This section is from the book "The Law Of Contracts", by William Herbert Page. Also available from Amazon: Commercial Contracts: A Practical Guide to Deals, Contracts, Agreements and Promises.
If the subject-matter of the contract is such that performance might be rendered by any one, but by the terms of the contract credit is to be given by one party to the other, it is ordinarily said that since the personality of the party to whom credit is given is material, such contract can not be assigned by such party.1 A contract by which B agrees to furnish meat to A for A's hotel at a certain price per pound, payable at the end of each month, can not be assigned by A to C so that C can compel B to accept C as a debtor or to give credit to C.2 A contract by which A may buy certain property from B at a certain price within a certain period of time on credit, can not be assigned by A to C.3
This rule has been laid down by the courts in a number of cases without any discussion of the effect of the assignment upon the liability of the assignor. If the nature of the contract does not make it necessary to extend credit to the assignee, and if the assignor remains liable upon the contract, it is difficult to see why the assignor may not assign the benefits of such contract to a third person, while he himself remains liable upon the original contract. The adversary party still retains his right to compel performance against the assignor, and from the nature of the case it is immaterial to the adversary party to whom he delivers the benefits of the contract, unless we are ready to say that no executory contracts can be assigned as to performance. At the same time the courts have ordinarily held that contracts by which credit was to be extended, could not be assigned without considering whether the adversary party was giving any greater credit in delivering the benefits of the contract to the assignee than he had agreed to give by the original terms of the contract.
2 Standard Sewing Machine Co. v. Smith, 51 Mont. 245, L. R, A., 1918A, 292, 152 Pac. 38; Chapin v. Longworth, 31 O. S. 421.
3Globe & Rutgers Fire Ins. Co. v. Jones, 129 Mich. 664, 89 N. W. 580 (explained on the theory that the personality of the employer was material); Standard Sewing Machine Co. v. Smith, 51 Mont. 245, L. R. A. 1918A, 292, 152 Pac. 38.
4 W. H. Barber Agency Co. v. Cooperative Barrel Co., 133 Minn. 207, L. R. A. 1916F, 88, 158 N. W. 38.
5 Wooster v. Crane, 73 X. J. Eq. 22, 66 Atl. 1093.
1 United States. Arkansas, etc., Co. v. Mining Co., 127 U. S. 379, 32 L. ed.
246; Demarest v. Dunton Lumber Co., 161 Fed. 264.
Georgia. Sims v. Cordele Ice Co., 119 Ga. 597, 46 S. E. 841; Macon Auto Co. v. Heard, 142 Ga. 264, 82 S. E. 658.
Iowa. Rappleye v. Seeder Co., 79 Ia. 220, 7 L. R. A. 139, 44 N. W. 363.
Missouri. Lansden v. McCarthy, 45 Mo. 106.
Texas. Menger v. Ward, S7 Tex. 622, 30 S. W. 853. 2 Lansden v. McCarthy, 45 Mo. 106.
3 Sims v. Cordele Ice Co., 119 Ga. 597, 46 S. E. 841. (It is said to lapse on A's death since it is non-assignable.) Macon Auto Co. v. Heard, 142 Ga. 264, 82 S. E. 658.
If the theory is correct that a personal contract is absolutely non-assignable, and that even if the adversary party assents to an attempted assignment, his assent is the acceptance of an offer made by the assignee, thus making a new contract and not an assignment of the original contract,4 it may be said that on accepting such offer from the assignee, the adversary party gives up his original contract with the assignor; and that he is thus given his choice between refusing to perform for the benefit of the assignee and releasing the assignor. If this is the correct theory of the effect of assent to the assignment of a personal contract,5 the party who has agreed to extend credit should not be compelled to release the adversary party to the contract and accept the credit of the assignee.
If the assignee has assumed and agreed to pay the obligation incurred by his assignor, in a jurisdiction in which it is held that the election of the beneficiary to enforce performance against the assignee, operates as a discharge of the assignor,6 or reduces the assignor to the position of a surety,7 such adversary party should not be compelled to perform for the benefit of the assignee and thus to give up his claim against the assignor.
In a jurisdiction in which the original primary debtor by an arrangement with a third person and notice to the adversary party may alter his position to that of a surety, the adversary party may give up his original contractual right as against the assignor upon agreeing to perform for the benefit of the assignee.8 Except where these theories are recognized and applied by the courts, no reason appears for denying the right of the assignor who remains personally liable upon the original contract to assign the benefits thereof to a third person.
4 American Colortype Co. v. Continental Colortype Co., 188 U. S. 104, 47 L. ed. 404.
5 See Sec. 2258.
6 See Sec. 2411.
7 See Sec. 2411.
A different question arises where from the nature of the contract it is necessary to give credit to the assignee.9 If A has entered into a contract with B, by which he agrees to collect money for B and to pay it over to him, A can not assign such contract to C.10 Cases of this sort are, however, merely apparent exceptions to the general principle, since in a case of this sort the personality of A is a material element of the contract.