Brief Fact Summary. Defendant placed a clause in a contract to prohibit assignments. The Plaintiff, who did not breach the contract with the Defendant, entered into an agreement with a third party for the purchase of the land from Plaintiff, who was to receive a deed upon payment of one-half the purchase price.
Synopsis of Rule of Law. Covenants against assignments are strictly construed in order to prevent forfeitures.
Facts. Defendant, a vendor of land under an executory sales contract with Plaintiff, placed in the contract a clause prohibiting assignments. It further stated that if an assignment was made by the vendee without written consent of vendor, it was a nullity. The Plaintiff, who did not breach the contract with the Defendant, entered into an agreement with a third party for the purchase of the land from Plaintiff, who was to receive a deed upon payment of one-half the purchase price. The Defendant claimed that the contract was void due to the alleged assignment, and that all monies paid by Plaintiff up until that point would be retained as liquidated damages. The Plaintiff was ready, willing, and able to perform under the contract and made tender of the amount due, which would trigger the deed conveyance subject to the contract. The Plaintiff filed suit and requested a temporary injunction to restrain Defendant from forfeiting monies paid by the Plaintiff under the contract. Plaintiff a
lso requested that the original contract remain in full force and effect, and that he be granted specific performance. The trial court issued the temporary injunction, and the Defendant took an interlocutory appeal to have the temporary injunction lifted.
Issue. Is the Plaintiff entitled to a temporary injunction?
Held. Yes. Affirmed.
The Defendant claimed that the prohibition against assignments was a condition, which the breach thereof, gave Defendant the right to re-enter and take possession. The Defendant cited a case, which held that the prohibition against assignments was not merely a covenant but was a condition. However, the court stated that restraints on alienation have long been disfavored and that such covenants will be construed with the utmost strictness. If there is any doubt as to the meaning, they are to be construed against alienation.
Covenants against assignments are strictly construed in order to prevent forfeitures.
The court found that the agreement of Plaintiff with the third party was not an assignment but was in fact an independent contract. The court noted that the agreement between the Plaintiff and the third party did not release Plaintiff in any way from performing under the original contract.
The court noted that if they were to treat the agreement as an assignment the result would be particularly harsh. The temporary injunction must be kept in place.
Discussion. Note that the court was not called upon to render any final relief or review a final order, but was reviewing an interlocutory appeal. The court did, however, indicate guidelines, which would help the lower court on remand to determine the final outcome of the litigation.