Brief Fact Summary. The validity of an anti-assignment clause provided in a lease was at issue.
Synopsis of Rule of Law. A provision of a lease forbidding the assignment of the lease, does not prevent the assignment of the right to receive contractual payment.
Issue. Does a lease provision forbidding the assignment of the lease work to forbid the assignment of the right to receive contractual payments?
Held. No. The court first recognizes that the Appellee relies upon an "anti-assignment clause in the lease agreement to argue that the assignment was void and unenforeceable." The pertinent part of the clause reads as follows: "TENANT agrees not to assign, mortgage, pledge, or encumber this Lease, in whole or in part, or to sublet the whole or any part of the DEMISED PREMISES, or to permit the use of the whole or any part of the DEMISED PREMISES by any licensee or concessionaire, without first obtaining the prior, specific written consent of LANDLORD at LANDLORD'S sole discretion…. Any such assignment, encumbrance or subletting without such consent shall be void and shall at LANDLORD'S option constitute a default." The Appellant argues that the anti-assignment clause is ineffective for two reasons. First, based on Article 9 of the UCC. Second, under ordinary contract principles. The court summarily rejects the first contention, but accepts the second. As to the second, based on Restatement (Second) of Contracts, §322(1), and as a rule of construction, the court recognizes that the "lease provision at issue … does not prevent the assignment of the right to receive contractual payments."
As a rule of construction, in other words, a prohibition against assignment of the contract (or in this case, the lease will prevent assignment of contractual duties, but does not prevent assignment of the right to receive payments due--unless the circumstances indicate the contrary.View Full Point of Law