Opinion ID: 1985924
Heading Depth: 1
Heading Rank: 18

Heading: Anti-Assignment Provision

Text: The B181 contracts entered into on the Burwick and Walton Heath projects provide in part in article 8.3: Neither the Owner nor the Architect shall assign, sublet or transfer any interest in this Agreement without the written consent of the other. It is undisputed that there was no written consent given prior to the assignment to FAL. Kerns and the ownership entities argue that the contractual prohibition against an assignment of any interest without prior written consent bars FAL, as an assignee, from recovering damages for any breach of the contracts. The parties have not cited a Nebraska case addressing this issue, and our independent research has revealed no such case. As noted by the Court of Appeals, however, there are cases from other jurisdictions which specifically address the issue presented. The Washington Supreme Court addressed whether the identical language present in the instant case barred an assignment for breach of contract damages in Berschauer/Phillips v. Seattle Sch. Dist., 124 Wash.2d 816, 881 P.2d 986 (1994). In that case, a school district (District) contracted with an architect to design a new elementary school. The contract between the District and the architect provided: `Neither the Owner [District] nor the Architect shall assign, sublet or transfer any interest in this Agreement without the written consent of the other.' Berschauer/Phillips, 124 Wash.2d at 829, 881 P.2d at 993-94. A construction company, relying upon the plans created by the architect, subsequently submitted a bid to construct the new school and was awarded the project by the District. When construction costs exceeded estimates by approximately $3.8 million, the construction company sued the District for breach of contract, alleging its loss was in part caused by the defective plans. The District settled with the construction company, and in doing so, the District assigned `any and all such claims relating to this project' that it had against the architect to the construction company. Id. at 820, 881 P.2d at 989. When the construction company sought recovery from the architect based upon this assignment, the architect claimed the anti-assignment provision in its contract with the District prohibited the District from assigning its claim to the construction company. On appeal, the construction company argued the language at issue was merely a general anti-assignment clause and thus did not prohibit the assignment of a breach of contract action. The architect, in contrast, argued that the contract prohibited the assignment of  any interest,  which necessarily included a cause of action for breach of contract. Id. at 829, 771 P.2d at 994. Reasoning that the contractual language at issue was a boilerplate provision intended to prohibit the exchange of contractual performances and that the architect had completed the terms of the contract prior to the assignment, the court held that the clause did not prohibit the assignment of a cause of action for breach of contract. Id. at 830, 881 P.2d at 994. The contractual language at issue in this case was also reviewed in Ford v. Robertson, 739 S.W.2d 3 (Tenn.App.1987), a case relied upon by the Court of Appeals. In Ford, an owner and an architectural firm entered into an AIA standard form contract containing the following provision: `Neither the Owner nor the Architect shall assign, sublet or transfer any interest in this Agreement without the written consent of the other.' Id. at 4. After completing design services on numerous apartment complexes and executing a certificate of substantial completion, the architects were paid in full. Thereafter, the owner sold the apartments to the plaintiffs in an instrument also assigning `Grantor's right, title and interest in and to all leases and other contracts (including, without limitation, all warranties, guaranties and bonds,) affecting the property....' Id. at 4. Plaintiffs thereafter attempted to sue the architects for breach of contract. Interpreting the owner's assignment as a conveyance of every interest he had in the property, the Tennessee Court of Appeals held that the owner could assign his right to recover damages from the architects for breach of contract. The court reasoned: The law draws a distinction between the right to assign performance under a contract and the right to receive damages for its breach. The nonassignability clause prohibits the assignment or transfer of any interest in this agreement. This any interest language must be construed to mean any interest in the performance of the executory contract. Plaintiffs contend, and we agree, that this is a suit for damages for breach of a fully executed contract and is not a suit for performance by the Architects of an executory contract. What the plaintiffs acquired by the assignment was any claim that [the owner] had against the Architects for money damages for nonperformance and such a claim is not within the scope of the clause prohibiting assignment of any interest in this agreement. (Emphasis in original.) Id. at 5. See, also, Cordis Corp. v. Sonics Intern., Inc., 427 So.2d 782 (Fla.App.1983) (holding provision forbidding assignment of rights under contract does not preclude assignment of accrued claims for damages arising from breach of contract); Fuller v. Favorite Theaters Co. of Salt Lake, 119 Utah 570, 230 P.2d 335 (1951) (holding provision prohibiting assignment of contract does not affect assignability of cause of action for breach of contract). We find the reasoning of these cases to be persuasive. Kerns' argument to the contrary is premised upon American Community Stores Corp. v. Newman, 232 Neb. 434, 441 N.W.2d 154 (1989). In that case, we held that in Nebraska, an assignment by a lessee of an interest in a lease which prohibits such assignment without the lessor's consent generally is ineffective without such consent. American Community Stores Corp. is distinguishable from the instant case. Assigning an interest in a lease directly affects the parties' actual performance of the contract, whereas the assignment of a right to collect damages for a breach of contract, as in the instant case, does not. Therefore, the intent of the provision against assignment of rights under a contract, which generally is to allow the parties to choose with whom they contract, is not affected by allowing an assignment of a right to collect damages for breach of contract. 6 Am.Jur.2d Assignments § 33 (1999). See, also, Panwitz v. Miller Farm-Home Oil Service, 228 Neb. 220, 224, 422 N.W.2d 63, 66 (1988) (holding contractual provision prohibiting assignment without vendor's consent does not preclude such assignment or sale if the contract has been fully performed or if assignee offers and is able to complete performance (emphasis omitted)). It is undisputed that the assignment at issue occurred after the contracts were breached. The anti-assignment clause therefore did not bar the assignment of the claims at issue.