8/12/2019 Assignment Essay II

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Anushi AminCommercial Law

James FaganGroup: B

How effective is a clause in a contract that prohibits the transfer of

rights arising under the contract?

Clauses that prohibit assignment of rights are often included in contracts as a

means of preventing the transfer of rights arising under the contract. The are

valuable in circumstances where an obligor !can have a genuine commercial

interest in see"ing to ensure that he is in contractual relations onl with a

person whom he has selected as the other part to the contract.# $The law is

re%uired to stri"e a balance between recognising the practical interests of the

obligor& together with the principle of freedom of contract that led to a

prohibition of assignment clause in a contract& and the commercial importance

of maintaining the alienabilit of propert. ' argue that ultimatel the efficac of

a non(assignment clause rests on its construction) however& the *udiciar has

reduced its effect through creative interpretation.

+espite the prohibition of the assignment of the benefit of the contract being

upheld as effective in Linden Gardens2& Lord Browne(,il"inson in the -ouse

of Lords ma"es a number of obiter remar"s& which signal the first indications

of limits to such a clause. 'n considering whether the clause prohibits the

assignment of accrued rights of action& he considered the Court of Appeals

distinction between an assignment of the right to ac%uire future performance

of a contract b the other part and an assignment of the benefits arising

under the contract. Although his dominant concern in precluding this

distinction was to insulate the obligor from contractual dealings with anone

other than the obligee& he does concede that it is hpotheticall possible toconstrue a prohibitor term so !as to render invalid the assignment of rights to

future performance but not so as to render invalid assignments of the fruit of

performance.#/-e subse%uentl clarifies that his remar"s are confined to

prohibitions of assignment that have the effect of engaging the debtor into

direct contractual relations and do not detract from Goodes view that !if the

$Linden Gardens Trust Ltd v Lenesta Sludge Disposals Ltd & St Martins Property

Corporation Ltd v Sir Robert McAlpine Ltd0$1123 $ AC 45 6-L7 per Lord Browne(,il"inson& at$89'bid 0$1123 $ AC 45 6-L7

/'bid 0$1123 $ AC 45 6-L7 at pg $85

8/12/2019 Assignment Essay II

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Anushi AminCommercial Law

James FaganGroup: B

prohibition see"s to prevent the assignor from binding himself to pa over

such fruits to the assignee& such prohibition is pro tanto void.#2;ot onl does

this wea"en the efficac of the non(assignment clause but it also paves the

wa for the law to develop a dut on the assignor to account to the assignee

for the proceeds received of a chose in action purportedl assigned.

;otabl& in St Martins5the court held that the obligor 6who suffered no loss

from breach of contract b the obligee7 could claim against the obligee and

account for the proceeds of litigation to the assignee for losses incurred. B

using the e

5St Martins Property Corporation Ltd v Sir Robert McAlpine Ltd0$1123 $ AC 45 6-L7

9The Albaero 0$1>>3 AC >>2) +unlop v Lambert 6$4/17 9 ClF988

>Tolhurst& G.& !The Assignment of Contractual ights# 68897 -art

4e Turcan 6$4447 28 Ch + 5

1+on Ding Eroductions 'nc v ,arren 08883 Ch 1$& Ch +

8/12/2019 Assignment Essay II

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8/12/2019 Assignment Essay II

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Anushi AminCommercial Law

James FaganGroup: B

Barbados Trust. Thus there is no interference b Barbados Trust.#$2 B

turning a blind ee to the practicalities of the procedure and focusing on the

formalities of the procedure ,aller LJs *udgment reflects the e

$2'bid per ,aller LJ at pg 22/

$5'bid.

$9EG Turner& !Charges of Inassignable ights# 68827 8 JCL 1>

$>+on Ding Eroductions 'nc v ,arren 08883 Ch 1$& Ch + at pg /