Page 1
Restatement of the Law, Second, Contracts
Copyright (c) 1981, The American Law Institute
Case Citations
Rules and Principles
Chapter 15 - Assignment and Delegation
Restat 2d of Contracts, § 316
§ 316 Chapter Scope of This
(1) In this Chapter, references to assignment of a right or delegation of a duty or condition, to the obligee or
obligor of an assigned right or delegated duty, or to an assignor or assignee, are limited to rights, duties, and
conditions arising under a contract or for breach of a contract.
(2) The statements in this Chapter are qualified in some respects by statutory and other rules governing
negotiable instruments and documents, relating to interests in land, and affecting other classes of contracts.
COMMENTS & ILLUSTRATIONS: Comment:
a. Contractual right; chose in action. Statements in this Chapter are limited to contractual rights and duties. Such
rights include debts, rights to non-monetary performance and rights to damages and other contractual remedies, whether
or not a right to payment has been earned. On the other hand, "chose in action" is a much broader term. In its primary
sense it includes debts of all kinds, tort claims, and rights to recover ownership or possession of real or personal
property; it has been extended to instruments and documents embodying intangible property rights, to such intangible
property as patents and copyrights, and even to equitable rights in tangible property. The rules stated here may have
some application to non-contractual choses in action, but the transfer of non-contractual rights is beyond the scope of
the Restatement of this Subject.
b. Negotiable instruments and documents; conveyances of land. The rules governing negotiable instruments and
documents and the benefits and burdens attached to successive owners of real property by virtue of a contract in a prior
conveyance or lease are to some extent different from the law governing contracts in general. The law governing
negotiable instruments and documents derives from the law merchant and is now largely statutory. See Comment to §
6. The law relating to covenants in conveyances and leases of land grew up as part of the law of real property and is left
to the Restatement, Second, of Property.
c. Assignment and delegation. In this Chapter rights are said to be "assigned"; duties are said to be "delegated."
The phrase "assignment of the contract," which may refer to either or both, is avoided because "contract" is defined in §
1 in terms of the act or acts of promising. See § 328. "Assignment" is the transfer of a right by the owner (the obligee
or assignor) to another person (the assignee). See § 317. A person subject to a duty (the obligor) does not ordinarily
have such a power to substitute another in his place without the consent of the obligee; this is what is meant when it is
said that duties cannot be assigned. "Delegation" of performance may be effective to empower a substitute to perform
on behalf of the obligor, but the obligor remains subject to the duty until it has been discharged by performance or
Page 2
Restatement of the Law, Second, Contracts, § 316
otherwise. Compare the usage of terms in Uniform Commercial Code § 2-210. Delegation of performance of a
condition is similar in effect to delegation of performance of duty.
d. Involuntary transfer. In accordance with common usage, assignment and delegation in this Chapter include only
transfers made or powers created by virtue of a manifestation of intention of the assignor or obligor. The manifestation
may be made to the assignee or the person delegated or to another person on his behalf, but transfers made and powers
created by operation of law are excluded. Such transfers and powers, including transfers to and powers of an executor,
administrator, trustee in bankruptcy or receiver by virtue of his office, are in general beyond the scope of this
Restatement. As to the equitable remedies of constructive trust, equitable lien, and subrogation, which sometimes
operate much like an assignment, see Restatement of Restitution §§ 160-62; Restatement of Security § 141.
REPORTERS NOTES: See 3 Williston, Contracts §§ 404, 407 (3d ed. 1960); 4 Corbin, Contracts §§ 859-64 (1951);
Holdsworth, The History of the Treatment of Choses in Action by the Common Law, 33 Harv. L. Rev. 997 (1920);
Corbin, Assignment of Contract Rights, 74 U. Pa. L. Rev. 207 (1926). 1 Gilmore, Security Interests in Personal Property
Ch. 7 (1965), 2 id. Ch. 41 (1965).
Comment a. On the elimination, in the 1972 Amendments to the Uniform Commercial Code, of the term "contract
right," and its inclusion within "account," see Uniform Commercial Code, Appendix II, § 9-106 Reasons for 1972
Change, and Reporter's Note to the Introductory Note to this Chapter.
Comment c. For some of the problems caused by unclear analysis (by both the parties and the court) of a
transaction alleged to be an assignment, see University Caseworks Systems v. Bahre, 172 Ind. App. 624, 362 N.E.2d 155
(1977). For an analysis that would have been clearer and easier had "delegation" been used in the place of "assignment,"
see Smith v. Wrehe, 199 Neb. 753, 261 N.W.2d 620 (1978).
Comment d. For a distinction between the impermissible assignment of a personal injury claim (§ 317 Comment c
and Illustration 8) and the permissible subrogation of an insurer advancing payment, see Western Cas. and Sur. Co. v.
Bowling, 39 Colo. App. 357, 565 P.2d 970 (1977); Higgins v. Allied American Mut. Fire Ins. Co., 237 A.2d 471 (D.C.
Ct. App. 1968); Annot., 19 A.L.R.3d 1054 (1968).
