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Chapter19: Third-Party Rights to Contracts

Assignments and Delegations

Both parties to a contract are both obligors (contractual parties who agreed to do something for the other party) and obligees (contractual parties who agreed to receive something from the other party). Contracts thus create a situation in which both parties have a duty to perform the agreed-on action and a right to be the recipient of the other party's duty. These rights and duties can be transferred to third parties. This section discusses both the transfer of rightsassignmentand the transfer of dutiesdelegation.

ASSIGNMENT
Assignment occurs when a party to a contractan assignortransfers her rights to receive something under the contract to a third partyan assignee (see Exhibit 19-1). For example, Bina agrees to sell her car to Jos for $8,000. She then assigns her right to receive Jos's payment to Kelly. Kelly, who was not part of the original contract between Bina and Jos, is an assignee and now has the right to receive payment from Jos for Bina's car. When an assignor transfers her rights to an assignee, the assignor legally gives up all rights she had to collect on the contract.3 Now the assignee may legally demand performance from the other party to the original contract. Returning to our example, once Bina transfers her right to Kelly, Bina can no longer require that Jos pay her for her car; Kelly, however, can request that Jos pay her for Bina's car. What is an assignment?

What are the rights and duties of an assignor?

Exhibit 19-1
Assignment of Rights

p. 427

Legal Principle: A person who transfers his or her rights under a third party is an assignor, and the person who receives the transfer and is now entitled to enforce the rights is the assignee. An assignee essentially fills in for the assignor as the legal recipient of the contractual duties and thereby acquires the same rights the assignor had. The assignee is offered no additional protections, however, and the obligor (the other party to the contract, who owes a duty to the assignee) may raise any of the same defenses for nonperformance to the assignee that he would have been able to raise against the assignor. Returning to our earlier example, if Bina failed to deliver her car to Jos, he can legally refuse to pay Kelly on the basis of Bina's breach of contract. It does not matter that Kelly had no duty in the original contract; she is subject to the same defense Jos has against Bina and therefore would not be paid in this situation.

What are the rights and duties of an assignee?

Although assignments require no special wording or forms to be valid, certain restrictions exist. First, assignments covered by the statute of frauds must be in writing.4 Because it is difficult to prove the existence of assignments given orally, it is usually suggested they all be in writing. Second, an assignee must agree to accept the assigned rights. An assignee may decline an assignment if he has not legally agreed to it and if he declines in a timely fashion after learning about the assignment and its terms.5 There is no protocol for rejecting an assignment, but once rejected, it is considered rejected from the time it was first offered. Third, in some situations contractual rights cannot be assigned.6 Case 19-1 demonstrates the problems that can arise in business transactions when it is not clear whether something is a sale or an assignment of rights. Pay close attention to the court's discussion of assignment of rights as opposed to the transfer of business property.

COMPARING THE LAW OF OTHER COUNTRIES Expanding Third-Party Rights in Australia and the United Kingdom
Most countries do not grant third-party rights to contracts. Rather, most countries require that a party be a direct party to a contract before he or she can recover under the contract. The logic of the doctrine of privity is that a person who is not a party to a contract does not have the right to enforce it because no consideration was offered to him or her under the contract. One notable exception is Australia, where a third party can sue for breach of contract. In most other countries, privity must be established before a party may sue. However, privity requirements are beginning to be relaxed in the United Kingdom, expanding third-party rights. U.K. solicitors (lawyers) who have been negligent in the creation of a will have been held liable to the will's intended beneficiaries. Privity is still required in most situations in Australia and the United Kingdom, but the number of exceptions continues to grow.

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CASE 19-1

GENERAL MILLS, INC. v. KRAFT FOODS GLOBAL, INC.

