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Content-Type: text/plain; charset=ANSI_X3.4-1968 Content-Transfer-Encoding: 7bit X-From: Eric Gillaspie X-To: Gerald Nemec X-cc: X-bcc: X-Folder: \Gerald_Nemec_Dec2000_June2001_1\Notes Folders\Notes inbox X-Origin: NEMEC-G X-FileName: gnemec.nsf Gerald, In Illinois, the courts have generally held a contract may be assigned to another party if the contract is silent on whether the contract is assignable. However, the case law fails to specifically discuss if consent of the non-assigning party is required for the assignment to be valid. However, I think it is reasonable to interpret the omission of such a "consent requirement" in the discussion on assignment, to conclude that consent is not required. See the discussion below: ILLINOIS JURISPRUDENCE Copyright 1999 LEXIS Law Publishing, a div. of Reed Elsevier Inc. Thomas D. Nusbaum, J.D. COMMERCIAL LAW ? PART TWO. UNIFORM COMMERCIAL CODE ? CHAPTER 9. ARTICLE 2: SALES ? III. PERFORMANCE ? A. OVERVIEW OF OBLIGATIONS Illinois Jur, Commercial Law o 9:35 o 9:35. Delegation or assignment ? ?A party may perform a duty under a sales contract through a delegate, unless otherwise agreed or unless the other party has a substantial interest in having the original promisor perform or control the acts required by the contract. No delegation of performance relieves the party delegating of any duty to perform or any liability for breach. ?n35 All rights of the seller or buyer may be assigned, unless otherwise agreed. ?n36 This may include rights under a warranty, such that the assignee of a warrantee's rights under an express warranty, if the assignment is otherwise valid, succeeds to all those rights and thus stands in privity with the warrantor. Such an assignee's privity would generally enable it to sue for economic loss and consequential damages, just as an original contracting party might do. ?n37 Unless the circumstances indicate the contrary, a prohibition of assignment of ''the contract'' is to be construed as barring only the delegation to the assignee of the assignor's performance. ?n38 However, an assignment is barred where it would materially change the duty of the other party, increase materially the burden or risk imposed on him by the contract, or impair materially his chance of obtaining return performance. A right to damages for breach of the whole contract or a right arising out of the assignor's due performance of his entire obligation can be assigned despite an agreement otherwise, ?n39 because no delegation of any performance is involved. ?n40 An assignment of ''the contract,'' of ''all my rights under the contract,'' or in similar general terms is an assignment of rights, and unless the language or the circumstances, as in an assignment for security, indicate the contrary, is also a delegation of performance of the duties of the assignor. The acceptance of such an assignment by the assignee constitutes a promise to perform those duties. This promise is enforceable by either the assignor or the other party to the original contract. ?n41 Comment: Article 2 of the Uniform Commercial Code ?n42 takes no position on the possibility of extending some recognition or power to the original parties to work out normal commercial readjustments of the contract in the case of financing assignments even after the original obligor has been notified of the assignment. This question is dealt with in Article 9. ?n43 On the other hand, the other party may treat any assignment which delegates performance as creating reasonable grounds for insecurity and may, without prejudice to his rights against the assignor, demand assurances from the assignee. ?n44 Digest Data Case Authorities: Assignments to jobbers were not forbidden where agreements' assignment provision made only one limitation on dealer's right to assign and no limitations on franchisor. Beachler v Amoco Oil Co., 112 F3d 902 (CA7 Ill 1997). The sale of the defendant corporation was not violative of a clause in the parties' contract that prohibited assignment without the prior written consent of the plaintiff, since a change in corporate ownership does not constitute a variation of that corporation's contractual duty and at all times, the defendant remained an independent, functioning organization; thus, the sale of the defendant corporation did not change the defendant's obligations under the contract and did not assign the defendant's rights and duties under the agreement to anyone. Baxter Healthcare Corp. v O.R. Concepts, 69 F3d 785 (CA7 Ill 1995). The change of ownership of defendant's stock did not constitute an assignment of defendant's interests in its agreement with plaintiff; a change in corporate ownership does not constitute a variation of that corporation's contractual obligations. Baxter Healthcare Corp. v O.R. Concepts, 69 F3d 785, 27 UCCRS2d 1185 (CA7 Ill 1995). Annotation References: Sales: what constitutes ''reasonable grounds for insecurity'' justifying demand for adequate assurance of performance under UCC o 2-609. 37 ALR5th 459. Liability of secured creditor under uniform commercial code to third party on ground of unjust enrichment. 27 ALR5th 719. Periodicals: For article, ''Survey of Illinois Law: Commercial Law,'' see 21 S. Ill. U.L.J. 729 (1997). FOOTNOTES: ???[n35] 810 ILCS 5/2-210(1). [n36] 810 ILCS 5/2-210(2). Assignments are generally discussed in Illinois Jur, Property. [n37] Collins Co. v Carboline Co. (1988) 125 Ill 2d 498, 127 Ill Dec 5, 532 NE2d 834, CCH Prod Liab Rep 12019, 7 UCCRS2d 616, later proceeding (CA7 Ill) 864 F2d 560, 7 UCCRS2d 629. As to warranties generally, see oo 9:76 et seq. [n38] 810 ILCS 5/2-210(3). [n39] 810 ILCS 5/2-210(2). [n40] Official Comment 3 to UCC o 2-210. [n41] 810 ILCS 5/2-210(4). [n42] 810 ILCS 5/2-101 et seq. [n43] Official Comment 5 to UCC o 2-210. As to Article 9 of the UCC (810 ILCS 5/9-101 et seq.) generally, see Chapter 17, Article 9: Secured Transactions. [n44] 810 ILCS 5/2-210(5). As to the right to seek assurance under 810 ILCS 5/2-609, see o 9:36. Research References: Forms: Complaint-Misrepresentation of ability to pay for goods. 7A Callaghan's Illinois Civil Practice Forms, Sales o 176.07. COMMERCIAL LAW ? PART ONE. CONTRACTS ? CHAPTER 6. GUARANTY, SURETY, AND INDEMNITY CONTRACTS ? II. GUARANTY CONTRACTS ? A. IN GENERAL Illinois Jur, Commercial Law o 6:10 o 6:10. Assignability; substitution of parties ? ?Illinois recognizes the general principle of nonassignability of guaranties. ?n44 The general rule provides that a guarantor is released from his obligations where the creditor assigns his contract to a third party. ?n45 However, that rule is not applied mechanically; rather, the facts of each case determine whether the policy underlying the rule applies. ?n46 The test of whether a guaranty may be transferred is not whether new credit is extended after the transfer, but whether the obligations of the parties to the guaranty have thereby changed. ?n47 The rationale for the rule that a special guaranty is not assignable without the consent of the guarantor stems from the general contract principle that a person may be held only to the precise obligation he undertook. ?n48 The rule thus rests upon the principle that the assignment would be a material alteration because the surety may have extended his promise because of his reliance on one or the other of the original parties or because the addition of the new party would materially affect the operation of the instrument. ?n49 A simple assignment of a guaranty pursuant to a contract between a creditor-guarantee and a third party is more likely to cause a material alteration in the guarantor's obligation than an assignment pursuant to a merger, but, in either case, a court must determine whether the guarantor's obligation was materially altered. The manner in which an assignment takes place is not determinative. ?n50 Claims for money arising by virtue of past extensions of credit made in reliance upon a continuing guaranty can be assigned. ?n51 Eric Gillaspie 713-345-7667 Enron Building 3886
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