Continental Purchasing Co. v. Van Raalte Co

Brief Fact Summary. Plaintiff is an assignee of Ethel L. Potter (Potter). Defendant is Potter’s employer. Potter signed a contract with Plaintiff, assigning all of her income to Plaintiff in order to pay off a debt. Instead, Defendant gave $1.50 of Potter’s wages to her, because she had no other income.

Synopsis of Rule of Law. When a contract is assigned and the non-assigning party agrees to the assignment, the non-assigning party becomes liable to the party to which the contract was assigned.

Facts. Defendant is Potter’s employer. Plaintiff is a party to which Potter assigned all her income. After Potter made the assignment to Plaintiff, Plaintiff sent notice to Defendant of the assignment. Defendant asked, since Potter had no other income, if Defendant could give some of the income to Potter for her to live on. Plaintiff withdrew its formal notice. The parties operated this way for a few months. Plaintiff did not send Defendant a copy of the assignment agreement. After a few months, Plaintiff sent another formal notice to Defendant, reminding Defendant that all of the wages due Potter, were owed to Plaintiff, and that money paid to Potter did not relieve Defendant of its obligation to pay Plaintiff.

Issue. Should Defendant pay the sum that Defendant paid to Potter over the months to Plaintiff due to the assignment?

Held. Yes.
Once a party to a contract has notice that the contract has been assigned and accepts the assignment, the party owes the obligation, not to the assignor, but to the assignee. In this case, Defendant owed Potter an obligation to compensate Potter for her work. After the assignment, Defendant owed this obligation to Plaintiff.

Discussion. By paying Potter’s wages to Plaintiff, Defendant accepted Potter’s assignment to Plaintiff, and became obligated to Plaintiff rather than to Potter.