U.S. COURT OF APPEALS FOR THE FEDERAL CIRCUIT 487 F.3d 1368 (2007)

General Mills sells rolled food items under the brand name Fruit by the Foot, and it owns two U.S. patents on the rolled food item. In 1995, General Mills sued Farley for infringement of these patents, a dispute that General Mills and Farley resolved through a settlement agreement. The

Settlement Agreement required Farley to pay General Mills a lump sum in exchange for the grants by General Mills of a release of its patent claims and a covenant not to sue Farley for past, current, or future infringement. The Settlement Agreement includes as Farley any and all parent companies, subsidiaries, predecessors, and successors. The covenant not to sue also contains language defining the Releasee as including Farley and its successors. The Settlement Agreement also contains two provisions that define limiting conditions to the assignment or transfer of rights under the Agreement to another party by Farley (or its successors). Kraft became the successor to Farley. General Mills agrees that Kraft became Farley's successor. In 2002, Kraft sold and transferred Farley assets, including the Farley trademark and goodwill, to a subsidiary of Catterton Partners. It is undisputed that Kraft retained at least some portion of the original Farley assets and of Farley's rolled food business. After a few years of what General Mills alleges to be infringing activity, Kraft sold the remainder of its rolled food business and purported to transfer whatever rights it had under the Settlement Agreement to Kellogg Company. General Mills does not claim that Kraft engaged in infringing activities after the Kellogg transaction. General Mills sued Kraft alleging infringement of the two patents in the period between the Catterton transaction and the Kellogg transaction. Kraft argues that General Mills breached the Settlement Agreement by filing suit. The district court granted Kraft's motion to dismiss. General Mills appealed. JUDGE LINN: II. Discussion B. Kraft's Status as Successor to Farley As mentioned above, General Mills concedes that Kraft became Farley's successor by virtue of the Farley transaction. General Mills does not allege infringement prior to the Farley transaction or between the Farley transaction and the Catterton transaction. Rather, General Mills argues that [t]he Catterton Transaction divested Kraft of any rights it might have had under the Settlement Agreement, because without the Farley assets that were sold to Catterton Partners, Kraft cannot be 'Farley' under the Settlement Agreement. The part of the Settlement Agreement from which General Mills derives this argument is Article 8.4, which requires that Farley (including its successors, under Article 1.6) must transfer its entire rolled food business if it wishes to assign its rights under the Settlement Agreement without General Mills' consent. Article 8.4, General Mills argues, makes certain that the Farley Agreement remains with Farley's entire rolled-food business. However, as the district court correctly recognized, the Settlement Agreement speaks only to the assignment of rights: [n]either article [8.3 or 8.4] addresses Farley's retention of the Settlement Agreement and sale of other assets. Because the Catterton transaction did not purport to assign Kraft's rights under the Settlement Agreement, the restrictions imposed by Article 8.4 simply do not apply.
p. 429

Nor does any other provision of the Settlement Agreement bar Farley from retaining its rights under the agreement when it transfers parts of its rolled food business. As mentioned, General Mills does not dispute that pursuant to Article 8.4, Kraft became Farley's successor before the Catterton transaction. Accordingly, the question is not whether Kraft complied with the conditions necessary for it to become Farley's successor. The question is whether the Settlement Agreement imposed conditions on Kraft's continuing entitlement to the covenant not to sue. Although General Mills and Farley could have agreed to impose on Farley or Farley's successor ongoing obligations such as the retention of specified assets, they did not do so. There is simply

