The word “assignment” is a living, breathing legal concept. In legal terms, an assignment is the transfer of property or an interest in property from one person, known as the assignor, to another person, called the assignee.
Stripped to its basics, an assignment is a contract setting forth certain rights, duties and obligations. As long as the assignor expresses intent to transfer a right to a third person, the expression of that intent may be either oral or written, unless a statute or contract states otherwise.
There is no shortage of properties or rights that can be assigned from one person to another. In the construction industry, for example, a subcontractor on a commercial construction project commonly assigns any rights or claims it may have against the general contractor to the owner of the project.
In the 2007 circuit court case Spectrum Interiors, Inc. v. Exterior Walls, Inc., Spectrum Interiors was a subcontractor on a large construction project in Flagler County, Fla. It, in turn, subcontracted certain work to Exterior Walls, Inc. (EWI), an Orlando-based stucco subcontractor. EWI brought various claims against Spectrum in connection with Spectrum’s alleged failure to pay what EWI claimed was a large balance. Spectrum also sued EWI.
One of the key issues during the two-week trial was the impact of several Partial Waiver and Release of Claim documents EWI signed and provided to Spectrum while working on the project. The documents contained important provisions, including one stating EWI assigned all claims it had against Spectrum through the date specified in the document (Sept. 30, 2003) to the general contractor. These Partial Waivers and Releases of Claim were important because Spectrum also had sued the general contractor and settled its claims well in advance of trial.
In settling with Spectrum, the general contractor had every reason to believe that EWI had no claims against Spectrum in light of the clear assignment language in the Partial Waiver and Release of Claim documents.
Spectrum argued that based on the Partial Waiver and Release of Claim, EWI was barred from introducing any evidence of its damages through Sept. 30, 2003—and EWI had made no effort to separate out its damages, pre-Sept. 30 versus post-Sept. 30. Ultimately, the jury returned a verdict in favor of EWI. Spectrum moved for a judgment notwithstanding the verdict and a new trial, arguing the court should not have allowed evidence of damages through Sept. 30, 2003, in light of EWI’s assignment of its claims through that date to the general contractor. However, the trial court again entered judgment in favor of EWI.
On appeal, the 5th District Court of Appeal reversed in part and remanded the case down to the circuit court for a trial on the issue of EWI’s damages solely for the period after Sept. 30, 2003. The court specifically noted:
“Here, EWI clearly and unambiguously assigned any claims it might have had against Spectrum through September 30, 2003, to the contractor; therefore, EWI was not entitled to recover any damages from Spectrum that occurred prior to that date.”
Had the 5th District Court of Appeal affirmed the judgment, arguably the validity and enforceability of assignments may have been in jeopardy. Decades of decisions could have been called into question.
Assignments are critical, and due to their frequency among contractors and subcontractors, their validity is paramount. In light of the appellate decision, assignments still have real meaning.
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Wednesday, February 8, 2012