Citation. 22 Ill.167 N.J. 450, 771 A.2d 1208 (2001)
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A settlement agreement was obtained between Plaintiff and Defendant, an insurance company, for a tort claim against Defendant’s client. The agreement contains a non-assignment clause. Plaintiff sought a declaratory judgment to declare the clause is unenforceable.
Synopsis of Rule of Law.
A non-assignment clause in a contract is unenforceable unless it materially changes the contract or gives the non-assigning party duties or aspect of compensation the non-assigning party did not bargain for.
Facts.
Defendant is an insurance company that signed a settlement agreement with the Plaintiff. The agreement included several periodic payments. The agreement also contained a clause forbidding Plaintiff from assigning the contract. Due to an unrelated illness, Plaintiff assigned the payments to a mortgage company in exchange for a lump sum payment. Defendant refused to pay the periodic payments to the mortgage company.
Issue.
Is the non-assignment clause in the structured settlement agreement enforceable?
Held.
No.
Generally, the contractual privilege to receive money is assignable. The only time it is not assignable is when it would materially change the contract or change the duties of the payer.
In this case, Defendant argues that Defendant would not get some of the tax benefits by paying Plaintiff’s mortgager rather than Plaintiff. The laws that made such tax breaks possible were not in place when Plaintiff and Defendant signed the contract, however, so there is no way Defendant could have bargained to receive them.
Discussion.
Generally, as the case provides, a contract is assignable if and only if it does not materially change the contract or put the non-assigning party in a position they did not bargain for.
