Cheney v. Jemmett

Brief Fact Summary.

Cheney sued Jemmett for violation of a contracts anti assignment clause.

Synopsis of Rule of Law.

If a contract contains an anti assignment that requires the consent of the seller before the buyer can assign the contract, rejecting assignment of the contract must be made in good faith.

Facts.

Cheney entered into an agreement with the Jemmetts for the purchase of certain real property. The contract contained a clause that required the Jemmetts to get the approval of Cheney if they were going to assign the contract to another person. The Jemmetts sought Cheney’s permission to assign the contract, he refused, nonetheless the Jemmetts went forward with the assignment. Cheney sued for violating the anti assignment clause.  

Issue.

If a contract contains an anti assignment that requires the consent of the seller before the buyer can assign the contract, rejecting assignment of the contract must be made in good faith.

Held.

Yes. If a contract contains an anti assignment that requires the consent of the seller before the buyer can assign the contract, rejecting assignment of the contract must be made in good faith.

Dissent.

Under contract law, parties have the right to contract for whatever they want and court must respect the parties’ intent.

Concurrence.

While this rule is the minority rule, the court is correct in applying it to the set of facts before it.

Discussion.

While a provision in a contract that requires consent when assigning a contract is valid, withholding consent must be done in good faith by the party exercising their right to reject consent and they must do so in a reasonable fashion. For example, a lessor of real property must withhold consent in good faith when a lessee wishes to sublease the property. Here, Cheney gave no explanation as to why he was rejecting the assignment of the real property and therefore his decision was arbitrary, not reasonable, and in bad faith.