Assignment of Rights

I found a very interesting case (Cunningham, 2012), which involves assignment of rights and also uses concepts related to delegation of duties.  It’s starting about the assignment of rights a Cablevision’s Loan by JP Morgan to a third party during the financial crisis in 2009.  With the purpose of managing the exposure to the risk credit quality, JP Morgan tried to transfer its rights of the Cablevision’s loan to another bank owned by an archrival of Clablevision; but Cablevision stop the operation based on a well-know case, in the early 1980s, concerning Nexxus Products.

Nexxus used distributors for resale hair care product to salons.  Nexxus agreed with Best Barber & Beauty Supply (Best) that Best would be the exclusive distributor of Nexxus in Texas; both companies agreed several commercial terms but nothing was said about assigning of rights.  Two years later a Nexxus’ competitor bought Best, and Nexxus canceled the contract with Best arguing that they could not allowed having a competitor as distributor.  The competitor (Sally Beauty Co.) sued Nexxus for breach of contract; Nexxus denied that the assignment by Best to Sally was valid arguing that they were looking for Best’s personal and distinctive services.  Here the most interesting concept, although Best’s and therefore Sally’s services were not considered personal services or special skills, court interpreted that the silence of a regulation in the agreement of assignment of rights implied a duty of doing it under good faith; and a transfer to a competitor did not show good faith, so decision was in favor of Nexxus.

Another generic example, suppose that A contracts B for financial advisory. B, an expert in finance known for her/his expertise, wants to delegate her/his duties to a third party, C. This delegation cannot proceed because B has contracted to render a service that is founded on her/his expertise. The delegation would change A's expectations and services under the contract. Hence, C cannot perform B's duties.

Reference:

Cunningham, Lawrence A. (2012) Contracts in the Real World—Stories of Popular Contracts and Why They Matter. Chapter 9.  New York, NY: Cambridge University Press.