**Assignment Of Claims Act **

Source: Encyclopedia of Banking & Finance (9h Edition) by Charles J
Woelfel**\
**

Approved Oct. 9, 1940, "to assist in the national defense program by
amending Sections 3477 and 3737 of the Revised Statutes to permit the
assignment of claims under public contracts" (P.L. 811,76^th^
Congress).  Such assignment of claims allowed manufacturers to assign
the contracts as security for borrowings from banks needed for defense
plant construction.

Accordingly, a new form of uniform bankable contract was developed by
the NATIONAL DEFENSE ADVISORY COMMISSION after consultation with the War
and Navy departments and the Comptroller General.  This contract had two
purposes:  to expedite signing of supplies contracts by the Army and
Navy by assuring the contractor against loss on construction undertaken
for military purposes and to safeguard the government's interest in such
facilities on termination or completion of the contract.

The contract provided that the government reimburse the contractor not
in additions to the unit price, as previously, but in five equal annual
installments covering the amount of his capital expansion costs.  Thus,
cost of supplies and amortization of construction cost would be kept
separate.  Prices were held at a minimum, and while the manufacturer was
relieved of the risk involved in building fixed assets for the
emergency, he still absorbed the risks involved in production.  The
contract also contained provisions whereby the contractor might by
purchase or lease from the government acquire use of the facilities for
himself after they had served their emergency needs.

### FAR Subpart 32.8- Assignment of Claims 

## 32.800 Scope of subpart. 

This subpart prescribes policies and procedures for the assignment of
claims under the Assignment of Claims Act of 1940, as amended, 31 U.S.C.
3727, 41 U.S.C. 15 (hereafter referred to as \"the Act\").

## 32.801 Definitions. 

\"Designated agency,\" as used in this subpart, means any department or
agency of the executive branch of the United States Government (see
32.803(d)).

\"No-setoff commitment,\" as used in this subpart, means a contractual
undertaking that, to the extent permitted by the Act, payments by the
designated agency to the assignee under an assignment of claims will not
be reduced to liquidate the indebtedness of the contractor to the
Government.

## 32.802 Conditions. 

Under the Assignment of Claims Act, a contractor may assign moneys due
or to become due under a contract if all the following conditions are
met:

\(a\) The contract specifies payments aggregating \$1,000 or more.

\(b\) The assignment is made to a bank, trust company, or other
financing institution, including any Federal lending agency.

\(c\) The contract does not prohibit the assignment.

\(d\) Unless otherwise expressly permitted in the contract, the
assignment-

\(1\) Covers all unpaid amounts payable under the contract;

\(2\) Is made only to one party, except that any assignment may be made
to one party as agent or trustee for two or more parties participating
in the financing of the contract; and

\(3\) Is not subject to further assignment.

\(e\) The assignee sends a written notice of assignment together with a
true copy of the assignment instrument to the-

\(1\) Contracting officer or the agency head;

\(2\) Surety on any bond applicable to the contract; and

\(3\) Disbursing officer designated in the contract to make payment.

## 32.803 Policies. 

\(a\) Any assignment of claims that has been made under the Act to any
type of financing institution listed in 32.802(b) may thereafter be
further assigned and reassigned to any such institution if the
conditions in 32.802(d) and (e) continue to be met.

\(b\) A contract may prohibit the assignment of claims if the agency
determines the prohibition to be in the Government\'s interest.

\(c\) Under a requirements or indefinite quantity type contract that
authorizes ordering and payment by multiple Government activities,
amounts due for individual orders for \$1,000 or more may be assigned.

