Assignment. Abby's Cakes on Dixie, Inc, agreed in a lease contract to lease space in a shopping center from Colonial Palms Plaza, Inc The contract included a provision in which Colonial agreed to pay Abby's a construction allowance of up to $11,250

Question

after Abby's had satisfactorily completed certain improvements to the rented premises. The contract also contained a clause stating that Abby's agreed "not to assign, mortgage, pledge, or encumber this Lease" without first obtaining the written consent of Colonial and that any such "assignment, encumbrance or subletting without such consent shall be void." Prior to the completion of the improvements, Abby's assigned its right to receive the first $8,000 of the construction allowance to Robert Aldana (without first obtaining Colonial's consent). In return, Aldana loaned Abby's $8,000 to finance the construction. Aldana notified Colonial of the assignment by certified mail. After Abby's had completed the improvements to the rented premises, Colonial ignored the assignment and paid Abby's the construction allowance. In Aldana's suit against Colonial for the $8,000 due him pursuant to the assignment, Colonial claimed that the assignment was prohibited by the contract provision and therefore void. Who will win, and why?

Answer 1

Assignment
Aldana won. The law in this area is summarized in the Restatement (Second) of Contracts, Section 322(1): "Unless the circumstances indicate the contrary, a contract term prohibiting assignment of ‘the contract' bars only the delegation to an assignee of the performance by the assignor of a duty or condition. As a rule of construction, in other words, a prohibition against assignment of the contract [in this case, a lease] will prevent assignment of contractual duties, but does not prevent assignment of the right to receive payments due."