Non-assignable contracts – in detail

Non-assignable contracts – in detail

As a matter of law, some contracts cannot be assigned, because, for instance, they are personal contracts. However, there are sometimes other ways to ensure that a third party can take the benefit of a contract. 

Personal contracts 

Personal contracts contain rights considered so personal to the parties concerned that they cannot be assigned. Examples of commercial agreements generally considered to be personal contracts include publishing contracts and recording contracts. It has been said that rights under an agreement can only be assigned in "cases where it can make no difference to the person on whom the obligation lies to which of two persons he is to discharge it". Therefore, the right to employ a particular person under a service agreement is not assignable, although the right for an employee to receive remuneration is usually assignable. Although personal contracts cannot be assigned in the strict sense, it may be possible for a party to declare himself a trustee of the benefit of a personal contract for a third party as a declaration of trust. 

Assignments savouring of champerty or maintenance and bare rights to litigate 

The benefit of a contract may not be assigned if the assignment savours of maintenance or champerty. As a result, it has often been asserted that a bare right to litigate (or bare cause of action) is not assignable. However, where a proprietary right or interest is assigned, and the cause of action is ancillary to that right or interest, or the assignee has a genuine commercial interest in taking the assignment and enforcing it for his own benefit, the assignment will not be struck down.

Assignments prohibited by public policy 

Public policy prohibits the assignment of rights under a small category of contracts. The assignment of a public officer's salary has been held void on grounds of public policy (the salary is paid from national funds) and the same may be true of maintenance payments to a divorced spouse. However, public policy considerations do not usually affect assignments under normal business contracts.