nothing in the contract that requires Kraft to retain all or any particular assets of the Farley business to preserve Kraft's status as successor. General Mills nonetheless argues that general principles of successorship prevent Kraft from continuing as Farley or a successor once it had sold off assets that were part of the original Farley business in the Catterton transaction. For General Mills to prevail, Kraft's rights under the agreement must have either (1) terminated by operation of law at the time of the Catterton transaction, or (2) been transferred from Kraft to Catterton by operation of law or by the terms of the Catterton transaction. We are not persuaded that either of these eventualities has occurred. As to the second possibilitythat Catterton became Farley's successor after the Catterton transaction and divested Kraft of that statusGeneral Mills does not even make this argument. The record contains no allegations as to what law controls the Catterton transaction or what assets, aside from Farley's goodwill and trademarks, Kraft transferred to Catterton. However, we note that the general rule of corporate law is that a transaction involving a transfer of property from one corporation to another without consolidation or merger, does not include a transfer of all the powers or immunities of the selling corporation. Here, not only did the Catterton transaction not involve a merger or consolidation, but there is not even an allegation that Catterton acquired the entirety of Farley. Indeed, had Kraft not retained at least some part of Farley's rolled food business after the transaction, General Mills could not have alleged infringement. There is simply no basis from which we might conclude that anyone other than Kraft succeeded to Farley's rights under the Settlement Agreement, at least until the Kellogg transaction. There is also no merit to General Mills' argument that the Catterton transaction excused General Mills' obligation to perform under the Settlement Agreement pursuant to the doctrine of impossibility. It is true that after the Catterton transaction, Kraft no longer owned the Farley name and all of Farley's assets. But this fact did not prevent General Mills from affording Kraft the same rights under the Settlement Agreement that it had possessed since the Farley transaction. In the other direction, Kraft's only obligation that the Catterton transaction might possibly interfere with the requirement in Article 8.4 that Farley transfer its entire rolled food product businessapplies only when Farley or its successor purports to assign its rights under the Settlement Agreement. At the time of the Catterton transaction, no one alleges that this occurred. Accordingly, we hold that at least until the Kellogg transaction, Kraft was entitled to the protection of Farley's covenant not to sue, and the district court properly dismissed General Mills' patent infringement claim against Kraft. AFFIRMED.

CRITICAL THINKING
Notice that one of the keys to the decision is whether the deal between Kraft and Catterton involved a sale of a part of a business or involved an assignment of contractual rights. In business, specific definitions can be

ETHICAL DECISION MAKING

Two critical events led up to this case: (1) the transaction between Kraft and Catterton and (2) General Mills' decision to sue Kraft. What ethical implications exist in each of these decisions? Can the behavior of one side or the other be deemed more ethically defensible? If so, which

important for determining which laws apply in a given situation. Besides the transaction between Kraft and Catterton, are there significant ambiguous words or phrases in the decision that would lead to possible confusion regarding the ruling? In what way do these ambiguities affect the ruling?

side, and why? What ethical theories or guidelines support your claim? Does the decision of the court reflect an agreement with your view?

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COMPARING THE LAW OF OTHER COUNTRIES Assignment of Rights in China

Almost all developed market economies permit the free assignability of contract rights. Assignments play a crucial role in business financing because they enable banks and businesses to make loans and pay debts. Almost all developed market economies thus permit the free assignability of contract rights, while most centrally planned economies, such as China, permit only limited assignability. When a contract is with the state, approval by the proper state authority must first be obtained unless the contract allows for assignments. If the contract is with a private party, the assignor must first get the obligor's approval before an assignment can be made.

Rights That Cannot Be Assigned. Exhibit 19-2 lists the four situations in which contractual
rights cannot be assigned to a third party. We discuss each of them below. First, the rights to a contract cannot be assigned when the contract is personal in nature, meaning the obligor has promised something specific to the person receiving it. Third parties cannot legally become the recipient in such situations unless the only part of a contract left to be fulfilled is the payment,7 because rights to payment can always be assigned. For example, when Burkhart went to work for NES, a company that rented and sold trenching equipment to Las Vegasarea contractors, he received $10,000 to sign an agreement not to compete for one year if he left the company's employ. NES was subsequently sold to Traffic Control Services. Burkhart refused to sign a noncompete agreement with the new firm and subsequently quit and went to work for a competitor. When Traffic Control Services sued to enforce the noncompete agreement Burkhard had signed with NES, the court ultimately found that the agreement could not be assigned.8 Second, rights cannot be assigned when the assignment increases the risk or duties the obligor would face in fulfilling the original contract. For example, Ben agrees to replace the siding on Erin's two-bedroom ranch. Erin cannot assign her right to Ben's services to Chris, who lives in a threestory, five-bedroom house, because Ben's duties would be greatly increased by the change.

