Assignor’s Liability On Contract Assigned

An assignment of a contract will not operate to cast on the assignee liabilities imposed by the contract on the assignor.[i] An assignor cannot relieve himself/herself from the contract obligations merely by assigning the contract to a third party.  The assignor remains liable as a surety.

An assignor remains secondarily liable as a surety or guarantor if the assignee assumes the contractual obligation.  In other words, when the assignee takes the benefit of the contract, he/she also assumes its liabilities and the assignor stands only as a surety for the performance of the obligation by the assignee.[ii]

If an assignor is bound by a contract of a personal nature, he/she cannot substitute someone else in his/her place.  The burden of an obligation cannot be transferred without the consent of the party entitled to the benefit.  Moreover, if the assignor withdraws from his/her rights under the contract, then the whole contract becomes unassignable.[iii] However, an assignor remains liable to the obligor for the assignee’s defective performance.[iv]

[i] Nat’l Retail Dev. Partners I, LLC v. Maness (In re Mortgs. Ltd.), 405 B.R. 669 (Bankr. D. Ariz. 2009) see also Walker v. Phillips, 205 Cal. App. 2d 26 (Cal. App. 2d Dist. 1962)

[ii] Cutting Packing Co. v. Packers’ Exchange of California, 86 Cal. 574 (Cal. 1890)

[iii] Fenn v. Pickwick Corp., 117 Cal. App. 236 (Cal. App. 1931)

[iv] Harris v. First Union Mortg. Corp. (In re Harris), 2002 Bankr. LEXIS 771 (Bankr. S.D. Ala. May 10, 2002)

Inside Assignor’s Liability On Contract Assigned