YALE LAW JOURNAL

ASSIGNMENT OF CONTRACT
The right to property and its enjoyment constitutes ownership.
This includes the legal title, and the beneficial interest. The
owner may part with the beneficial interest and retain the legal
title. Thus another may gain the right to enjoy the fruits of the
property. Courts of law do not recognize beneficial ownership,
and such owner must obtain relief in equity. Only the holder of
the legal title can claim recognition in a court of law.
In the early days of any people tangible property only is
known, and its transfer is accomplished by bodily delivery or by
giving some symbol indicative thereof. The conception of in-
tangible property and its transfer requires a refinement of
thought which develops later.
In the primitive Roman, German and English law a chose in
action could not be transferred.'
In the case of a contract there was a further objection to an
assignment. The promisor obligates himself to a particular in-
dividual. This was thought to be personal in all cases, and
hence it was believed that the promisee only could enforce
2
rights under a promise.
At an early day, lawyers devised a plan by which the transfer
of a chose in action, although not directly possible, could be
accomplished in effect. This was done by means of a power of
attorney authorizing the proposed transferee to enforce the claim
in the name of the principal by action or otherwise.3
I See Pollock and Maitland: History of English Law. ist ed. Vol. II,
pp. 223,
2 224.
According to Coke, (Coke's Littleton, 214 a) the explana-
tion is to be found in the doctrine of maintenance. This view is repeated
even today. See Bishop-Contract-lastedition (xgo7), Sect. ii79, citing
Coke and Blackstone. It is now recognized by the best authorities that
Coke was mistaken and his explanation incorrect. 2 Spence Eq., 85x;
Ames, 3 Harvard Law Review, 339.
sIn Rome, an assignment was not permitted at first on the ground,
apparently, that a transfer changed the substance of the obligated per-
formance. A novation was necessary. Later they devised the plan of
giving a power of attorney, permitting an action to be brought in the
name of the assignor as with us. Puchta: Institutionen. 8th ed. Vol. II,
p. 267. Windscheid: Pandekten. 4th ed. Vol. II, p. 253. The German
Civil Code provides specifically for assignments. Defenses and set offs
against the assignor are available against the assignee. Provision is also
made as to notifying the obligor. See Sects. 398, 404, 409, 410.
 ASSIGNMENT OF CONTRACT

The modem written assignment was developed in this way.

It takes the place of the ancient power of attorney, and has the
same effect. It follows that the assignment of a contract does
not pass legal title, but empowers the assignee to sue in his
assignor's name.
- This is a legal doctrine. No equitable principle- is involved,
notwithstanding an erroneous notion which prevailed at one
time. Blackstone4 speaks of an assignment as being in the na-
5
ture of a declaration of trust, and Story also treats an assignee
as having "an equitable right or interest." This idea is not un-
natural, as the assignee has only the beneficial interest while the
legal title remains in the assignor. .
If courts of law had failed to offer a remedy, there is no doubt
that equity would have taken jurisdiction. As the remedy pro-
vided at law has proved ample, there has been no occasion for
equitable relief. Should any special circumstance make this
remedy inadequate there would be ground for equitable jurisdic-
tion, but not otherwise. Such a situation would arise if the
8

assignor should propose to release the assigned claim, or should

refuse the use of his name for the purpose of suit.
Any defense or set off existing against the assignor at the time
of the assignment or previous to notice thereof to the obligor, can
be urged against the assignee, because he does not hold the legal
title. Therefore, it is immaterial whether the assignee is a pur-
7
chaser for value or not.
The requisites of an assignment are well expressed by Shaw,
C. J., as follows :8
"But in order to constitute such an assignment, two things
must concur. First, the party holding the chose in action must, by
some significant act, express his intention that the assignee shall
have the debt or right in question, and, according to the nature
4Commentaries (Sbarswood's ed), Bk. II, p. 442.
5Story: Equity fur., Sect. 1057 a.
6Hammond v. Messenger, 9 Sim., 327; Walker v. Brooks, 125 Mass.,
2x. See also Ames: Cases on Trusts. pp. 6o, 6x-notes and authorities
cited.
SAt first sight it might appear that this circumstance would warrant
the intervention of equity, but the result is due to the substantive law, and
not to any failure of the law courts to give an adequate remedy. An equity
judge is as much bound by the substantive law as a common law judge.
He cannot ignore the positive law as to legal title nor change the results
which flow from absence of such title.
8 Palner v. Merrill, 2 Cush., 282.
 YALE LAW JOURNAL

