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Law Governing Assignments

An assignment is a transfer by the  owner of a right (the assignor) to another person (the assignee). Generally, questions regarding the validity, enforceability, or effect of an assignment are governed by the law of the place where the assignment was made.

Whether a right under a contract is capable of being transferred is determined by the law of the place where the contract was entered into.  The validity and effect of an assignment is determined by the law of the place of assignment.[i]  The validity of an assignment of a contractual right is governed by the law of the state with the most significant relationship to the assignment and the parties.[ii]  However, this rule is not applicable if an assignment of wages violates the public policy of one of the two jurisdictions.

In some jurisdictions, the traditional conflict of laws rules governing assignments has been rejected and the law of the place having the most significant contacts with the assignment applies.  In Downs v. American Mut. Liability Ins. Co., 14 N.Y.2d 266 (N.Y. 1964), a wife and her husband separated and the wife obtained a judgment of separation from the husband in New York.  The judgment required the husband to pay a certain yearly sum to the wife.  The husband assigned 50 percent of his future salary, wages, and earnings to the wife.  The agreement authorized the employer to make such payments to the wife.

After the husband moved from New York, the wife learned that he was employed by an employer in Massachusetts.  She sent the proper notice and demanded payment under the agreement.  The employer refused and the wife brought an action for enforcement.  The court observed that Massachusetts did not prohibit assignment of the husband’s wages.  Moreover, Massachusetts law was not controlling because New York had the most significant relationship with the assignment.  Therefore, the court ruled in favor of the wife.

Therefore, the validity of an assignment is determined by looking to the law of the forum with the most significant relationship to the assignment itself.  To determine the applicable law of assignments, the court must look to the law of the state which is most significantly related to the principal issue before it.[iii]

[i] Geo. H. Jett Drilling Co. v. Tibbits, 230 F. Supp. 58 (W.D. La. 1964)

[ii] Conopco, Inc. v. McCreadie, 826 F. Supp. 855 (D.N.J. 1993)

[iii] Ivor B. Clark Co. v. Hogan, 296 F. Supp. 398 (S.D.N.Y. 1968)

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