The theory of contract being that it is a personal relationship between two or more persons who have chosen each other, assignment of rights thereunder, without the other party's consent, is permitted, as we have seen, upon the theory that the contractual arrangement is not thereby disturbed. It follows from this, that such assignment cannot be permitted to increase the obligations of the other party thereunder. Therefore, the assignee will take the right as it actually exists, not as it may seem to be; and will take it subject to all adjustments and defenses to which the assignor would have been subject had there been no assignment.
Example 77. A has a contract of service with B, by which B pays him a monthly salary. A assigns his salary to C in security for a loan. If this salary has already been paid, though not due, or if A does not earn his salary, or if A owes B money as a set off, these defenses may be had by B against C as readily as against A, provided B had done nothing by which C in taking the assignment has been misled as to the true facts.163
If the assignment is by way of negotiation of a negotiable instrument, this reasoning does not apply, as negotiable paper was invented in part to escape this situation.
Where a contract is assignable, the debtor must pay heed to the assignment and recognize the assignee when he has received notice of the assignment, but no rights are acquired against him until notice is given.
Assignment may be with the consent and knowledge of the other party to the contract, or it may be done quite independently of him. The usual practice in assignment of wages as security for a loan is an example of this. If a contract is assignable and is assigned, the debtor must recognize the assignment when it is brought to his notice. He need not, however, ever assume that the party has assigned his contract and may treat with him on the theory that there has been no assignment. Thus an assignable instrument differs again from a negotiable one. The maker of a negotiable promissory note has no right to assume that a note has not been negotiated and must therefore demand, in order to protect himself, the production of the instrument. But a promisor of a non-negotiable, though assignable, right, need not assume its assignment and can treat with his promisee in perfect safety until the assignee notifies him.164
163. Westfall v. Jones, 23 Barb. (N. Y.) 9.
The fund or right assigned must be designated or identified. An order by one party upon another to pay a third a certain designated fund or debt owing will operate as an assignment of the fund. But a draft or a check is not an assignment for it is drawn on the credit of the drawer and not upon the credit of any fund.
If B has a fund belonging to A, and A draws an order on B directing B to pay this fund to C, this will operate as an assignment of the fund. There can be no assignment of a right to a fund, account, etc., unless it is identified. Manifestly this must be so. The assignee must have a right to demand some certain thing and the other party to the contract must know what to deliver or pay over.
A bill of exchange is an order by A on B to pay C, or order, a certain amount. Suppose B has in his possession funds belonging to A. Is the bill of exchange an assignment? It is well settled it is not, because the bill is drawn on A's general credit, and B assumes no liability until he accepts the bill. The bill also creates a liability both on A and on B when B accepts that the face of the instrument will be paid, though the fund might fail. Even if the bill of exchange refers to a fund out of which B may reimburse himself when he pays C, the bill is not an assignment.165 An assignment must direct the payment of the fund. If an order is drawn on the general credit of the drawer it is not an assign164. Sears v. Trustees, 28 111. 183.
165. See Negotiable Paper in this series.
ment. If it is an assignment it is not a bill of exchange, because it does not fulfil the definition of a bill of exchange. The same reasoning applies to checks which are a species of a bill of exchange.
On the death or bankruptcy of a person, certain of his rights and liabilities pass to his representative. In general, all rights and obligations pass which are not purely personal. In a sale of real estate, many rights and obligations pass which were created by former deed.
The assignment of contracts by operation of law takes place in case of death or bankruptcy of a contracting party. Such rights or liabilities as are not purely personal will go to the representative, who is called in case of death, the executor (if appointed by will), or the administrator (if appointed by the court), and who is called in case of bankruptcy, the trustee. Rights or liabilities purely personal would not pass. Thus, if A agrees to work for B for a year, but dies during the year, the liability to B is discharged, but the right to salary earned during the period of actual employment would pass to the executor or administrator. For the title which is acquired by a trustee in bankruptcy, see subject of Bankruptcy.