Third, rights cannot be assigned when the contract expressly forbids assignments. When parties include an antiassignment clause in their contract, the parties are attempting to limit their ability to assign their rights under the contract. However, the wording of the antiassignment clause is determinative regarding the effectiveness of the clause. That is, if worded improperly or ambiguously, the clause does not effectively limit assignments. Most courts consider antiassignment clauses as promises. Assignments made despite such clauses are effective, but the party who makes the assignment will still be liable for breaching the terms of the contract. Moreover, unless the clause is very specific, courts generally consider that it prevents delegation of duties, not assignment of rights.9 A clause stating All assignments are void under this contract will be considered effective in prohibiting the assignment of rights. In contrast, when a contract includes a clause explicitly permitting assignments, the parties may assign rights, even when assignments would normally be considered improper because of an increased duty, risk, or burden to the obligor.10

Exhibit 19-2
Contractual Rights That Cannot Be Assigned 1. Rights that are personal in nature. 2. Rights whose assignment would increase the obligor's risk or duties. 3. Rights whose assignment is prohibited by contract. 4. Rights whose assignment is prohibited by law or public policy.
p. 431

Even in the presence of an antiassignment clause, there are exceptions in which assignments can still be made. For instance, antiassignment clauses do not affect assignments made by operation of law. If a law necessitates an assignment, such as in bankruptcy cases, the assignment is effective regardless of any contractual agreement to the contrary. Likewise, as we've said above, the right to assign monetary payments cannot be denied. Therefore, even when a contract has an antiassignment clause, either party may still assign his or her right to receive payment.11 One reason the law does not bar the right to receive payment is that companies often transfer rights to payments in the regular course of business. Preventing these transfers would have a negative impact on the business community. Also, one's duty to pay is not affected when the party receiving payment changes; that is, no added burden is placed on the obligor. In addition, assignments of the right to receive damages for a breach of contract to sell goods or services are unaffected by antiassignment clauses.12 If one party breaches the contract, the other can sue and transfer the right to recovery to a third party. Finally, when law or public policy forbids assignments, the forbidden rights cannot be assigned. Various state and federal statutes prohibit the assigning of specific rights. If the assignment is determined to be against public policy, it is also deemed ineffective. Except as outlined in this section, all other rights are presumed assignable. Once it has been established that an assignment is valid, notice should be given to the obligor regarding the assignment.

Notice of Assignment. Although notice need not be given for a valid assignment, it is usually
a good idea for the assignor or the assignee to notify the obligor. Assignments are effective

immediately regardless of notice, but by providing notice the assignor can help avoid two serious complications. The first possible complication occurs if the obligor fulfills the contract as written. Because fulfilling the contract discharges the obligor's duties, the act also discharges the assignee's claim on the assignor's right. However, once given notice, the obligor can discharge his contractual obligations only by fulfilling the contract for the assignee. For example, suppose Stefan contracts with Latoya to purchase her speedboat. Latoya assigns her right to collect Stefan's money to Meghan. Neither Latoya nor Meghan notifies Stefan of the assignment. Accordingly, Stefan pays Latoya for the boat. His contractual duties have been discharged, and Meghan cannot request performance from him. Had Stefan been notified about the assignment, the only way he could fulfill his contractual obligations would be by paying Meghan the money owed to Latoya. If, after receiving notice, Stefan pays Latoya, Meghan may still legally request that he pay her. Giving the obligor proper notice avoids such problems with performance. Legal Principle: The assignee should always give notice to the obligor as soon as possible after receiving the assignment, because the obligor may satisfy his or her obligations by performing for the assignor until receiving notice of the assignment from the assignee. The second complication occurs when an assignor assigns two or more parties the same right, and confusion arises as to which party has the right to the contract. Most states use the firstassignment-in-time rule, which gives the contractual right to the first party granted the assignment. Giving proper notice can ensure that there is no confusion over when the assignment was made. Furthermore, a minority of states have adopted the English rule, which states that the first assignee to give notice of assignment to the obligor is the party with rights to the contract. Especially in a state using the English rule, parties are well advised to give notice of assignments to ensure that they maintain their assigned rights.
p. 432

