LAW 506-002 – Contracts II

Restatement Second of Contracts § 338


Discharge of an Obligor After Assignment

View on Lexis Advance

  1. Except as stated in this Section, notwithstanding an assignment, the assignor retains his power to discharge or modify the duty of the obligor to the extent that the obligor performs or otherwise gives value until but not after the obligor receives notification that the right has been assigned and that performance is to be rendered to the assignee.
  2. So far as an assigned right is conditional on the performance of a return promise, and notwithstanding notification of the assignment, any modification of or substitution for the contract made by the assignor and obligor in good faith and in accordance with reasonable commercial standards is effective against the assignee. The assignee acquires corresponding rights under the modified or substituted contract.
  3. Notwithstanding a defect in the right of an assignee, he has the same power his assignor had to discharge or modify the duty of the obligor to the extent that the obligor gives value or otherwise changes his position in good faith and without knowledge or reason to know of the defect.
  4. Where there is a writing of a type customarily accepted as a symbol or as evidence of the right assigned, a discharge or modification is not effective
    1. against the owner or an assignor having a power of avoidance, unless given by him or by a person in possession of the writing with his consent and any necessary indorsement or assignment;
    2. against a subsequent assignee who takes possession of the writing and gives value in good faith and without knowledge or reason to know of the discharge or modification.