Sec. 110. Assignments Of Contractual Rights By Way Of Security

Contractual rights may be assigned by way of security.

(1) Power to assign.

We have already considered the pledge of property by use of the Document of Title representing the same. Now, we consider the assignment of rights under a contract not including those documents.

Assignment of contractual rights may be by way of sale, gift, or security. We think of it here as for the purpose of security.

A person has power to assign a contractual right without or even against the consent of the other party to the contract in cases where the assignment does not involve any transfer of credit, skill or other personal attribute, i. e., merely results in entitling the assignee to receive money or goods. Thus an employee, may, without his employer's consent, assign his salary in security for a loan and the employer must recognize such assignment.

(2) Assignment of expectancies and future interests.

It is decided that if one expects to inherit property he may assign his right to that property and usually where an expectancy may be said to be coupled with an interest it is assignable. With reference to contractual rights it is settled that rights of this sort cannot be assigned unless the contract has already been entered into. It is, however, unnecessary that the contract be definite as to its duration. Thus one may assign all his future wages which he is to earn under a present contract of employment even though that employment might without breach be terminated at any time.230

(3) Title of assignee.

One who acquires a right by assignment takes it in the same condition in which it exists in the hands of the assignor. Thus if B assigns to C his salary, alleged to be due from A and A has already paid the salary or does not owe it he can set up the defense as well against C as he could against B although C may have supposed he was getting a valid claim and may have given full value for it.

This, as we know, is not true in the case of that sort of transfer which we term negotiation. Rights are not negotiable unless drawn up in a particular way and contain certain essential elements; and they are then negotiable because the parties by putting them in that form thereby signify their intentions to make them negotiable. In such a case, transfer may cut off defenses and the transferee takes a better title than his transferor, but this is not true in respect to rights and instruments merely assignable.

230. Mallin v. Wenham, 209 111. 292.

(4) Notice to debtor.

Using our same illustration of an assignment by B to C of his right or claim against A we must notice that C cannot acquire full protection of his rights until he has notified A of the assignment. Thus if A owes B a salary and B in order to secure C for a loan made by C to B assigns C his salary, C must give A notice of the assignment, otherwise C runs the risk that A may pay the salary to B not knowing of the assignment. In the case of that sort of transfer termed negotiation, this is not true for from the fact that it is made to be negotiated, the debtor must take notice that it may have been negotiated and hence must not pay any money except to the party holding the instrument properly endorsed.