\(d\) Any contract of a designated agency (see FAR 32.801), except a
contract under which full payment has been made, may include a no-setoff
commitment only when a determination of need is made by the head of the
agency, in accordance with the Presidential delegation of authority
dated October 3, 1995, and after such determination has been published
in the *Federal Register.* The Presidential delegation makes such
determinations of need subject to further guidance issued by the Office
of Federal Procurement Policy. The following guidance has been provided:

Use of the no-setoff provision may be appropriate to facilitate the
national defense; in the event of a national emergency or natural
disaster; or when the use of the no-setoff provision may facilitate
private financing of contract performance. However, in the event an
offeror is significantly indebted to the United States, the contracting
officer should consider whether the inclusion of the no-setoff
commitment in a particular contract is in the best interests of the
United States. In such an event, the contracting officer should consult
with the Government officer(s) responsible for collecting the debt(s).

\(e\) When an assigned contract does not include a no-setoff commitment,
the Government may apply against payments to the assignee any liability
of the contractor to the Government arising independently of the
assigned contract if the liability existed at the time notice of the
assignment was received even though that liability had not yet matured
so as to be due and payable.

## 32.804 Extent of assignee\'s protection. 

\(a\) No payments made by the Government to the assignee under any
contract assigned in accordance with the Act may be recovered on account
of any liability of the contractor to the Government. This immunity of
the assignee is effective whether the contractor\'s liability arises
from or independently of the assigned contract.

\(b\) Except as provided in paragraph (c) of this section, the inclusion
of a no-setoff commitment in an assigned contract entitles the assignee
to receive contract payments free of reduction or setoff for-

\(1\) Any liability of the contractor to the Government arising
independently of the contract; and

\(2\) Any of the following liabilities of the contractor to the
Government arising from the assigned contract:

\(i\) Renegotiation under any statute or contract clause.

\(ii\) Fines.

\(iii\) Penalties, exclusive of amounts that may be collected or
withheld from the contractor under, or for failure to comply with, the
terms of the contract.

\(iv\) Taxes or social security contributions.

\(v\) Withholding or nonwithholding of taxes or social security
contributions.

\(c\) In some circumstances, a setoff may be appropriate even though the
assigned contract includes a no-setoff commitment; *e.g.-*

\(1\) When the assignee has neither made a loan under the assignment nor
made a commitment to do so; or

\(2\) To the extent that the amount due on the contract exceeds the
amount of any loans made or expected to be made under a firm commitment
for financing.

## 32.805 Procedure. 

\(a\) *Assignments*.

\(1\) Assignments by corporations shall be-

\(i\) Executed by an authorized representative;

\(ii\) Attested by the secretary or the assistant secretary of the
corporation; and

\(iii\) Impressed with the corporate seal or accompanied by a true copy
of the resolution of the corporation\'s board of directors authorizing
the signing representative to execute the assignment.

\(2\) Assignments by a partnership may be signed by one partner, if the
assignment is accompanied by adequate evidence that the signer is a
general partner of the partnership and is authorized to execute
assignments on behalf of the partnership.

\(3\) Assignments by an individual shall be signed by that individual
and the signature acknowledged before a notary public or other person
authorized to administer oaths.

\(b\) *Filing.* The assignee shall forward to each party specified in
32.802(e) an original and three copies of the notice of assignment,
together with one true copy of the instrument of assignment. The true
copy shall be a certified duplicate or photostat copy of the original
assignment.

\(c\) *Format for notice of assignment.* The following is a suggested
format for use by an assignee in providing the notice of assignment
required by 32.802(e).

Notice of Assignment

To: \_\_\_\_\_\_\_\_\_\_\_ *\[Address to one of the parties specified in
32.802(e)*\].

This has reference to Contract No. \_\_\_\_\_\_\_\_\_\_ dated
\_\_\_\_\_\_, entered into between \_\_\_\_\_\_ \[*Contractor\'s name
and address*\] and \_\_\_\_\_\_ \[*Government agency, name of office,
and address*\], for \_\_\_\_\_\_\_\_ \[*Describe nature of the
contract*\].

Moneys due or to become due under the contract described above have been
assigned to the undersigned under the provisions of the Assignment of
Claims Act of 1940, as amended, 31 U.S.C. 3727, 41 U.S.C. 15.

