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Future Interests, Expectancies, and Contingencies

An assignment is the transfer, by one party to another, of all or part of one’s property in exchange for valuable consideration.[i]  An assignment of a right is the manifestation of an assignor’s intention to transfer such right and the assignor’s right to the performance by the obligor is extinguished in whole or in part as the assignee acquires the right to such performance.

In order to be assignable, the subject matter must have either an actual or a potential existence at the time of the purported assignment.  Thus, a mere possibility is not assignable.  However, this does not mean that the property has to be in existence at the time the contract is made for an equitable assignment to be enforceable.  An assignment can be made if the subject matter potentially exists and is in existence during the time within which the assignment may operate.[ii]

Principles of Equity require that the assignment take effect when “the thing assigned comes into existence, provided the assignment was fairly made, is supported by sufficient consideration, is not contrary to public policy, and no superior right has arisen in the meantime.”  Courts recognize even small consideration in validating assignments.[iii]

An assignment of a right to the future performance of an obligation is allowed since it may relate to a conditional right which is adequately identified.   For instance, in a suit involving a money receivable, an assignment was not invalidated because of the fact that the client’s right to receive money was conditioned upon the availability of proceeds from the action against the insurance company.[iv]

However, an assignment of a future interest will be void if it is against public policy.  The distinction between an assignment of a cause of action for personal injuries and an assignment of the expectancy of recovery from such an action is an inadequate distinction for some jurisdictions.  If the assignment of the cause of action is void, the assignment of the expectancy of the proceeds from such an action is also void.[v]

The fact that a right is created by an option contract, is conditional on the performance of a return promise, or is otherwise conditional does not prevent its assignment before the condition occurs.[vi]  For instance, A is party to a contract with B under which certain payments are to be made to A by B under a fixed schedule and other payments are to be made if B’s earnings exceed stated amounts.  As security for a loan to A by C, A assigns to C A’s rights to payments by B, A to retain any payments becoming due before default by A under the loan agreement.  The assignment is effective according to these terms.[vii]

[i] Hsu v. Parker, 116 Ohio App. 3d 629 (Ohio Ct. App., Trumbull County 1996)

[ii] University of Texas Medical Branch v. Allan, 777 S.W.2d 450, 453 (Tex. App. Houston 14th Dist. 1989)

[iii] Williams Press, Inc. v. Flavin, 74 Misc. 2d 1082 (N.Y. Sup. Ct. 1972)

[iv] Bonanza Motors v. Webb, 104 Idaho 234, 236 (Idaho Ct. App. 1983)

[v] Town & Country Bank v. Country Mut. Ins. Co., 121 Ill. App. 3d 216 (Ill. App. Ct. 4th Dist. 1984)

[vi] Restat 2d of Contracts, § 320

[vii] Id.

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