Lloyd's Maritime and Commercial Law Quarterly

Contractual prohibitions against assignment

Roy Goode *

The effect of a contractual prohibition against assignment remains controversial. The position taken in this article is that such a prohibition, even if extended to cover a declaration of trust, operates purely as a matter of contract and does not affect the transfer of ownership of the contract right. The writer also supports the majority view in Barbados v. Bank of Zambia that, if the assignor refuses to sue, the assignee should be entitled to join the assignor as defendant in order to secure a judgment in favour of the assignor, who would then be accountable to the assignee. Finally, since a no-assignment clause is inimical to receivables financing, it should not be effective in that context.


This paper addresses the nature and effect of contractual provisions prohibiting the assignment of debts and other contract rights. Other grounds of non-assignability, such as statutory provisions, rules of public policy and the fact that the rights in question are by their nature personal to the creditor, are outside the scope of this review.

A. The importance of assignability

The common law has always attached great importance to the concept of alienability of property, regarding it as contrary to the public interest for assets to be tied up indefinitely. So there are long-established rules striking down excessive restrictions on alienation, either as being repugnant to the grant made to the intending transferor or as being contrary to public policy. These rules have traditionally been directed to physical assets in general and land in particular; but in modern commerce, transactions involving physical assets are dwarfed in value by dealings in pure intangibles, particularly debts, intermediated securities1 and derivatives. It is thus important that legal rules based on freedom of contract do not impair the free flow of intangibles in the stream of trade.
There are other reasons why it is important that rights should be assignable. A leading English work on construction law discusses some of them:



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