and circumstances of the case, deliver to the assignee, or to some

person for his use, the security if there be one, bond, deed, note,
or written agreement, upon which the debt or chose in action
arises; and, secondly, the transfer shall be of the whole and
entire debt or obligation, in which the chose in action consists,
and, as far as practicable, place the assignee in the condition of
the assignor, so as to enable the assignee to recover the full debt
due, and to give a good and valid discharge to the party liable."
There is, however, one notable exception to the rule thus de-
veloped. In the case of bills of exchange and promissory notes,
legal title passes by transfer when made in requisite form. The
origin of this difference is historical.
Bills of exchange were first invented by Lombard 0 merchants
and their custom established this peculiarity. In England, the
courts were reluctantly compelled to recognize these instruments,
but owing to the opposition of Lord Holt," an Act of Parliament
was necessary to put promissory notes on the same footing. The
result is that the holder of commercial paper can pass a legal title
by endorsement.
When the term "negotiable" is applied to such paper, it merely
indicates this possibility of passing legal title. This is its char-
acteristic. There is no difference in result between the transfer
of a cow, and the negotiation of a promissory note. If a thief
steals the cow and sells her to an innocent stranger, she may be
recovered by legal process in spite of the bona fides of the
stranger. Should the same thief steal a promissory note, forge
the endorsement, and then sell it to the same innocent stranger,
the note may be recovered as readily as the cow. This is so be-
cause the legal title has not passed in either case. The innocent
stranger has received a title neither to the cow nor to the note.
In neither case did the thief acquire title, and therefore could
give none. Consequently, both cow and note may be recovered
wherever found.
Imagine, now, that a business man induces someone by fraud
to endorse and deliver to him a note, and also to deliver to him
a cow with intent to pass title. If he then sells the cow and
transfers the note for value to an innocent third person, the one
9 As the assignment must be of the whole claim a transfer of a portion
only thereof gives no rights at law, and hence equity takes jurisdiction in
such cases. See Ames: Cases on Trusts. pp. 61, 63, notes.
20 See Beawe's: Lex Mercatoria, 448. He thinks that the better view
is that they were invented by the expelled Italian, Gibelius.
"Buller v. Crips, 6 Mod., 29.
 ASSIGNMENT OF CONTRACT

defrauded cannot recover either cow or note, because the title

has passed in each case. Thus the innocent purchaser is as fully
protected in his title to the cow as to the note.
12
In the case of Cundy v. Lindsay, one, Blenkiron, by a fraudu-
lent contrivance obtained goods from Lindsay & Co. and then
sold them to Cundy & Co. who purchased innocently. Later
Lindsay & Co. brought action against Cundy & Co. for conver-
sion of the goods. Under the peculiar circumstances of that
case, the court found that no title passed from Lindsay & Co. to
Blenkiron, and hence none to the innocent Cundy & Co. who were
consequently liable in tort. This is similar in principle to the case
of the cow in the first illustration.
But suppose in the second illustration the note had been drawn
to bearer or endorsed in blank, then the innocent purchaser from
the thief could retain the note against the original owner but
not the cow. Although a thief has no title and could not retain
either a bearer note or money as against the owner, yet the inno-
cent purchaser does acquire title to them, while this is not true as
regards the cow.
It is, therefore, a characteristic of commercial paper that legal
title can pass, which is not possible where contracts are of com-
mon law origin. The latter are said to be assignable and not
negotiable. An assignment does not pass legal title, negotiability
does.
This may be illustrated by the case of a promissory note, drawn
to the order of the payee, sold by him to a third person and acci-
dentally delivered unendorsed. Legal title does not pass with-
out endorsement, but here is the equivalent of the assignment of
an ordinary contract. Therefore, it has been held that the holder
may sue in the name of the payee, precisely as though an actual
assignment had been given. The action is brought subject to all
defenses against the payee, who still holds the legal title.. This
was the situation in the case of Goshen National Bank v. Bing-
ham. 13 The court, by Parker, J., says:
"It is too well settled by authority, both in England and in this
country, t6 permit of questioning, that the purchaser of a draft,
or check, who obtains title without an endorsement by the payee,
holds it subject to all equities and defenses existing between the
original parties, even though he has paid full consideration, with-
22 L. R., 3 App. Cas., 459.
Is118 N. Y., 349.
 184 YALE LAW JOURNAL

