Owner’s Assignment to Contractor, of Claims Against Architect, Not Barred by Anti-Assignment Clause

A school district and architect signed a contract, with a common anti-assignment clause, for design of an elementary school building . During construction of the project, disputes arose between the district and contractor, and the contractor claimed delays arising from the architect’s work.

The district and contractor settled their dispute, and the settlement included an assignment by the district, to the contractor, of the district’s rights against the architect. When the contractor-as-assignee sued the architect, the architect moved to dismiss the lawsuit on the basis of an anti-assignment clause in the design contract.

The clause at issue, which appears almost identical to language in Section 10.3 the AIA B101 (both 2007 and 2017) contract forms, stated (emphasis added by the court):

[School District] and Architect, respectively, bind themselves, their partners, successors, assigns and legal representatives to the other party to this Agreement and to the partners, successors, assigns and legal representatives of such other party with respect to all covenants of this Agreement. Neither [School District] nor the Architect shall assign this Agreement without the written consent of the other, except that [School District] may assign this Agreement to an institutional lender providing financing for the Project. In such event, the lender shall assume [School District’s] rights and obligations under this Agreement. The Architect shall execute all consents reasonably required to facilitate such assignment.

The trial court dismissed the claims of the contractor-as-assignee, but on appeal the Superior Court reversed.

The issue of post-project assignment of contract rights, per the court, “is a matter of first impression, as there is no Pennsylvania appellate precedent addressing whether an anti-assignment clause in a non-insurance contract that merely provides that neither party shall assign the contract or agreement or rights thereunder bars assignment of a post-performance claim for damages for breach of the contract.”

The court distinguished between assignment of obligations to perform and assignment of post-project causes of action or claims for damages; the anti-assignment clause would be effective to prohibit assignment of the former. Citing decisions from other states and the Restatement (Second) of Contracts, though, the Pennsylvania court held that this clause “does not bar assignment of a post-performance claim for damages.”

Thus, the contractor-as-assignee would be entitled to pursue the district’s claims against the architect. The case is Gito, Inc. v. Axis Architecture, P.C., 2021 Pa. Super. LEXIS 715, 2021 PA Super 241 (Dec. 10, 2021).