A true copy of the instrument of assignment executed by the Contractor
on \_\_\_\_\_\_\_\_\_\_\_ \[*Date*\], is attached to the original
notice.

Payments due or to become due under this contract should be made to the
undersigned assignee.

Please return to the undersigned the three enclosed copies of this
notice with appropriate notations showing the date and hour of receipt,
and signed by the person acknowledging receipt on behalf of the
addressee.

Very truly yours,

\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_

\[*Name of Assignee\]*

By
\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_

\[*Signature of Signing Officer*\]

\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_

\[*Title of Signing Officer*\]

\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_

\[*Address of Assignee*\]

Acknowledgement

Receipt is acknowledged of the above notice and of a copy of the
instrument of assignment. They were received \_\_\_\_(a.m.) (p.m.) on
\_\_\_\_\_\_, 20\_\_\_.

\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_

\[*Signature*\]

\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_

\[*Title*\]

\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_

On behalf of

\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_

\[*Name of Addressee of this Notice*\]

\(d\) *Examination by the Government.* In examining and processing
notices of assignment and before acknowledging their receipt,
contracting officers should assure that the following conditions and any
additional conditions specified in agency regulations, have been met:

\(1\) The contract has been properly approved and executed.

\(2\) The contract is one under which claims may be assigned.

\(3\) The assignment covers only money due or to become due under the
contract.

\(4\) The assignee is registered separately in the Central Contractor
Registration unless one of the exceptions in 4.1102 applies.

\(e\) *Release of assignment*.

\(1\) A release of an assignment is required whenever-

\(i\) There has been a further assignment or reassignment under the Act;
or

\(ii\) The contractor wishes to reestablish its right to receive further
payments after the contractor\'s obligations to the assignee have been
satisfied and a balance remains due under the contract.

\(2\) The assignee, under a further assignment or reassignment, in order
to establish a right to receive payment from the Government, must file
with the addressees listed in 32.802(e) a-

\(i\) Written notice of release of the contractor by the assigning
financing institution;

\(ii\) Copy of the release instrument;

\(iii\) Written notice of the further assignment or reassignment; and

\(iv\) Copy of the further assignment or reassignment instrument.

\(3\) If the assignee releases the contractor from an assignment of
claims under a contract, the contractor, in order to establish a right
to receive payment of the balance due under the contract, must file a
written notice of release together with a true copy of the release of
assignment instrument with the addressees noted in 32.802(e).

\(4\) The addressee of a notice of release of assignment or the official
acting on behalf of that addressee shall acknowledge receipt of the
notice.

## 32.806 Contract clauses. 

(a)(1) The contracting officer shall insert the clause at 52.232-23,
Assignment of Claims, in solicitations and contracts expected to exceed
the micro-purchase threshold, unless the contract will prohibit the
assignment of claims (see 32.803(b)). The use of the clause is not
required for purchase orders. However, the clause may be used in
purchase orders expected to exceed the micro-purchase threshold, that
are accepted in writing by the contractor, if such use is consistent
with agency policies and regulations.

\(2\) If a no-setoff commitment has been authorized (see 32.803(d)), the
contracting officer shall use the clause with its Alternate I.

\(b\) The contracting officer shall insert the clause at 52.232-24,
Prohibition of Assignment of Claims, in solicitations and contracts for
which a determination has been made under agency regulations that the
prohibition of assignment of claims is in the Government\'s interest.

ASSIGNMENT OF CLAIMS (52.232-23) (JAN 1986)\--ALTERNATE I (APR 1984)

\(a\) The Contractor, under the Assignment of Claims Act, as amended, 31
U.S.C. 3727, 41 U.S.C. 15 (hereafter referred to as the \"the Act\"),
may assign its rights to be paid amounts due or to become due as a
result of the performance of this contract to a bank, trust company, or
other financing institution, including any Federal lending agency. The
assignee under such an assignment may thereafter further assign or
reassign its right under the original assignment to any type of
financing institution described in the preceding sentence. Unless
otherwise stated in this contract, payments to an assignee of any
amounts due or to become due under this contract shall not, to the
extent specified in the Act, be subject to reduction or setoff.