CROSS REFERENCES: Digest System Key Numbers:
Assignments 1 et seq.
Page 1
Restatement of the Law, Second, Contracts
Copyright (c) 1981, The American Law Institute
Case Citations
Rules and Principles
Chapter 15 - Assignment and Delegation
Topic 1 - What Can Be Assigned or Delegated
Restat 2d of Contracts, § 317
§ 317 Assignment of a Right
(1) An assignment of a right is a manifestation of the assignor's intention to transfer it by virtue of which the
assignor's right to performance by the obligor is extinguished in whole or in part and the assignee acquires a
right to such performance.
(2) A contractual right can be assigned unless
(a) the substitution of a right of the assignee for the right of the assignor would materially change the duty of
the obligor, or materially increase the burden or risk imposed on him by his contract, or materially impair his
chance of obtaining return performance, or materially reduce its value to him, or
(b) the assignment is forbidden by statute or is otherwise inoperative on grounds of public policy, or
(c) assignment is validly precluded by contract.
COMMENTS & ILLUSTRATIONS: Comment:
a. "Assignment." The word "assignment" is sometimes used to refer to the act of the owner of a right (the obligee
or assignor) purporting to transfer it, sometimes to the resulting change in legal relations, sometimes to a document
evidencing the act or change. In this Chapter "assign" and "assignment" refer to an act which has the effect stated in
Subsection (1). To avoid ambiguity, such an assignment is said to be "effective"; a similar act which does not have the
stated effect is referred to as an "attempted" or "purported" assignment. In either case the actor is referred to as the
"assignor" and the transferee or intended or purported transferee is referred to as the "assignee."
Illustrations:
1. A has a right to $ 100 against B. A assigns his right to C. A's right is thereby extinguished, and C acquires a
right against B to receive $ 100.
2. A purports to assign to C a right to receive $ 100 from B. A has no such right. The assignment is ineffective,
and C can recover damages from A under the rules stated in § 333.
Page 2
Restatement of the Law, Second, Contracts, § 317
b. Assignment to obligor. A purported assignment by a creditor to his debtor of the indebtedness owed by the
debtor is not covered by this Chapter. Such an "assignment" may or may not be effective to extinguish the assignor's
right and thus to discharge the debtor; it cannot create in the debtor a right to performance by himself. Compare § 9.
c. Historical note. As is indicated in the Introductory Note to this Chapter, the historic common-law rule that a
chose in action could not be assigned has largely disappeared. It remains applicable to some non-contractual rights,
particularly claims for damages for personal injury, and to certain claims against the Government. This Section is
limited by § 316 to contractual rights, and the historic rule now has very limited application to such rights. Except as
stated in this Section, they may be effectively assigned. Notwithstanding the historical background, recourse need no
longer be had to the law merchant, to doctrines peculiar to courts of equity, or to the concept of a power of attorney
irrevocable because coupled with an interest. The restrictions in paragraphs (2)(a) and (c) rest on the basic principle
that rights based on agreement are limited by the agreement.
d. Material variation. What is a material variation, an increase in burden or risk, or an impairment of the obligor's
expectation of counter-performance under paragraph (2)(a) depends on the nature of the contract and on the
circumstances. Both assignment of rights and delegation of performance are normal and permissible incidents of many
types of contracts. See, for example, as to contracts for the sale of goods, Uniform Commercial Code § 2-210
Comment. When the obligor's duty is to pay money, a change in the person to whom the payment is to be made is not
ordinarily material. Compare § 322; Uniform Commercial Code § 9-318. But if the duty is to depend on the personal
discretion of one person, substitution of the personal discretion of another is likely to be a material change. The clause
on material impairment of the chance of obtaining return performance operates primarily in cases where the assignment
is accompanied by an improper delegation under § 318 or § 319: if the obligor is to perform in exchange for the promise
of one person to render a return performance at a future time, substitution of the return promise of another impairs the
obligor's expectation of counter-performance. But in cases of doubt, adequate assurance of due performance may
prevent such an impairment. Compare § 251; Uniform Commercial Code § 2-609.
Illustrations:
3. B contracts to support A for the remainder of A's life. A cannot by assignment confer on C a right to have B
support C.
4. B contracts to support A for the remainder of A's life. B commits a material breach of the contract, and A
assigns his right of action to C. The assignment is effective.
5. B contracts to sell to A for three years 250 tons of ice a week, and A contracts to pay on delivery a stated price
per ton. A assigns his right under the contract to C. The assignment is effective. C's right to delivery is conditional on
payment, but payment by C satisfies the condition.
