Construction Contract Assignments
Generally, parties are free to assign their rights and responsibilities under a contract. However, many construction contracts include a provision prohibiting this practice absent written consent by the owner. When the owner enters into a contract with a contractor, he has done so based on the desired characteristics of the particular contractor. From the standpoint of the owner, it would completely defeat the owner's investigation into the contractor's qualifications and appropriateness for the project if the contractor could be unilaterally replaced. It is immaterial that the contractor may secure another contractor who is reputable and performs quality work. Technically, the owner "owns" the project and who performs work on that project should then be the sole decision of the owner. Further, if the original contractor secured the construction contract through the bidding process, it would seem to be patently unfair for that contractor to then turn around and assign the project to another contractor of its own choosing. Allowing such a result could easily defeat the competitive nature of the process.
With respect to the assignment of proceeds from a construction contract, there is not complete uniformity on the effectiveness of a contractual prohibition against the same. The Uniform Commercial Code (UCC) negates the right of a party to prohibit the assignment of proceeds. However, not all states agree with this position. One way courts have skirted the UCC's position is to characterize a construction contract as one for services with the furnishing of equipment and material (i.e., goods) being only incidental to the main purpose for the contract. This, then, removes the contract from the operation of the UCC. Further, a partial assignment of proceeds may fare differently depending upon the jurisdiction.
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