Does a 'no assignment without consent' clause stop the counterparty from assigning its breach-of-contract claim against us, or the money we owe it, in Washington?
A general one does not stop the assignment of a claim. Contracts are assignable in Washington unless the assignment is expressly prohibited by statute or contract, or is in contravention of public policy. The Supreme Court of Washington holds that a general antiassignment clause, one aimed at prohibiting the assignment of a contractual performance, does not, absent specific language to the contrary, prohibit the assignment of a breach of contract cause of action; it then stated the holding a second time tied to completed performance: such a clause does not, after performance is completed, prohibit the assignment of a cause of action for breach of contract (Berschauer/Phillips). The clause that failed there was ordinary boilerplate: "Neither the Owner nor the Architect shall assign, sublet or transfer any interest in this Agreement without the written consent of the other." The Court of Appeals applies the same rule to assigned construction-defect contract claims: even general anti-assignment clauses "will not be construed to prohibit assignments of a breach of contract cause of action unless the contract contains specific language to the contrary" (Carlile). To stop the claim from moving, the clause has to name the cause of action.
The trap
Two traps, one for the drafter and one for the researcher. DRAFTING: "any interest in this Agreement" is not specific language. Berschauer/Phillips called that provision "a boilerplate provision intended to prohibit the exchange of contractual performances" and let the assignment through, so a clause meant to stop the counterparty handing its claim to a stranger has to say that about the cause of action, not about interests in the agreement. The court's reason also marks how far the rule reaches: it took the primary purpose of a clause prohibiting assignment without permission to be protecting the other party "in selecting the persons with whom he [or she] deals", a purpose it treated as already served where the assignor had finished performing. In both decisions here the assignment came after performance was complete, and neither decides a clause invoked while performance is still running. RESEARCH: this answers the assignment of a CLAIM. It does not answer whether an anti-assignment term binds an account debtor who still owes money: the provision that governs that, Washington's enactment of UCC 9-406, sits in RCW Title 62A, which is not among the statutes checked for this rule, so what it does to such a term was not read and is not stated here. One more limit the second case carries: a claim involving "personal confidence" is an exception to general assignability, and Carlile held the exception inapplicable only because "the assignments at issue are assignments of claims, not contractual performance": an attempt to assign performance under a personal-service contract is a different question.
9 authorities
- case124 Wash. 2d 816Berschauer/Phillips Construction Co. v. Seattle School District No. 1Wash.decided 1994read it at the source ↗
The words that state the rule
The Superior Court ruled the antiassignment clause contained in the contract between the District and Cummings prohibited the assignment by the District to Berschauer/ Phillips of a breach of contract cause of action against Cummings. We disagree and reverse the Superior Court.
- case124 Wash. 2d 816Berschauer/Phillips Construction Co. v. Seattle School District No. 1Wash.decided 1994read it at the source ↗
The words that state the rule
14.6 Assignment. The Owner and the Architect, respectively, bind themselves, their partners, successors, assigns and legal representatives to the other party to this Agreement, and to the partners, successors, assigns and legal representatives of such other party with respect to all covenants of this Agreement. Neither the Owner nor the Architect shall assign, sublet or transfer any interest in this Agreement without the written consent of the other.
- case124 Wash. 2d 816Berschauer/Phillips Construction Co. v. Seattle School District No. 1Wash.decided 1994read it at the source ↗
The words that state the rule
Berschauer/Phillips argues this is a general antiassignment clause and thus does not prohibit the assignment of a breach of contract cause of action. In contrast, Cummings argues the contract language plainly prohibits the District from assigning any interest in the agreement without first obtaining Cummings’ written consent. Cummings asserts any interest means all interests, including a cause of action for breach of contract. Contracts are assignable unless such assignment is expressly prohibited by statute or contract, or is in contravention of public policy.
- case124 Wash. 2d 816Berschauer/Phillips Construction Co. v. Seattle School District No. 1Wash.decided 1994read it at the source ↗
The words that state the rule
We follow the reasoning adopted in Portland Elec, and hold a general antiassignment clause, one aimed at prohibiting the assignment of a contractual performance, does not, absent specific language to the contrary, prohibit the assignment of a breach of contract cause of action. The assignment clause between Cummings and the District is a boilerplate provision intended to prohibit the exchange of contractual performances. Cummings completed the terms of its contract prior to the District’s assignment of the breach of contract claim to Berschauer/Phillips. Given complete performance, the rule in Portland Elec, makes good sense. We therefore hold a general assignment clause, one directed at performance of the contract, does not, after performance is completed, prohibit the assignment of a cause of action for breach of contract.
- case124 Wash. 2d 816Berschauer/Phillips Construction Co. v. Seattle School District No. 1Wash.decided 1994read it at the source ↗
The words that state the rule
The primary purpose of clauses prohibiting the assignment of contract rights without a contracting party’s permission is to protect him [or her] in selecting the persons with whom he [or she] deals.
- case124 Wash. 2d 816Berschauer/Phillips Construction Co. v. Seattle School District No. 1Wash.decided 1994read it at the source ↗
The words that state the rule
We also hold a general antiassignment provision in a contract does not prohibit the assignment of a breach of contract cause of action after the completion of performance.
The words that state the rule
Contracts are assignable unless such assignment is expressly prohibited by statute, contract, or is in contravention of public policy. [37] The traditional test for whether a cause of action is assignable is whether the claim would survive to the personal representative of the assignor upon death. [38] If it would, the cause of action is assignable. [39] A right of action arising from a contract is a chose in action and personal property.
The words that state the rule
We also conclude that the homeowners' obtained valid assignments of the original purchasers' breach of contract claims. Even general anti-assignment clauses in contracts, aimed at prohibiting the assignment of contractual performance, will not be construed to prohibit assignments of a breach of contract cause of action unless the contract contains specific language to the contrary.
The words that state the rule
Relying on Robbins v. Hunts Food & Indus., Inc., [44] Harbour Homes argues that claims involving "personal confidence" are an exception to the general assignability of claims. [45] But the issue in Robbins was whether an executory sales contract making one party the exclusive sales agent of the other could be assigned. The court noted the personal confidence exception, but found that it did not apply where there was no evidence the contract was based "upon the business and financial skill, judgment, and credit" of the assignor. [46] ¶ 37 Here, unlike Robbins, the assignments at issue are assignments of claims, not contractual performance. Moreover, this case does not involve executory contracts or a "relation of personal confidence." The personal confidence exception does not apply.