6. B sells his business to A and makes a valid contract not to compete. A sells the business to C and assigns to C
the right to have B refrain from competition. The assignment is effective with respect to competition with the business
derived from B. The good will of the business, with contractual protection against its impairment, is treated as an
assignable asset.
e. Public policy and statutory limitations. The rules for promises and other terms of an agreement stated in
Chapter 8 apply by analogy in determining whether an assignment is inoperative on grounds of public policy under
paragraph (2)(b) of this Section. Additional statutory restrictions are common. Uniform Commercial Code § 5-116
prevents assignment of the right to draw under a letter of credit unless the credit is expressly designated as transferable
or assignable, and renders ineffective an assignment of the beneficiary's right to proceeds until the letter of credit or
advice of credit is delivered to the assignee. As is stated in the Statutory Note preceding § 316, wage-assignment
statutes often contain a variety of limitations, and there are statutes forbidding or limiting the assignment of rights under
government contracts.
Page 3
Restatement of the Law, Second, Contracts, § 317
Illustrations:
7. For value A, a public official, assigns to C salary or fees already earned and also his unearned salary for the
ensuing month. The assignment of the earned salary or fees is effective, in the absence of a contrary statute, but the
assignment of unearned salary is against public policy.
8. A contracts with B, a physician, for medical services, and later claims that B's negligence in performing the
services caused personal injury to A in violation of B's contractual duty to use due care. A assigns the claim to C. The
assignment is ineffective.
9. A, a retired officer of the United States Army, borrows money from C and as security for the loan assigns to C
whatever is due or shall become due to A as retired pay. The assignment is ineffective except as permitted by statute
under regulations prescribed by the Secretary of the Army.
f. Contractual prohibition. The effect of a term in a contract forbidding the assignment of rights arising under the
contract is the subject of § 322. Such a term may resolve doubts as to whether an assignment violates paragraph (2)(a)
of this Section. Where it seems to forbid an assignment clearly outside the scope of paragraph (2)(a), it may be read
restrictively to permit the assignment, or to give the obligor a claim against the assignor rather than a defense against
the assignee, or the term may be invalid by statute or decision. See Uniform Commercial Code §§ 2-210, 9-318. Even
if the term gives the obligor a defense against the assignee, the assignment is usually partially effective as an assignment
conditional on the assent of the obligor.
REPORTERS NOTES: Subsection (1) is based on former §§ 149(1) and 150(1). The distinction in those sections
between "assignment" and "effective assignment" is eliminated. Subsection (2) contains the substance of former § 151.
See 3 Williston, Contracts §§ 404, 412, 417-23 (3d ed. 1960); 4 Corbin, Contracts §§ 857, 861, 864-79 (1951 &
Supp. 1971).
Comment a. Illustration 1 is a revision of Illustration 1 to former § 150. Illustration 2 is new; for discussions of
what may be assigned, see Stathos v. Murphy, 26 A.D.2d 500, 276 N.Y.S.2d 727 (1966), aff'd, 19 N.Y.2d 883, 281
N.Y.S.2d 81, 227 N.E.2d 880 (1967); Factors Etc., Inc. v. Creative Card Co., 444 F. Supp. 279 (S.D.N.Y. 1977).
Comment d. Illustration 3 is new; compare duPont de Bie v. Vredenburgh, 490 F.2d 1057 (4th Cir. 1974) in which
the right to accrued but unpaid support payments was held assignable. Illustrations 4 and 5 were substantially
Illustrations 3 and 2 respectively to former § 151. As to Illustration 5, compare Crane Ice Cream Co. v. Terminal
Freezing & Heating Co., 147 Md. 588, 128 A. 280 (1925); Comment 4 to Uniform Commercial Code § 2-210. For
other discussions of when assignment may or may not be barred because it materially would vary the obligor's burden
or risk, see, e.g., Finance America Private Brands v. Harvey E. Hall, Inc., 380 A.2d 1377 (Del. Super. Ct. 1977);
Munchak Corp. v. Cunningham, 457 F.2d 721 (4th Cir. 1972); cf. Union Bond and Trust Co. v. M and M Wood
Working Co., 256 Or. 384, 474 P.2d 339 (1970). Illustration 6 is substantially based on Illustration 4 to former § 151;
see also T.E. Moor & Co. v. Hardcastle, 421 S.W.2d 126 (Tex. Civ. App. 1967), ref. n.r.e.
Comment e. Illustration 7 was substantially Illustration 7 to former § 151. Illustration 8 is new. Illustration 9 is
based on Illustration 5 to former § 151; the applicable statute is 37 U.S.C. § 701 (1976). For a discussion of the
interpretation of purported assignments to avoid statutory bars, see Stathos v. Murphy, 26 A.D.2d 500, 276 N.Y.S.2d 727
(1966), aff'd, 19 N.Y.2d 883, 281 N.Y.S.2d 81, 227 N.E.2d 880 (1967).
Comment f. See Annots., 75 A.L.R.3d 1184 (1977); 59 A.L.R.3d 244 (1974).
CROSS REFERENCES: ALR Annotations:
Assignability of licensee's rights under patent licensing contract. 66 A.L.R.2d 606.
Page 4
Restatement of the Law, Second, Contracts, § 317
Assignability of warranty of goods and chattels. 17 A.L.R.2d 1196.
Digest System Key Numbers:
Assignments 1, 10-23
Legal Topics:
For related research and practice materials, see the following legal topics:
Contracts LawThird PartiesDelegation of Performance