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A general assignment, such as an assignment of “the contract” or “all my rights under the contract” is not also a delegation of duties if the assignment is merely for security. This rule applies if the assignment is made merely to secure an obligation, not to transfer the assignor’s rights in total to the assignee. [U.C.C. § 2-210(5) (1951); 2A Anderson U.C.C. § 2-210:57 (3d. ed.), Westlaw (database updated June 2021).] Assignment with Delegation as Reasonable Grounds for Insecurity If an assignment of rights also operates as a delegation of duties, the counterparty may treat the assignment/delegation as creating reasonable grounds for insecurity as to the assignor’s performance. This fact, in turn, gives the counterparty the right to demand adequate assurances of performance from the assignee. [U.C.C. § 2-210(6) (1951); Right to Adequate Assurance of Performance, infra .] f. Effect of Assignment on Assignor As with delegation, a mere assignment does not absolve the assignor of her contractual liability. Thus, the assignor retains all contractual duties and may be liable for breach if they are not timely performed. However, the assignor, the assignee, and the assignor’s counterparty may agree to effectively substitute the assignee as a contractual party in place of the assignor. Here, there is a novation. In a novation, the assignor is relieved of all contractual liability, which the assignee assumes in her place. [2A Anderson U.C.C. §§ 2- 210:88, 2-210:89 (3d. ed.), Westlaw (database updated June 2021).] g. Effect of Assignment on Assignee As to any rights assigned, the assignee steps into the assignor’s shoes. Thus, the assignee becomes entitled to receive the counterparty’s performance and may sue, in her own name, to enforce the assigned rights. By the same token, the assignee acquires no greater rights than the assignee had. Thus, ordinarily, the assignee takes the assigned rights subject to any defenses that the obligor could assert against the assignee directly. [2A Anderson U.C.C. §§ 2-210:94, 2-210:95, 2-210:100, 2-210:102 (3d. ed.), Westlaw (database updated June 2021).] III. Interpreting the Contract Contract interpretation lies at the heart of many controversies under both UCC Article 2 and the common law. To that end, Article 2 contains many provisions that relate to interpreting the contract, particularly as it concerns divining the nature and scope of the parties’ obligations.
Parties’ General Obligations
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