\(b\) Any assignment or reassignment authorized under the Act and this
clause shall cover all unpaid amounts payable under this contract, and
shall not be made to more than one party, except that an assignment or
reassignment may be made to one party as agent or trustee for two or
more parties participating in the financing of this contract.

\(c\) The Contractor shall not furnish or disclose to any assignee under
this contract any classified document (including this contract) or
information related to work under this contract until the Contracting
Officer authorizes such action in writing.

(End of clause)

 

+-----------------------------------+-----------------------------------+
| ###                               | # PLACE PREPARED                  |
| ## U.S. Department of Agriculture |                                   |
|                                   | ** **                             |
| **Forest Service**                |                                   |
|                                   |                                   |
+-----------------------------------+-----------------------------------+
| ### NOTICE OF ASSIGNMENT          | **DATE**                          |
|                                   |                                   |
|                                   | ** **                             |
|                                   |                                   |
|                                   |                                   |
+-----------------------------------+-----------------------------------+

 

PLEASE TAKE NOTICE that moneys due or to become due under the contract
No. have been assigned to the undersigned pursuant to the provisions of
the Assignment of Claims Art of 1940 (Public Law No. 811, 76^th^
Congress), approved October 9, 1940.

 

Payments due or to become due under such contract should be made to the
assignee.

 

Please return to the undersigned the three enclosed copies of this
notice with appropriate notations showing the date and hour of receipt
and duly signed by the person acknowledging receipt on behalf of the
addressee.

 

+-----------------------+-----------------------+-----------------------+
| NAME AND ADDRESS OF   | BY (Signature)        | TITLE OF SIGNING      |
| ASSIGNEE              |                       | OFFICER               |
|                       |                       |                       |
|                       |                       |                       |
|                       |                       |                       |
|                       |                       |                       |
|                       |                       |                       |
|                       |                       |                       |
|                       |                       |                       |
|                       |                       |                       |
+-----------------------+-----------------------+-----------------------+
| **A copy of this      |                       |                       |
| assignment must be    |                       |                       |
| attached to each      |                       |                       |
| invoice to be         |                       |                       |
| effective and in      |                       |                       |
| applicable to Federal |                       |                       |
| fires only.**         |                       |                       |
+-----------------------+-----------------------+-----------------------+

 

Receipt is hereby acknowledged of the above notice and instrument of
assignment.

 

+-----------------------------+---------------------+-----------------+
| DATE RECEIVED               | HOUR RECEIVED       |                 |
|                             |                     |                 |
|                             |                     |                 |
|                             |                     |                 |
|                             | A.M. P.M.           |                 |
+-----------------------------+---------------------+-----------------+
| NAME AND TITLE OF ADDRESSEE | BY (Signature on    | TITLE           |
| OF NOTICE                   | behalf of           |                 |
|                             | addressee)          | CONTRACTING     |
|  USDA Forest Service,       |                     | OFFICER         |
| Pacific Northwest Region    | MONTY L. BELL       |                 |
|                             |                     |                 |
|  P.O. Box 3623              |                     |                 |
|                             |                     |                 |
|  Portland, Oregon 97208     |                     |                 |
|                             |                     |                 |
|                             |                     |                 |
+-----------------------------+---------------------+-----------------+

 

## INSTRUCTIONS

 

In order to avoid delay, inconvenience, and possible impairment of the
validity of assignments, these instructions should be followed
carefully.

 

1\. Under the terms of the Assignment of Claims Act of 1940, written
notice of each assignment of moneys due or to become due from the United
States or from any agency or department thereof, must be filed with:

\(a\) the contracting office or the head of his department or agency.