out notice of such equities and defenses. (Citations.) The reason-

ing on which this doctrine is founded may be briefly stated as
follows: The general rule is that no one can transfer a better
title than he possesses. An exception arises out of the rule of
the law merchant, as to negotiable instruments. It is founded on
the commercial policy of sustaining the credit of commercial
paper. Being treated as currency in comnrcial transactions,
such instruments are subject to the same rule as money. If trans-
ferred by endorsement, for value, in good faith and before ma-
turity, they become available in the hands of the holder, not-
withstanding the existence of equities, and defences, which would
have rendered them unavailable in the hands of a prior holder.
"This rule is only applicable to negotiable instruments which
are negotiated according to the law merchant.
"When, as in this case, such instrument is transferred but with-
out an endorsement, it is treated as a chose in action assigned
to the purchaser. The assignee acquires all the title of the as-
signor, and may maintain an action thereon in his own name.
And like other choses in action it is subject to all the equities and
defenses existing in favor of the maker or acceptor against the
previous holder."
The decision is clearly sound. In so far, however, as the
learned justice states that "the assignee acquires all the title of
the assignor" an error is involved, as the assignee does not ac-
quire the legal title from the assignor. It is just for this reason
that bona fides does not cut out equities.
It is true that in New York an assignee may maintain an
action in his own name; this is due to a statute changing the
procedure, but the substantive law is unaffected by it.
The suggestion that negotiability enables anyone to give a
better title than he has himself is also erroneous. It is true of
bearer instruments and those endorsed in blank, but not of
others. In other words, purchase for value without notice does
not give title except in the case of the above-named instruments
and money. 1'
The doctrine which attaches equities to the holder of a legal
title unless he has taken bona fides, is purely equitable, and ap-
plies to the transfer of any title. If the legal title is transferred
in any case the new holder of such title takes it clear of any
equities unless the circumstances are such that courts exercising
equitable jurisdiction can attach such equities. In dealing with
14 There are also some instances under Recording Acts, and in Eng-
land, sales in market overt produce the same results. See Langdell: Sum-
mary of Equity Pleading. 2nd ed. Sects. i82-x85.
 ASSIGNMENT OF CONTRACT

commercial paper, courts of law may have borrowed this doc-

trine from equity. 15 At least the result is identical.
The characteristics of some contracts render assignment im-
possible. This is so whenever the contract is personal and made
with reference to some quality in the promisee.26 Thus suppose
a promise to deliver goods upon credit. The question of credit
depends upon the financial standing of the promisee. This
right to the goods on credit cannot be assigned. But suppose
the contract to be assigned and the assignee to desire the goods,
tendering the cash and not asking credit. In such case the
promisor has no reasonable ground for objection, and should
perform. 17
So also in employment cases. If the work promised is per-
sonal, the promisor must perform. If, however, there has been
performance and payment alone remains due, there may be
assignment.' s In these cases the personality of both employer
and employee is involved. Should the employer die, his executor
cannot exact performance. 19 This is true only when the employ-
ment has a personal element, 20 but generally this would be the
case.
The test is whether the promisor will be put to any dis-
advantage or may reasonably object. Can he realize his just
expectations under such an assignment? 21
Rights under a contract may be assigned but not obligations.
No one can relieve himself of obligations by passing on his
burdens.
In England, the sovereign may sue in his own name, upon a
contract assigned to him, as may also an assignee from the sov-
ereign. 22 The same thing is true of the28United States when an
assignment is made to that government.

1' See Langdell: Summary of Equity Pleading. 2nd ed. Sects. 182-

185. See Ames: Summary-Bills and Notes-Title, Purchase for Value

without Notice. p. 863.
'$Farrow v. Wilson, L. R., 4 C. P., 744.
"7Arkansas Valley Smelting Co. v. Belden, 127 U. S., 379.
18 Carter v. Nichols, 58 Vt., 553.
1
Lacy v. Getman, ixg N. Y., iog.
20
British Wagon Co. v. Lea, L. R., 2 Q. B. Div., 149.
21 Thus in a contract for personal service, if money is due for work
performed this claim may be assigned. Stubbs v. Holywell Ry. Co., L. R.,
2 Exch.,
22 311; Devlin v. Mayor, 63 N. Y., 8.
Lambert v. Taylor, 4 B. & C., 138, 150.
28 U. S. v. Buford, 3 Peters, 12, 30.
 YALE LAW JOURNAL

Assignments may take place by operation of law in which case

the legal title may pass, as in the case of executors or administra-
tors. So, too, under acts of bankruptcy, and in a few instances
where statutes vest the legal title in receivers.
Upon an assignment, notice should be given promptly to the
obligor. If one, in ignorance of an assignment, pays his debt
to the original creditor, or takes a release for value paid or per-
forms his promise, no objection can be raised by the assignee. 2
But should he pay money or do other act under his contract after
knowledge of the assignment be performs at his peril, and is still
25
responsible to the assignee.
In some jurisdictions statutes enable the assignee to bring the
action in his own name.28 These statutes affect procedure only, and
the legal title is not affected and still remains in the assignor. Thus
suppose a New York contract assigned in New York. Should
the assignee, in such a case, bring an action in a State adhering
to the common law, he must sue in the name of his assignor.
The New York statute affects procedure only, and hence does
not make any change in the legal title. Such "astatute does not
change the substantive law.?
In cases where statutes cause a change of title, this substantive
change should be recognized in all jurisdictions.
Clarence D. Ashley.
Dean of New York University Law School.

24 The burden of establishing notice is upon the assignee. Heermans

v. Ellsworth, 64 N. Y., i59.
25
Legh v. Legh, i B. P., 447; Littlefield v. Storey, 3 John, 425.
28 For example see N. Y. Code of Civil Procedure. Sects. i99, igio.
27 Green v. Busey, 5 Mack, 233.