Pam borrows $5,000 from Quality Auto Sales to buy a car. When Pam does not pay the loan or return the car, Quality wants to transfers the right to the payment to Rapid Collection Agency. Rapid agrees to pay Quality for this right, but for a price that is less than the amount owed. Can Quality transfer this right to Rapid without Pam's consent? If so, and Quality committed fraud in the deal with Pam, could Pam legitimately refuse to pay Rapid? Explain.
What will be an ideal response?
Quality can transfer the right to receive Pam's payment in an assignment to Rapid. The parties in an assignment are the assignor, the assignee, and the obligor. The party originally entitled to the payment of the money is the assignor (Quality), the party who agreed to pay is the obligor (Pam), and the party who receives the right to the payment is the assignee (Rapid). The obligor's consent is not necessary for an effective assignment. On an assignment, the rights of the assignor are extinguished, and the assignee has a right to demand performance¾in this question, payment¾from the obligor. The assignee takes only those rights that the assignor originally had, however, subject to the defenses that the obligor has against the assignor. Thus, if Quality fraudulently procured the right to Pam's payment, Pam can raise this fraud as a defense against payment to Rapid.
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