\(b\) the surety or sureties upon the bond or bonds, if any, in
connection with such contracts, and

\(c\) the disbursing officer, if any, designated in such contract to
make payment.

 

2\. All blanks should be carefully filled in and the original and three
copies should be forwarded to each of the

parties with whom notice is required to be filed.

 

3\. The addressee should acknowledge receipt of this notice on the three
copies and return the same to the assignee.

 

4\. One copy of each such receipt should be retained by the assignee for
his own records and two copies of each such receipt should be attached
to the first invoice, voucher, or other similar document submitted for
payment.

 

5\. It will not be necessary to forward additional copies of such
receipt with requests for further payment, because the first copies will
be duly recorded in the appropriate offices of the Government.

 

6\. If there is no surety bond in connection with the contract, giving
rise to the claim which is assigned, it is not necessary to serve notice
of assignment upon any surety.

 

7\. If no disbursing officer is designated in such contract to make
payment, it is not necessary to serve notice of assignment upon any
disbursing officer.

 

**ASSIGNMENT OF CLAIM**

**(See Instructions on Reverse Side)**

6300-33 (1/72)

**KNOW ALL MEN BY THESE PRESENTS:**

**FOR VALUE RECEIVED,** the undersigned assignor, hereinafter referred
to as "assignor", in accordance with the provisions of the Assignment of
Claims Act of 1940, as amended (31 U.S.C.203, 41 U.S.C. 15), hereby
sells, transfers, and assigns to ,

of [,]{.underline} all moneys due or to become due to assignor from the
United States of America or from any department or agency thereof under
the following contract:

 

  ------------- ---------------------------------------------------------
  Contact        
  number        

  Date of        
  contact       

  Department or Forest Service, USDA
  agency        

  Name of        
  contractor    

  Address of     
  contractor    

  Amount of      
  contract      
  ------------- ---------------------------------------------------------

 

Assignor hereby stipulates that no previous assignment has been made,
and that no additional assignments will be made, of moneys due under
said contract. Assignor hereby irrevocably authorizes and directs the
disbursing officer of the United States of America or department or
agency thereof to make payment to said assignee of said moneys due or to
become due to assignor under said contract.

 

**IN WITNESS WHEREOF,** assignor has executed this assignment this day
of , 19

(NAME OF CONTRACTOR)

(CORPORATE SEAL)

ATTEST: By [.]{.underline}

(SIGNATURE OF OWNER, PARTNER,)

By [.]{.underline}

Title . Title

 

#### INDIVIDUAL ACKNOWLEDGEMENT

STATE OF )

as:

COUNTY OF **)**

On this day of , in the year 19 , before me, ,

a notary public in and for said State, personally appeared , known

to me to be the person whose name is subscribed to the within
instrument, and acknowledged to me that he executed the same.

 

[.]{.underline}

NOTARY PUBLIC

 

(NOTARIAL SEAL)

My commission expires [.]{.underline}

** **

#### PARTNERSHIP ACKNOWLEDGEMENT

STATE OF )

as:

COUNTY OF )

On this day of , in the year 19 , before me,

, a notary public in and for said State, personally appeared , known to
me to be one of the partners of the partnership that executed the within
instrument, and acknowledged to me that such partnership executed the
same.

  [.]{.underline}

NOTARY PUBLIC

 

(NOTARIAL SEAL)

My commission expires [.]{.underline}

** **

#### CORPORATE ACKNOWLEDGEMENT

STATE OF )

as:

COUNTY OF )

On this day of , in the year 19 , before me, ,

a notary public in and for said State, personally appeared , known to me
to be the of the corporation that executed the within instrument, and
acknowledged to me that such corporation executed the same.

[.]{.underline}

NOTARY PUBLIC

(NOTARIAL SEAL)

My commission expires dated