Essay 7- Third Party Rights- Transfer of Auto Payment Collection Rights
Pam borrows $25,000 from Quality Auto Sales to buy a car. When Pam does not pay the loan or return the car, Quality wants to transfers the right to the payment to Rapid Collection Agency. Rapid agrees to pay Quality for this right, but for a price that is less than the amount owed. Can Quality transfer this right to Rapid without Pam’s consent? If so, and Quality committed fraud in the deal with Pam, could Pam legitimately refuse to pay Rapid? Explain.
The transfer of contractual rights to a third party is known as an assignment. The transfer of contractual duties to a third party is known as a delegation. An assignment or a delegation occurs after the original contract is made. The book gives the example of Tia obtaining a loan from a bank and later she receives notice that the bank has assigned its rights to receive payments to another firm. When it is time to pay the loan, Tia is obligated to make payments to the other firm.
In this situation, Quality can transfer the rights to Rapid without Pam’s consent. The only times that rights can’t be assigned are; when there is a statute prohibiting assignment, the contract is personal in nature, the assignment will significantly change the risk of the duties of the obligor, or when the contract prohibits assignment. In this case, none of these situations apply. Companies often transfer their right to payments to collection agencies after a certain period of time or after determined to be uncollectable.
In conclusion, Quality can transfer the right to Rapid without Pam’s consent. If Quality has committed fraud in the deal with Pam, then Pam could legitimately refuse to pay Rapid. Pam could sue Quality for fraudulent practices, which would prevent Rapid from making any efforts to collect payment. If fraud was proven, it would mean that Rapid no longer has a right of payment from Pam since Quality acted fraudulently in the deal.
The transfer of contractual rights to a third party is known as an assignment. The transfer of contractual duties to a third party is known as a delegation. An assignment or a delegation occurs after the original contract is made. The book gives the example of Tia obtaining a loan from a bank and later she receives notice that the bank has assigned its rights to receive payments to another firm. When it is time to pay the loan, Tia is obligated to make payments to the other firm.
In this situation, Quality can transfer the rights to Rapid without Pam’s consent. The only times that rights can’t be assigned are; when there is a statute prohibiting assignment, the contract is personal in nature, the assignment will significantly change the risk of the duties of the obligor, or when the contract prohibits assignment. In this case, none of these situations apply. Companies often transfer their right to payments to collection agencies after a certain period of time or after determined to be uncollectable.
In conclusion, Quality can transfer the right to Rapid without Pam’s consent. If Quality has committed fraud in the deal with Pam, then Pam could legitimately refuse to pay Rapid. Pam could sue Quality for fraudulent practices, which would prevent Rapid from making any efforts to collect payment. If fraud was proven, it would mean that Rapid no longer has a right of payment from Pam since Quality acted fraudulently in the deal.