 30-9A-407 , and subsections (5) and (10) of this section, and subject to subsection (8) of this section, a term in an agreement between an account debtor and an assignor or in a promissory note is ineffective to the extent that it:
- statuteMont. Code Ann. § 30-9A-406enactment date not established
The words that state the rule
Subsections (4) and (6) do not apply to a security interest in an ownership interest in a general partnership, limited partnership, or limited liability company.
- statuteMont. Code Ann. § 30-9A-408enactment date not established
The words that state the rule
Except as otherwise provided in subsections (2) and (7), a term in a promissory note or in an agreement between an account debtor and a debtor that relates to a health-care-insurance receivable or a general intangible, including a contract, permit, license, or franchise, and that prohibits, restricts, or requires the consent of the person obligated on the promissory note or the account debtor to, the assignment or transfer of, or the creation, attachment, or perfection of a security interest in, the promissory note, health-care-insurance receivable, or general intangible is ineffective to the extent that the term:
- statuteMont. Code Ann. § 30-9A-409enactment date not established
The words that state the rule
A term in a letter of credit or a rule of law, including a provision in a statute or governmental rule or regulation, custom, or practice applicable to the letter of credit that prohibits, restricts, or requires the consent of an applicant, issuer, or nominated person to a beneficiary's assignment of or creation of a security interest in a letter-of-credit right is ineffective to the extent that the term or rule of law, custom, or practice:
The words that state the rule
Montana law enforces contract clauses requiring consent prior to assignment of a party's rights. In Rother-Gallagher v. Montana Power Co. (1974), 164 Mont. 360, 522 P.2d 1226, this Court held that an attempted assignment of a party's rights to a roadbuilding and timber removal contract was void.
The words that state the rule
We conclude that the District Court was correct in determining that the contractual restrictions on assignment of the Melaleuca contract must be met in order to accomplish a valid assignment of the contract during Johnson's lifetime.
- statuteMont. Code Ann. § 30-9A-406enactment date not established
The words that state the rule
Subject to subsections (2) through (9) and (11), an account debtor on an account, chattel paper, or payment intangible may discharge its obligation by paying the assignor until, but not after, the account debtor receives a notification, signed by the assignor or the assignee, that the amount due or to become due has been assigned and that payment is to be made to the assignee. After receipt of the notification, the account debtor may discharge its obligation by paying the assignee and may not discharge the obligation by paying the assignor.
- statuteMont. Code Ann. § 30-9A-406enactment date not established
The words that state the rule
This section does not apply to an assignment of a health-care-insurance receivable.
- statuteMont. Code Ann. § 30-9A-408enactment date not established
The words that state the rule
Subsection (1) applies to a security interest in a payment intangible or promissory note only if the security interest arises out of a sale of the payment intangible or promissory note, other than a sale pursuant to a disposition under 30-9A-610 or an acceptance of collateral under 30-9A-620 .
“Defective” means that reading found something to correct. What you are reading is the rule as it stands after that reading.