Suppose Shelia assigns her contractual rights to Tony. A week later, she assigns the same rights to Cho. Under the first-assignment-in-time rule, Tony legally has Shelia's rights to the contract. However, if Cho gives notice first and the state in question uses the English rule, although Shelia assigned her rights to Tony first, legally Cho possesses them. The Restatement (Second) of Contracts takes a position between the first-assignment-in-time rule and the English rule.13 It grants legal right to the first assignee in most situations. However, if the first assignment is legally voidable or revocable by the assignor, subsequent assignments are considered evidence of the voiding or revocation of the first assignment and the later assignee has legal right to the contract. Also, the later assignee is considered the legal owner of the contractual right if she offers something to the assignor as consideration and then obtains (1) performance by the obligor on his duty, (2) judgment requiring performance by the obligor, (3) a new contract with the obligor, or (4) evidence frequently used to signify a contractual right (a writing indicating a contractual obligation).

DELEGATION
A delegation occurs when a party to a contracta delegatortransfers her duty to perform to a third partya delegateewho is not part of the original contract. Whereas assignments transfer rights to a contract, delegations transfer duties. (See Exhibit 19-3.) Instead of receiving something,

as in an assignment, the delegatee must fulfill the delegator's contractual obligation to the obligee the party to the contract to whom a duty is owed. For example, Johann contracts with Teresa to have her deliver machinery to his factory. Teresa then delegates her duty to Bill, who delivers the machinery to John. One important distinction between assignments and delegations is apparent in the rights of the transferring party. After making an assignment, the assignor has no right left to the original contract. After making a delegation, however, the delegator is not relieved of his duty to perform. If the delegatee fails to fulfill the contract, the delegator is still liable to the obligee for fulfillment. Using the previous example, if Bill fails to deliver the machinery to John, Teresa is liable to Johann for damages.

Exhibit 19-3
Delegation of Duties

p. 433

Legal Principle: A party transferring her or his duties under the contract is the delegator, and the one receiving the transfer is the delegatee. After the delegation, although the delegatee is bound to perform, the delegator remains liable if the delegatee fails to perform.

Duties That Cannot Be Delegated. As with assignments, the starting assumption is that
duties to a contract can be delegated. However, courts tend to examine delegations more closely than assignments. The reasoning is that assignments usually do not affect the party to the contract who is not involved in the assignment (the obligor), whereas a delegation forces the uninvolved party (the obligee) to receive performance from a party with whom he or she did not directly contract. Also, just as with assignments, certain duties cannot be delegated (see Exhibit 19-4).14 The first is any duty of a personal nature that requires the specific talents, skills, or expertise of the obligor. Victorine contracts with Michael, a famous artist, to paint her portrait using his skill and expertise. Michael cannot delegate his duty to paint Victorine's portrait to anyone else, not even someone of equal skill or talent. An interesting situation arises when the initial contract bears an implicit assumption that work will be performed by others. In such situations, if supervision is important to the task, the To see how delegation of duties relates to business management, please see the Connecting to the Core

supervision could be considered a personal duty the obligor may not delegate. Suppose you are planning to have a new office building built to specifications you have personally created. You contract with Ian, the well-respected manager of a construction firm. Both you and Ian know that he will not build the office building singlehandedly, but because he was sought out for his management skills, his contractual duties are considered personal and therefore cannot be delegated.

activity on the text Web site at [Link]/kubasek2e.

