Brief Fact Summary. 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.
In another relevant section, the Restatement of Contracts recognizes the validity of assignments of contractual rights, but with three important exceptions: (2) A contractual right can be assigned unless (a) the substitution of a right of the assignee for the right of the assignor would materially change the duty of the obligor, or materially increase the burden or risk imposed on him by his contract, or materially impair his chance of obtaining return performance, or materially reduce its value to him, or (b) the assignment is forbidden by statute or is otherwise inoperative on grounds of public policy, or (c) assignment is validly precluded by contract.View Full Point of Law
Issue. Is the non-assignment clause in the structured settlement agreement enforceable?
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.