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Brief Fact Summary.
Cheney sued Jemmett for breach of contract when Jemmett violated an anti-assignnment clause.
Synopsis of Rule of Law.
When a purchaser has the right to assign his interest in a contract pending the seller’s approval, the seller must act in good faith in objecting to the assignment.
It must first be noted that provisions in bilateral contracts which forbid or restrict assignment of the contract without the consent of the obligor have generally been upheld as valid and enforceable when called into question, although the meaning of such terms becomes a matter of interpretation.
View Full Point of Law
When Cheney entered into a contract for the sale of property with Jemmett, the contract had an anti-assignment clause unless Cheney approved of the assignment. When Cheney refused the assignment of Jemmett’s interest to Honn, Jemmett nonetheless drafted a rental agreement to Honn. Cheney sued claiming that Jemmett violated the anti- assignment clause. The trial court granted judgment to Jemmett.
Issue.
When a purchaser has the right to assign his interest in a contract pending the seller’s approval, must the seller act in good faith in objecting to the assignment?
Held.
Yes. The judgment of the trial court is affirmed. Cheney provided no reason for refusing to consent to assignment, and therefore acted arbitrarily in refusing consent.
Dissent.
(Bakes, J.) It is not the court’s job to read in a provision of good faith where a contract does not require it.
Concurrence.
(Bistline, J.) Funk v. Funk requires good faith in withholding or granting consent in any anti-assignment provision in a contract.
Discussion.
When a purchaser has the right to assign his interest in a contract pending the seller’s approval, the seller must act in good faith in objecting to the assignment.