Delegation of personal duties is permissible where otherwise not allowed when there is an explicit contractual agreement to allow delegations. Usually, for a delegation of personal duties to be effective, the contract must state that delegations are permitted. Any nonpersonal duties in a contract can be delegated. For example, delivering goods, mowing a lawn, paying money, and painting a house are all considered nonpersonal duties because they do not require particular skill or expertise and most people could complete them. Thus, they can all be delegated. The second type of duty that cannot be delegated is one whose performance would vary significantly from what the obligee has a contractual right to if the performance were done by the delegatee. To protect the obligee, who is a part of the original contract, when performance would differ substantially from what the obligee contractually has the right to, courts will rule that the delegation is ineffective. The focus here is the skill or abilities of the delegatee. If the delegatee cannot perform the contract at a level comparable to that of the delegator, the obligee would be unnecessarily harmed, and thus the delegation is deemed ineffective.

Exhibit 19-4
Duties That Cannot Be Delegated 1. 2. 3.
p. 434

Duties that are personal in nature. Duties for which the delegatee's performance will vary significantly from the delegator's. Duties in contracts that forbid delegations.

The third situation in which delegations are prohibited occurs when the contract prohibits them. The courts typically treat included agreements not to delegate as indicating the parties' desire to consider the contractual obligations personal and will find otherwise-allowable delegations inappropriate. However, even if a clause prohibiting delegations exists, the courts will probably allow delegations if they are impersonal, such as the payment of money. Case 19-2 demonstrates the problems arising from a party's failure to acknowledge a nondelegation agreement. Although the case discusses assignments of obligations, the court is treating the term assignment as a synonym for delegation of duties. Some courts use the term assignment to refer to a transfer of either rights or duties.

CASE 19-2

Forest Commodity Corp. (FCC) v. Lone Star

Industries, INC., ET AL.

Court of Appeals of Georgia, Third Division 255 GA. APP. 244 (2002)
CAL and FCC entered into a three-year contract for the thru-putting of aggregate stone. In the contract, FCC agreed to provide terminal space for unloading aggregate stone, which FCC would then store, reload onto trucks, and weigh for transshipment. CAL promised to unload a minimum of 150,000 tons per year, for a total of 450,000 tons over the three-year contract period. The agreement also contained a provision prohibiting the assignment or subcontracting of any portion of the obligations without the written consent of the other party. During the contract period, CAL unloaded a total of 198,170 tons of aggregate. Soon thereafter, CAL entered into negotiations with Martin Marietta Materials, Inc., for the sale of CAL's assets. Martin Marietta agreed to accept CAL's rights and obligations under the agreement with FCC, and CAL requested FCC accept an assignment of the thru-put agreement to Martin Marietta. FCC refused. FCC and Martin Marietta eventually entered into a substantially similar contract for the thru-putting of aggregate. It is undisputed that after Martin Marietta's acquisition of CAL and its assets, and pursuant to the new contract with FCC, Martin Marietta thru-put 286,698 tons of aggregate stone at the FCC terminal during the remainder of the original contract period for the CAL thru-put agreement. When combined with the 198,170 tons shipped by CAL, a total of 484,868 tons of aggregate stone was shipped through the FCC facility, 34,868 tons more than the guaranteed minimum under the original agreement. FCC sued CAL for breach of contract, alleging CAL failed to ship the minimum amount of aggregate stone under the contract. CAL filed a motion for summary judgment as to the breach of contract claim. The trial court granted the motion for summary judgment, finding FCC was precluded from enforcing the contract because it failed to comply with the nonassignability clause. FCC appealed. JUDGE JOHNSON: FCC contends the trial court erred in granting summary judgment to CAL because there are genuine issues of material fact regarding whether FCC assigned the contract. However, the irrefutable evidence, even when construed in a light most favorable to FCC, points inevitably to the conclusion an assignment of the CAL thru-put agreement was effected. The numerous items of undisputed facts in this case show FCC's interests and obligations in the CAL thru-put agreement were transferred to Woodchips Export Corporation (WEC) without the written consent of CAL, thereby violating the nonassignability clause of the agreement and extinguishing any right to recovery which FCC may have had. The thru-put agreement obligated FCC to provide a marine terminal facility for the off-loading of aggregate and to perform both the reloading of the aggregate onto trucks and the weighing of such trucks. Yet, the evidence in the record shows the terminal facility where the CAL aggregate was off-loaded was leased by FCC to WEC. In addition, it is undisputed FCC had no employees and no equipment to perform the obligations under the CAL agreement. FCC's vice-president admits FCC had no employees and FCC entered into an unwritten agreement with WEC under which WEC agreed to perform FCC's obligations as its operations agent.
p. 435

