Assignee of a contract has to give clear notice to original vendor

Where a purchaser assigns a contract, the assignee must give clear notice of the assignment to the original vendor. Otherwise the vendor is entitled, and bound, to complete the contract by transferring title to the original purchaser. The notice must make it clear that there has been an assignment and that the assignee is willing to stand in the shoes of the assignor as far as the benefit and burden of the contract are concerned.

In Shaw v Foster ((1871 – 1872) LR 5 HL 321) Foster entered into a contract to sell land to Pooley. Pooley agreed to assign the benefit of the contract to his bankers if requested to do so. The bank gave notice to Foster that Pooley had agreed to assign the contract to them by way of security if requested to do so. No further notice was given to Foster. In due course, Foster completed the contract by transferring title to Pooley. The bank claimed that Foster had acted unlawfully in disregarding their claims. The bank failed because the notice was to the effect that an assignment would take place in the future if the bank so requested. The House of Lords held that Foster was entitled, and obliged, to transfer the property to Pooley and not to the bank. The notice was not of an assignment but of a possible future assignment. Further, the bank did not make it clear that they were prepared to accept the obligations imposed on the purchaser by the contract.

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