The Assignee of Contract Rights and His Precarious Security, 74 YALE L.J. 217 (1964)
Security assignments of executory contract rights have been widely used
only in recent years. The assignment of "moneys due and to become due" under a building or construction contract has been institutional for nearly a hundred years: the contractor (or subcontractor) at the outset assigns to his bank the money he will earn by future performance as security for the present loan which enables him to undertake the job. But for a long time the pattern was not customary in any other context. The financing of government procurement contracts during World War II probably furnished the major stimulus for the spread of the device into other industries. The sudden and enormous increase of industrial production dictated by the war effort required a huge volume of new financing. That task could have been undertaken by the United States, but was instead delegated, to the extent possible, to private financing institutions. As one method of encouraging the banks to do their bit, the United States, reversing its long-standing policy, agreed, by the Assignment of Claims Act of 1940, to recognize assignments of moneys to become due under contracts with the federal government or its agencies. Thus, during the 1940's banks and their counsel became extensively familiar, albeit in an abnormal situation, with some of the incidents of lending against this novel type of collateral.
Date of Authorship for this Version
Gilmore, Grant, "The Assignee of Contract Rights and His Precarious Security" (1964). Faculty Scholarship Series. Paper 2684.