Moreover, FCC's tax returns for the years covered by the thru-put agreement show the only income received by FCC during this time period was rental income. These tax returns do not show any income for aggregate thru-putting, nor do they include any expenses for employee wages, equipment rental or maintenance, or fuel expenditures necessary to carry out its

obligations under the CAL thru-put agreement. On the other hand, WEC's income statements and tax returns reveal WEC deducted the expenses incurred in conjunction with aggregate thruputting and received income for the thru-put of aggregate in amounts that correspond to the amounts generated by the CAL thru-put agreement. Indeed, FCC's own accountants testified such debiting and crediting could not have occurred between these two parties since FCC files separate tax returns from the tax returns of WEC and other related companies. Furthermore, the same accountants testified even if such funds had, in fact, been debited and credited between these two companies, the income would first have appeared on the company actually earning it, which in this case was WEC. As a final note, FCC has offered no documentary evidence supporting this accounting practice, such as documents memorializing such inter-company adjustments through debits and credits. FCC next argues no assignment can be found in this case since there is no written assignment document or any other document indicating an intent to assign. However, an assignment can be inferred from the totality of the circumstances and need not be reduced to writing. In addition, Georgia courts may look to tax returns as probative evidence in ascertaining the existence of an assignment. The affirmative decision to declare the thru-put income on the tax returns of WEC and not on the tax returns of FCC is certainly evidence of an intent to assign. Moreover, FCC's vice-president testified oral agreements between FCC and WEC were entered into under his direction and supervision, showing yet another intent to assign. The trial court properly found FCC had assigned the CAL thru-put agreement to WEC. AFFIRMED.

CRITICAL THINKING
Do you agree with the reasoning of this decision? Is the evidence as strongly in support of the court's conclusion as the judge states? Are any pieces of evidence given unfair weight or insufficient weight? Further, what evidence that might not be included in this decision could affect the court's conclusion? Come up with at least one fact, not included in the ruling but possible given the information provided above, that would have a significant impact on the acceptability of this reasoning.

ETHICAL DECISION MAKING

How do you think this decision would hold up under the public disclosure test? Who might react favorably, and who unfavorably? What differences in ethical standards could explain contradictory reactions? What reaction do you think the majority of the U.S. public would have? Why?

3 4

Restatement (Second) of Contracts, sec. 317.

The UCC requires that assignments be in writing when the amount assigned is greater than $5,000.

5 6 7

Restatement (Second) of Contracts, sec. 327. Ibid., sec. 317(2). Ibid., secs. 317 and 318. Control Services v. United Rentals Northwest, 87 P.3d 1054 (Sup. Ct. Nev. 2004).

8Traffic 9

Restatement (Second) of Contracts, sec. 322(1) and UCC 2-210(3). Ibid., sec. 323(1). UCC 9-318(4). UCC 2-210(2). Sec. 342. Restatement (Second) of Contracts, sec. 318, and UCC 2-210.

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