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22. Is the buyer bound by the contract?
A seller contracted to manufacture 1,000 toasters for a buyer for a specified price. The contract contained a provision that clearly stated: «This contract may not be assigned, and any violation of this prohibition voids the contract.» After the contract was signed, the seller informed the buyer that the toasters would be manufactured by a competitor of the seller. Citing the non-assignment provision, the buyer claimed that it was no longer bound by the contract. Toasters manufactured by the competitor were of equal quality to toasters manufactured by the seller.
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«Delegation» refers to duties under a contract, not rights. A party who wishes to have another person perform his duties under a contract delegates them. However, when performance of a duty is delegated, the delegator remains liable for the duty.
Generally, courts will construe a clause barring assignment of «the contract» as prohibiting only the assignor from delegating his duties. Rest. (Second) of Contracts § 322. Thus, the strict effect is typically given to contractual prohibitions against delegation of duties.
A is correct. The buyer is not bound by the contract because the parties included in it a provision barring the assignment of «the contract.» Generally, courts will construe a clause barring assignment of «the contract» as prohibiting the assignor from delegating his duties. Courts will give strict effect to contractual restrictions on delegation. Here, the contract states, «This contract may not be assigned, and any violation of this prohibition voids the contract.» This was intended to prohibit delegation of duties, which the court will enforce. Therefore, the seller has breached the contract and the buyer is not bound.
B is incorrect. This answer reaches the correct answer with the wrong reasoning. The buyer is not bound, but because the seller delegated a duty in violation of the no-assignment provision of the contract. By assigning a job to a third party, the assignor is delegating a duty, not assigning a right. Nevertheless, the assignment of the seller's duty was a breach of the contract and on that basis, the buyer will not be bound.
C is incorrect. This question asks whether the buyer will be bound by the contract, not what damages may be owed as the result of a breach. The determination of remedies available follows a finding that a party is in breach of a contract. The seller breached the contract, meaning the buyer will not be bound. This is the end of the analysis required for the question.
D is incorrect. This is an inaccurate statement of the law. Generally, non-assignment provisions such as this one are enforceable by the court. There are circumstances where certain non-assignment provisions may be unenforceable, which may be based on public policy reasons, but that is not the case here.