Question: During the escrow period the Buyer assigns
the Contract to a third party. The Seller is threatening to cancel
the Contract because of this assignment unless a higher price
is negotiated. Can the Seller cancel the Contract because of the
assignment of the Contract by the Buyer to a third party?
Answer: No. A general rule of law is that any contract
can be assigned, unless the contract prohibits assignment. Restatement
(Second) of Contracts, §317 (1981). Although a contract can be
assigned, the party assigning the contract remains liable on the
contract. Therefore, the Buyer can assign the Contract, but if
the third party fails to perform under the Contract, the Buyer
will be required to perform under the Contract. Note: All AAR
Contracts permit assignment of the contract. Therefore, if the
Seller wants to prohibit the assignment of the contract, specific
language will have to be added to the contract.
