If Assignment is prohibited by contract, what is the effect?

If Assignment is prohibited by contract, what is the effect?

• A. The assignment is ineffective
• B. The assignor is liable to the obligor for breach, but the assignee still has a right to payment
• C. An obligor with notice is liable to assignee
• D. The assignment remains valid despite prohibition

Answer: (A)

Prohibiting assignment blocks the transfer of the right to receive payment. When a contract says you cannot assign a right, an attempted assignment does not take effect, so the right to payment stays with the original creditor. The obligor’s duty remains to pay the party who originally held the right, not the assignee. If the assignment were allowed, the assignee could demand performance, but with the prohibition in place, the transfer is ineffective and has no enforceable effect against the obligor. In short, the assignment doesn’t create new rights for the recipient, and the original creditor remains the one entitled to payment.

Prohibiting assignment blocks the transfer of the right to receive payment. When a contract says you cannot assign a right, an attempted assignment does not take effect, so the right to payment stays with the original creditor. The obligor’s duty remains to pay the party who originally held the right, not the assignee. If the assignment were allowed, the assignee could demand performance, but with the prohibition in place, the transfer is ineffective and has no enforceable effect against the obligor. In short, the assignment doesn’t create new rights for the recipient, and the original creditor remains the one entitled to payment.