Discharge by Assignment

Introduction

Discharge by assignment occurs when the rights or benefits under a contract are transferred to a third party. While the Indian Contract Act, 1872 does not specifically govern assignments, the principles are derived from the Transfer of Property Act and general contract law.

Meaning / Definition

Assignment of a contract means transferring the rights or benefits arising from a contract to another person. Assignments can only occur for contracts that are not personal in nature, as contracts involving personal skill, taste, or ability must be performed by the original promisor.

Modes / Types of Assignment

Assignment by Act of Parties

• The parties themselves agree to transfer rights or benefits.
• Key rules:
  • Liabilities cannot be assigned without consent: Promisor cannot force the promisee to accept a third party as promisor. Transfer of liability with consent is called novation.
  • Performance by competent person: If the contract does not require personal performance, the promisor may authorize another person to perform, but remains liable to the promisee.
  • Assignment of rights and benefits: Non-personal rights can be assigned. Assignee takes subject to all equities between original parties.
    • Example: A owes B Rs. 1,000. B assigns the right to C. If A already paid B partially, C can only claim the remaining amount.
  • Actionable claims: Can be assigned via written instrument with notice to the debtor. Includes money debts, book debts, or rights of action arising out of contracts.

Assignment by Operation of Law

• Occurs automatically in certain legal circumstances:
  • Death: Rights and obligations pass to heirs or legal representatives.
  • Insolvency: Rights and obligations pass to official receiver or assignee.
• Applicable only to non-personal contracts.

Practical Example

• A owes B Rs. 1,000. B assigns his right to C in writing and informs A. A now pays C, and B is no longer entitled to claim the amount.
• In the case of death, if B dies, his legal heirs can claim the Rs. 1,000 from A.

Summary

• Assignment transfers contractual rights or benefits to a third party.
• Liabilities generally cannot be assigned without consent (novation).
• Personal contracts cannot be assigned.
• Assignments may occur by act of parties or operation of law.
• Actionable claims must be in writing with notice to debtor.
• Rights and obligations pass to heirs or official receiver upon death or insolvency.