contract-law breach-of-contract
Remedy for breach of contract with a &quot;No Assignment&quot; clause
<p>It is common for written contracts between entities to contain a &quot;No Assignment&quot; clause, which essentially states that, for a contract between entities <em>A</em> and <em>B</em>, the benefits or rights under the contract <em>A</em> cannot be assigned to another entity <em>C</em> without the consent of <em>B</em>.</p>
<p>It is possible for a breach of contract by <em>B</em> to precipitate the dissolution of <em>A</em>.  (Examples: If <em>B</em> poaches a key member of <em>A</em>, or if the existence of <em>A</em> as a going concern depends entirely on its contract with <em>B</em>.)  In such an event, it appears that a &quot;No Assignment&quot; clause would in effect make <em>B</em> immune to any liability claims, because <em>A</em> no longer exists and the contract could not be assigned to any beneficiary of <em>A</em>.</p>
<p>Not a perfect analogy, but in playground terms this is sort of like Bob and Al agreeing, &quot;Let's build a sandcastle.  But (here's the No Assignment clause) your friends don't get to play with it unless I agree.&quot;  Once the sandcastle is complete Bob kills Al (yeah, it's a tough playground).  Per the contract, Bob can invite all his friends to play and reject all of Al's friends.</p>
<p><strong>Is there a legal doctrine that prevents a scenario like this?</strong></p>
<p>I.e., can a contract clause indirectly render a contract party immune to liability for that party's breach of contract?  I have a notion that there is something like the obverse of the &quot;unclean hands&quot; doctrine that would prevent this.</p>

<blockquote>
<p>Is there a legal doctrine that prevents a scenario like this?</p>
</blockquote>
<p>Yes. The particulars of the scenario would determine the grounds on which a non-assignment clause would be null and void. The <a href="http://www.oneclubofjusticides.com/p/restatement-second-contracts.html" rel="nofollow noreferrer"><em>Restatement (Second) of Contracts</em></a> roughly classifies these alternative grounds for unenforceability as grounds of <em>undue influence</em> and of <em>public policy</em>. Additionally, by default a non-assignment clause &quot;<em>does not forbid assignment of a right to damages for breach of the whole contract</em>&quot;. See <em>Restatement</em> at § 322(2)(a). Invoking this principle seems pertinent where, <em>inter alia</em>, a party breaches the <em>covenant of good faith and fair dealing</em>.</p>
<p>In the scenarios outlined in the 2nd paragraph of your question (i.e., <em>B</em> poaching a key member of <em>A</em>, or <em>A</em>'s existence depending entirely on its contract with <em>B</em>), the contract is voidable by <em>A</em> if <em>A</em> &quot;<em>is justified in assuming that [B] will not act in a manner inconsistent with [A's] welfare</em>&quot;, Restatement at § 177(1) (brackets added).</p>
<p>Although <em>undue influence</em> typically involves some sort of fiduciary duty that is unlikely to exist in an arm's-length agreement between <em>A</em> and <em>B</em>, the <em>Restatement</em> certainly elaborates in terms of <em>domination</em>. That choice of term affords to <em>A</em> the argument that <em>B</em>'s abuse of its domination warrants voiding the non-assignment clause insofar as it frustrates <em>A</em>'s ultimate purpose of entering that contract.</p>
<p>In the playground scenario, <em>B</em>'s intentional killing of the counterparty with whom <em>B</em> partnered constitutes serious and deliberate misconduct that renders the clause unenforceable on grounds of public policy. See <em>Restatement</em> at § 178(3)(c). Moreover, the connection between the killing and the non-assignment clause would be evident as to timing and motive, <em>Id</em> at (d).</p>
<p>Lastly, notwithstanding the premise of &quot;<em>breach of the <strong>whole</strong> contract</em>&quot; (emphasis added) in <em>Restatement</em> at § 322(2)(a), the multiple references to &quot;<em>grant[ing] relief as justice requires</em>&quot; and similar phrases suggest that other principles would supersede said premise in order to preempt an absurd outcome. That is, the interests of justice would outweigh <em>B</em>'s allegation that his compliance with other portions of the contract should bar an assignment [to <em>A</em>'s beneficiaries] of a right to damages.</p>
